George Bush, Republicans and their friends do not appear to be manipulating oil prices

[tongodeon]

Gas prices have gone down 17% recently, from $3.15 on August 1 to $2.67 today. I've heard and read several opinions that Bush is manipulating gas prices to increase Republican popularity for the midterm election, and supposedly 42% of Americans think Bush controls oil prices.

On one hand I can't rule it out entirely. It's possible, I suppose,

Comments

[tongodeon]

It seems beyond "plausible" and well into "extremely likely" that oil prices drive approval ratings and voting behavior. I totally accept that point. To go beyond your point, I also think that the Bush Administration knows this, and is trying to do what little it can to keep oil prices low.

I just don't think that the White House or their friends are doing very much - or can do very much - due to the realities of the market and a corporation's responsibility to put profits before everything else. I don't think they've been either slacking off or intentionally keeping prices high throughout the summer to make the November plunge seem better, any more than I think they intentionally drove up August Iraq combat casualties to make September's drop look better. The Bush Administration is making a constant effort to keep combat fatalities and oil prices low, but I don't think special election-season efforts are responsible for either decline

[sploof]

I just don't think that the White House or their friends are doing very much - or can do very much - due to the realities of the market and a corporation's responsibility to put profits before everything else.

I have no idea how likely it is that there's price manipulation going on, but I disagree that market forces/corporate responsibility would prevent it. We don't have a free market in gasoline in the US, and oil companies can dictate retail price to individual retailers. If Exxon thought it was in their best interest to support some House incumbant, they could tell all Exxon gas stations in that incumbant's district to cut their prices by 20%. It would cost them money in the short term, but so does lobbying; if it results in policies that mean higher long-term profits, they'll eat the short term cost.

On the other hand, I'll happily admit that I'm not an oil industry expert, and there may be all kinds of practicalities that make this completely implausible.

Sure Chavez and Ahmadinejad want to hurt Bush...I wouldn't be so sure

[tongodeon]

I disagree that market forces/corporate responsibility would prevent it.

I agree. That's why I was careful to never say that they're prevented from having any effect whatsoever. I said "I don't think that the White House or their friends are doing very much - or can do very much - due to the realities of the market". Heck, *I* had an effect on the market by whether or not I rode my bicycle to work this morning, but it was not very much of an effect. Bush's effect on oil prices is substantially reduced by the free market, not eliminated entirely. We're arguing a matter of degree, and I claim that the degree appears to be substantially less than 17%.

We don't have a free market in gasoline in the US, and oil companies can dictate retail price to individual retailers.That's kinda like saying we don't have a free market with cars because car companies can dictate retail price to their dealers. They can, but they don't because we would choose cheaper alternatives from other car producers. Gas consumers can always start filling up

[sploof]

Bush's effect on oil prices is substantially reduced by the free market

I disagree, because US gasoline markets are not "free markets"--there's insufficient competition or demand elasticity.

That's kinda like saying we don't have a free market with cars because car companies can dictate retail price to their dealers.

Car companies can't dictate retail price to their dealers. They can influence retail price by setting wholesale price, and they can give an MSRP, but the dealer decides how much to charge the customer. Exxon or Shell can tell a gas station "Charge $X for a gallon of gas."

That means that an oil company can set prices in a local market, say San Francisco, based on things other than supply and demand. Even if they take a short term loss in SF, they remain profitable in the short term as long as the loss is less than profits from all of the other local markets it operates in..

Gas consumers can always start filling up from a different oil company, or simply consuming less gas, as consumers did in the early part of

[tongodeon]

US gasoline markets are not "free markets"--there's insufficient competition or demand elasticity.

Fine. Six, ten, whatever. Nowhere in my main post did I ever describe the market as a "free market". I said it was a "market" - which it is - and that competition in the market reduces any single competitor's ability to dictate price - which it does. I have no interest in having a semantic argument concerning at what point the "free market" boolean bit flips to "true".

Car companies can't dictate retail price to their dealers. They can influence retail price by setting wholesale price, and they can give an MSRP, but the dealer decides how much to charge the customer. Exxon or Shell can tell a gas station "Charge $X for a gallon of gas."

Gas prices vary all over Los Angeles - even from Chevron to Chevron. The Chevron in Venice sells gas at a different price than the Chevron in Marina Del Rey, four blocks over. I have no idea whether or not, contractually, they can dictate the same price everywhere, but in practice either the

[sploof]

I said it was a "market" - which it is - and that competition in the market reduces any single competitor's ability to dictate price - which it does.

Except it doesn't. As I said, there are too few companies and too many barriers to entry to force competition on price, especially since individual companies can transfer profits across multiple local markets. I don't care that much about the semantics in this case either, but the fact is, gasoline companies can set price in any given local market on any number of things that have nothing to do with supply and demand.

I have no idea whether or not, contractually, they can dictate the same price everywhere, but in practice either the corporation is dictating price-competitive decisions or they're leaving these decisions up to the franchisee.

Oil companies can and do dictate price to individual gas stations, though I would assume that it's not cost effective to dictate exact prices to every gas station in the country every single day.

in practice either the corporation is dictating

[tongodeon]

there are too few companies and too many barriers to entry to force competition on price
...
the fact is, gasoline companies can set price in any given local market on any number of things that have nothing to do with supply and demand

You mean to tell me that those giant signs with prices are for show? That it's a *coincidence* that there's always a crowd at the station that's a few cents lower? I don't buy it. Even more than cars, gas is a uniform commodity. Gas companies try to create non-price competition (Chevron with Techron™) but in the end it's almost entirely about price and location.

2) Market forces would prevent anyone from significantly manipulating oil prices to influence the upcoming elections.

I never made the absolute claim, and I corrected you the first time you misrepresented me. I said "I just don't think that the White House or their friends are doing very much - or can do very much - due to the realities of the market". We're taking degrees. I think the degree to which individual partisan actors at oil

[sploof]

You mean to tell me that those giant signs with prices are for show? That it's a *coincidence* that there's always a crowd at the station that's a few cents lower?

I never said anything vaguely resembling this. I said that if they want to gasoline companies can set local prices based on things other than supply and demand and remain profitable. They can do so in part because they can set prices in local markets while averaging profits nationally. The fact that there are so few competitors and so many barriers to market entry also allows them to limit price competition through pricing collusion, whether implicit or explicit.

You just said that two stations in LA four blocks apart have different gas prices. If that's the case, and consumers flock to the one that's cheaper, and the stations are not insulated from market forces, how exactly does the more expensive one stay in business?

gas is a uniform commodity. Gas companies try to create non-price competition (Chevron with Techron™) but in the end it's almost entirely about price

[tongodeon]

You just said that two stations in LA four blocks apart have different gas prices. If that's the case, and consumers flock to the one that's cheaper, and the stations are not insulated from market forces, how exactly does the more expensive one stay in business?

Incomplete consumer knowlege combined with convenience. Some don't know about a gas station 5 cents cheaper on Washington. Some don't care because Washington isn't on the way. And some don't care about a few pennies.

To the extent that gas companies do compete, they do so on price and location. That doesn't mean they are competitive.
...
A market with 700 brand/retailer combinations is competitive. A market with 7 isn't.700 companies would be "more competitive". Also more expensive, since we wouldn't have the same economies of scale. You couldn't exactly build 100x the number of ports and refineries in the US without someone paying for them

[sploof]

Incomplete consumer knowlege combined with convenience. Some don't know about a gas station 5 cents cheaper on Washington. Some don't care because Washington isn't on the way. And some don't care about a few pennies.

In other words, the two gas stations aren't that competitive with each other on price, in large part because of demand inelasticity. Consumers aren't willing to spend the time or energy to know where the cheap gas is or drive the four blocks to get there.

700 companies would be "more competitive"... I don't want to get into a semantic argument over when the "competitive" bit flips.It's not about the number of companies or manufacturers. It's about the number of options the consumer has. The retail markets for most of the things you've listed are competitive because you can select from a wide variety of combinations of brands and retailers. You may be stuck with AMD and Intel, but you have a huge selection of retailers that sell either or both

[tongodeon]

In other words, the two gas stations aren't that competitive with each other on price, in large part because of demand inelasticity. Consumers aren't willing to spend the time or energy to know where the cheap gas is or drive the four blocks to get there.

This is true of almost any physical good I can think of regardless of elasticity. Shoes, bread, hair gel - most people don't look for the absolute cheapest, they just drive to the store and buy what's availiable. If something is grossly overpriced they notice, but as long as everything is within the range of what they consider a "fair price" most people don't care. It's not worth it to spend a half hour finding the absolute lowest price to save a few cents.

You may be stuck with AMD and Intel, but you have a huge selection of retailers that sell either or both.

How is that different from a huge selection of gas stations? AMD and Intel dictate wholesale prices just as effectively as gas stations.

In a great many cases, this is completely untrue. Anecdotal evidence can be

[sploof]

This is true of almost any physical good I can think of regardless of elasticity.

It can't be true regardless of elasticity--the propensity to change purchasing behavior in response to variations in price is the definition of elasticity.

Shoes, bread, hair gel - most people don't look for the absolute cheapest, they just drive to the store and buy what's availiable. If something is grossly overpriced they notice, but as long as everything is within the range of what they consider a "fair price" most people don't care.

There are a great many master's and PHD theses written entirely on this subject. Not being an MBA, I haven't read any of them, but I've talked with enough MBA's at parties to know that this is a gross oversimplification. Consumers' willingness to adjust their purchasing behavior to differences in price varies a great deal from one product to another; that's why economists and MBAs talk about demand elasticity.

AMD and Intel dictate wholesale prices just as effectively as gas stations.First, the relevant comparison

[tongodeon]

There are a great many master's and PHD theses written entirely on this subject. Not being an MBA, I haven't read any of them, but I've talked with enough MBA's at parties to know that this is a gross oversimplification.

I understand that you're trying to say that our economic system is ridiculously complex, that there are a lot more gotchas than there appear to be, and that it's difficult to make sweeping generalizations without the sort of qualifiers that only qualified economists would know about in the first place.

What I'm saying is that if a completely unqualified person starts floating conspiracy theories, as another completely unqualified person I'm bringing what I've got to the table, and what little I've got does not in any way support the Flying Spaghetti Republican theory. It doesn't seem like a very good argument if the first completely unqualified person says "you can't say that - you're completely unqualified like me".

You argued that your personal experience of gasoline prices was representative of an entire market

[sploof]

It doesn't seem like a very good argument if the first completely unqualified person says "you can't say that - you're completely unqualified like me".

It seems like a much better argument than "we're both completely unqualified, so I'm going to make an simplistic assertion about a complex subject that may or may not be supported by the huge volume of writings and evidence on the subject." Moreover, I am just qualified enough to say that if "most people don't look for the absolute cheapest, they just drive to the store and buy what's availiable" were true, economists and MBAs wouldn't spend all the time and energy they do studying the subject.

I argued that my personal experience of gasoline prices seems to be representative of the entire marketThere is no national retail gasoline market. There's nowhere that you can go as a retail consumer to buy gas that people from NYC and Chicago and Florida can also go. There are thousands and thousands of local retail gasoline markets. You're basing your pricing assertions on a handful of non-

[tongodeon]

Absence of evidence is not evidence of absence.

That's what frustrates me. This is the Flying Spaghetti Monster of conspiracy theories, with "Gas prices" and "Republicans" replacing "Global Temperature" and "Pirates".

[sploof]

This is the Flying Spaghetti Monster of conspiracy theories, with "Gas prices" and "Republicans" replacing "Global Temperature" and "Pirates".

The FSM is about religious refusal to acknowledge the overwhelming weight of evidence and the absense of significant contrary evidence because there's no "incontroverable proof". I'm trying to point out that this is a case where neither of us seem to have access to sufficient evidence to make a conclusive statement either way.

Put another way, when you say "No one's convinced me that X exists," I agree that "[you] don't need to disprove the existence of something [you] don't believe in." If you say "X doesn't exist," then I think you have some disproving to do. If I ignore a huge body of evidence that X doesn't exist because it's not "proof", you can feel free to mock me with pasta-based satire.

Which is not to say you shouldn't feel free to mock conspiracy theorists whenever the mood strikes.