One problem I have with discussions about energy pricing is what we're engaged in right now: very little mention of data, but plenty of theories
It is almost always a problem in discussions with me. I have time to think about these issues, but not as much time to dig up data. I recognize it as a huge flaw, but, so far, don't often work to fix it. Perhaps i should try to get funding as an economist so i can play with the problems for real?
the amount of trucking increased faster than the amount of passenger transport, which I feel like I've seen numbers for; that would, as you point out, increase demand for diesel relative to gasoline.
Well, individual drivers can reduce car trips, and long distance travel is way down. But truckers aren't really able to make either of those reductions. Add to that the increase in the number of diesel cars on the road...
In a competitive market, I have difficulty believing that offering a higher-price alternative could increase the price of the lower-price alternative.
I believe that this could happen for two reasons: 1) you can not choose between these two alternatives immediately. Buying a new vehicle or a new truck is an action that has a long lag time. So you'd expect to see the free market work on the choices over a number of years, but not over the number of months that we've seen something like increased bus ridership. Additionally, there are not big rigs readily available in alternative fuel prices, even if some truckers were willing to switch to lower their costs.
2) i think with the private consumer (not so much the industries in question) you can rely on some ignorance. Fuel prices go up, so you can raise all fuel prices. Even if the reality says that only one type of fuel has gotten more expensive. The diesel market may be able to bear more cost increase because diesels get more miles to the gallon, so the price per mile goes up relatively slowly compared to that of gasoline cars.
Although, i just thought of, for some reason, with this particular problem - if a larger percentage of gasoline's price is due to processing, than a smaller percentage is actually dependent on the basic oil price. It might be that gasoline prices went up more slowly than diesel prices for that reason.
Another problem is that one's complaint of profiteering is another's perfectly justified decision to charge whatever the market will bear.
Yeah, i'm not sure, either. My sense is that, because there is a difference between ideal capitalist market response and real capitalist market response, profiteering occurs when an industry can increase their prices more quickly than consumers can or will react to those increases. In the automobile industry there is definitely some lag between when someone notices rising fuel costs and when they can remedy the problem - particularly people who need to pay for food that has been shipped by a third party, or people whose vehicle represents a significant investment for them. I believe that this causes people to call out 'profiteering' because they believe the oil companies could be charging less for their products, while they can not be reducing their requirements for those products.
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timeasmymeasure
no subject
Date: 2008-09-09 08:31 pm (UTC)It is almost always a problem in discussions with me. I have time to think about these issues, but not as much time to dig up data. I recognize it as a huge flaw, but, so far, don't often work to fix it. Perhaps i should try to get funding as an economist so i can play with the problems for real?
the amount of trucking increased faster than the amount of passenger transport, which I feel like I've seen numbers for; that would, as you point out, increase demand for diesel relative to gasoline.
Well, individual drivers can reduce car trips, and long distance travel is way down. But truckers aren't really able to make either of those reductions. Add to that the increase in the number of diesel cars on the road...
In a competitive market, I have difficulty believing that offering a higher-price alternative could increase the price of the lower-price alternative.
I believe that this could happen for two reasons:
1) you can not choose between these two alternatives immediately. Buying a new vehicle or a new truck is an action that has a long lag time. So you'd expect to see the free market work on the choices over a number of years, but not over the number of months that we've seen something like increased bus ridership. Additionally, there are not big rigs readily available in alternative fuel prices, even if some truckers were willing to switch to lower their costs.
2) i think with the private consumer (not so much the industries in question) you can rely on some ignorance. Fuel prices go up, so you can raise all fuel prices. Even if the reality says that only one type of fuel has gotten more expensive. The diesel market may be able to bear more cost increase because diesels get more miles to the gallon, so the price per mile goes up relatively slowly compared to that of gasoline cars.
Although, i just thought of, for some reason, with this particular problem - if a larger percentage of gasoline's price is due to processing, than a smaller percentage is actually dependent on the basic oil price. It might be that gasoline prices went up more slowly than diesel prices for that reason.
Another problem is that one's complaint of profiteering is another's perfectly justified decision to charge whatever the market will bear.
Yeah, i'm not sure, either. My sense is that, because there is a difference between ideal capitalist market response and real capitalist market response, profiteering occurs when an industry can increase their prices more quickly than consumers can or will react to those increases. In the automobile industry there is definitely some lag between when someone notices rising fuel costs and when they can remedy the problem - particularly people who need to pay for food that has been shipped by a third party, or people whose vehicle represents a significant investment for them. I believe that this causes people to call out 'profiteering' because they believe the oil companies could be charging less for their products, while they can not be reducing their requirements for those products.