The cost (not price) of gasoline depends on two components: (1) the cost of petroleum, and (2) the cost of refining. Only the cost of petroleum has reduced. Price can drop, at best, only with the resulting total cost. And as the cost of petroleum drops further, it will have less effect on the total cost, and thus the price.
I feel smarter for reading your comment.. ❤️ So, the last sentence...Do you mean, cost of this petroleum must radically drop even further to have an effect on total cost - since the refining cost is still limited by the lack / number of working refineries? Or do you mean that too low a cost of petroleum is just as bad as too high a cost?
Ok, next issue I have....WHAT HAS VENEZUELA done to help or hinder the prices? I believe that the oil companies are keeping prices high to make us pay for their rebuilding the dilapidated Venezuelan Petro/refinery infrastructure. Because that is what global corps do.
Also, Hegseth is lobbying Capitol Hill for more money ($85b yesterday; $200b in March) because of Iran war ...I imagine aviation fuel is high. Different contents or ratios of fuel? Bottom line is either our War Dept. or the private oil companies will pass on the eventual "prices" to us, the end consumer.
Thanks for engaging, I 'm only mussing, w/o field knowledge.
No, the drop in the price of raw material will always help...but as it drops, its ability to affect the pump price diminishes, as the price begins to be dominated by other costs. In other words, if the price of crude oil drops in half, don't expect the pump price to drop as much.
Pricing is always what the market can bear. When someone finds its internal or raw materials costs have gone down, they have an incentive to INCREASE MARKET SHARE by lowering prices. This is what caused the formation of OPEC in the first place, as a restraint on an all-out "gas war" among oil producing countries. These market movements may take some time before business management concludes it would be a wise step.
As I understand it, both U.S. and Venezuelan production has compensated partly for the hiccup in Persian Gulf exports. Maybe also Russian oil, now that it is no longer encumbered by sanctions.
I don't think Pentagon use is at all large compared to the world market, and any extra being used for the Iran situation is only a small adjustment to that. I also get the idea that Europe is going on an austerity program (out of necessity). Remember, we had Gulf Wars I and II and the Afghanistan nation building going on for decades, and nobody thought to wonder, "Gee...what is this doing to the price of gasoline?"
Just remember that even the most vile corporations are driven by economics, and the relevant metric is NOT profit/gallon, it is (market share x profit/gallon). Market share is inversely related to price (profit)/gallon. They can unilaterally double their price at the pump...and sell nothing. So, don't get seduced by the idea that they have impunity to price level.
Nah. Just a 40-year systems engineer. An economy is only a complex system with lots of cause and effect relationships. The basic laws of economy prevail, supply and demand being the big one. It explains inflation exactly as the ratio between available money and available goods & services. When government throws a big bucket of money into the economy (stimulus!), a big rise in prices is inevitable because the "stimulus" does nothing to increase supply (crestfallen suckers).
It also explains why Trump's tariff's work when everyone says they shouldn't. All goods offered for sale as imports have a price consisting of (cost + profit). The "conventional" wisdom holds that if you apply a tariff, it will raise the cost of a good. But that makes sense only if there is NO PROFIT to begin with. If there is any profit, the importer must make a calculation of how much of the tariff should be paid by a price increase and how much by a profit decrease. Add into this that any price increase will shrink their market share (why they are importing in the first place). And---here's the big one---What if the profit is huge to begin with? Think of Chinese goods, made by pseudo-slave labor in a weak economy, with paltry cost, being sold to wealthy Westerners at lower cost than Western product, but far, far above the Chinese cost of manufacture. In that case, it makes sense for the importer to shrug, eat the tariff, and preserve his market share while still making a good profit. I don't hear that Walmart is going out of business!
As for the corporations, they may do a lot of things we don't like, but they never jeopardize their profitability (except when they make monumentally stupid strategic decisions---think Jaguar---but are generally aware of the economics of their situation).
I have to vent. I'm a Jaguar owner. Wonderful car to drive. So, the big brass hired some bald monkey with a lust for bananas and they dreamed up this wonderful strategy: "We have a great name and a loyal customer base---but we are going to abandon everything that makes a Jaguar a Jaguar and discard our customer base altogether---because we are going to slug it out with Bentley and Rolls Royce for a piece of a very small market share, with vehicles that will be all-electric ("chariots of fire"), and styling like a bar of soap." In other words, their strategy is to shoot themselves in the nuts, then arise from the dead in order to appeal to a very tiny market consisting of wealthy weirdos. Sir William Lyons must be reliving his death agonies in the grave.
The cost (not price) of gasoline depends on two components: (1) the cost of petroleum, and (2) the cost of refining. Only the cost of petroleum has reduced. Price can drop, at best, only with the resulting total cost. And as the cost of petroleum drops further, it will have less effect on the total cost, and thus the price.
I feel smarter for reading your comment.. ❤️ So, the last sentence...Do you mean, cost of this petroleum must radically drop even further to have an effect on total cost - since the refining cost is still limited by the lack / number of working refineries? Or do you mean that too low a cost of petroleum is just as bad as too high a cost? Ok, next issue I have....WHAT HAS VENEZUELA done to help or hinder the prices? I believe that the oil companies are keeping prices high to make us pay for their rebuilding the dilapidated Venezuelan Petro/refinery infrastructure. Because that is what global corps do. Also, Hegseth is lobbying Capitol Hill for more money ($85b yesterday; $200b in March) because of Iran war ...I imagine aviation fuel is high. Different contents or ratios of fuel? Bottom line is either our War Dept. or the private oil companies will pass on the eventual "prices" to us, the end consumer. Thanks for engaging, I 'm only mussing, w/o field knowledge.
No, the drop in the price of raw material will always help...but as it drops, its ability to affect the pump price diminishes, as the price begins to be dominated by other costs. In other words, if the price of crude oil drops in half, don't expect the pump price to drop as much.
Pricing is always what the market can bear. When someone finds its internal or raw materials costs have gone down, they have an incentive to INCREASE MARKET SHARE by lowering prices. This is what caused the formation of OPEC in the first place, as a restraint on an all-out "gas war" among oil producing countries. These market movements may take some time before business management concludes it would be a wise step.
As I understand it, both U.S. and Venezuelan production has compensated partly for the hiccup in Persian Gulf exports. Maybe also Russian oil, now that it is no longer encumbered by sanctions.
I don't think Pentagon use is at all large compared to the world market, and any extra being used for the Iran situation is only a small adjustment to that. I also get the idea that Europe is going on an austerity program (out of necessity). Remember, we had Gulf Wars I and II and the Afghanistan nation building going on for decades, and nobody thought to wonder, "Gee...what is this doing to the price of gasoline?"
Just remember that even the most vile corporations are driven by economics, and the relevant metric is NOT profit/gallon, it is (market share x profit/gallon). Market share is inversely related to price (profit)/gallon. They can unilaterally double their price at the pump...and sell nothing. So, don't get seduced by the idea that they have impunity to price level.
Ok, tell me the truth... you're a macroEcon professor aren't you? 🤩 Thank you! On your last sentence, ...I will try to keep my cynicism in check. Ha.
Nah. Just a 40-year systems engineer. An economy is only a complex system with lots of cause and effect relationships. The basic laws of economy prevail, supply and demand being the big one. It explains inflation exactly as the ratio between available money and available goods & services. When government throws a big bucket of money into the economy (stimulus!), a big rise in prices is inevitable because the "stimulus" does nothing to increase supply (crestfallen suckers).
It also explains why Trump's tariff's work when everyone says they shouldn't. All goods offered for sale as imports have a price consisting of (cost + profit). The "conventional" wisdom holds that if you apply a tariff, it will raise the cost of a good. But that makes sense only if there is NO PROFIT to begin with. If there is any profit, the importer must make a calculation of how much of the tariff should be paid by a price increase and how much by a profit decrease. Add into this that any price increase will shrink their market share (why they are importing in the first place). And---here's the big one---What if the profit is huge to begin with? Think of Chinese goods, made by pseudo-slave labor in a weak economy, with paltry cost, being sold to wealthy Westerners at lower cost than Western product, but far, far above the Chinese cost of manufacture. In that case, it makes sense for the importer to shrug, eat the tariff, and preserve his market share while still making a good profit. I don't hear that Walmart is going out of business!
As for the corporations, they may do a lot of things we don't like, but they never jeopardize their profitability (except when they make monumentally stupid strategic decisions---think Jaguar---but are generally aware of the economics of their situation).
I have to vent. I'm a Jaguar owner. Wonderful car to drive. So, the big brass hired some bald monkey with a lust for bananas and they dreamed up this wonderful strategy: "We have a great name and a loyal customer base---but we are going to abandon everything that makes a Jaguar a Jaguar and discard our customer base altogether---because we are going to slug it out with Bentley and Rolls Royce for a piece of a very small market share, with vehicles that will be all-electric ("chariots of fire"), and styling like a bar of soap." In other words, their strategy is to shoot themselves in the nuts, then arise from the dead in order to appeal to a very tiny market consisting of wealthy weirdos. Sir William Lyons must be reliving his death agonies in the grave.