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It was certainly a good thought experiment but I assume most now understand it's extremely difficult to model such a complex dynamic. Just consider the $millions KSA er all spends on analysts to model the price/supply/demand dynamic to develop a model. But even at that not all exporters develop the same model because they all don't have the same factors affecting them.

ROCKMAN wrote:It was certainly a good thought experiment but I assume most now understand it's extremely difficult to model such a complex dynamic. Just consider the $millions KSA er all spends on analysts to model the price/supply/demand dynamic to develop a model. But even at that not all exporters develop the same model because they all don't have the same factors affecting them.

Indeed, some countries are very dependent on oil export income while some others are very diversified and the oil money is great, but not crucial.

ROCKMAN wrote:It was certainly a good thought experiment but I assume most now understand it's extremely difficult to model such a complex dynamic. Just consider the $millions KSA er all spends on analysts to model the price/supply/demand dynamic to develop a model. But even at that not all exporters develop the same model because they all don't have the same factors affecting them.

Thanks, to me it was more about seeing where our members here stand on fundamental economic issues than really trying to convince anyone to adopt my POV on the topic. Our economy is very far from the theoretical free wheeling Capitalism people think it is between taxes, regulations and multiple other factors influencing things in a plethora of market distorting ways.

That makes me think that the displayed price we are used to when we buy stuff is just a convention to make things easier. When you travel outside our modern world (Africa is funny), you often have to bargain. And it's the buyer who has to make the first offer, he doesn't ask the price. Then it's a question of offer/demand, pressure on the buyer or the seller to set the final price...

I don't really know how trade is made with oil. I assumed sellers have an amount of oil to sell, and find the best offer they can find. And if that amount is not enough, then the price goes up, so those who can't afford it get out. And if there is too much oil, then the low offers find a seller.

If one seller decide to take no offer under a price, then the offers will goes up. But then he won't find enough buyers for all his oil. The others sellers will just sell under the set price. It's the same outcome than with quotas.

Edit: I wrote bullshit. Like rock said, too much dynamics involved.

tita wrote:That makes me think that the displayed price we are used to when we buy stuff is just a convention to make things easier. When you travel outside our modern world (Africa is funny), you often have to bargain. And it's the buyer who has to make the first offer, he doesn't ask the price. Then it's a question of offer/demand, pressure on the buyer or the seller to set the final price...

I don't really know how trade is made with oil. I assumed sellers have an amount of oil to sell, and find the best offer they can find. And if that amount is not enough, then the price goes up, so those who can't afford it get out. And if there is too much oil, then the low offers find a seller.

If one seller decide to take no offer under a price, then the offers will goes up. But then he won't find enough buyers for all his oil. The others sellers will just sell under the set price. It's the same outcome than with quotas.

Edit: I wrote bullshit. Like rock said, too much dynamics involved.

It is all about the chaos attraction Nearly all dynamical systems have attractors of focusing conditions that drive the system in different directions. For example in the oil market I can see supply, demand, political goals of each individual seller, profit needs of each individual seller, expectations of what future prices will be from each potential buyer. Those are just off the top of my head and all together they make up thousands of initial starting positions driving each individual transaction through inception to completion. The more simplified we make our mental model the more easily we can understand the dynamics, but as the number of inputs goes down the chances of making a false prediction goes up. In this example the most reductionist model is to only consider supply and demand without considering what existential factors impact upon either of them. We have a demand for 94 MM/bbl/d with supply fully meeting that demand resulting in a price of $26/bbl-$52/bbl.

Wait what? Price can change by 100 percent without altering demand? Yes, in the short term. Prices less than 9 months ago were $52/bbl and in the last eight weeks they have dipped below $27/bbl briefly. Neither supply nor demand changed substantially in that period of time so to understand what factors caused such a large change we have to look at factors outside of the strict supply/demand price setting dynamic.

tita wrote:That makes me think that the displayed price we are used to when we buy stuff is just a convention to make things easier. When you travel outside our modern world (Africa is funny), you often have to bargain. And it's the buyer who has to make the first offer, he doesn't ask the price. Then it's a question of offer/demand, pressure on the buyer or the seller to set the final price...

I think it very much depends on the industry.

Where it's things like commodities where there are liquid futures markets, then the price is clearly based on a well defined market, plus/minus things like shipping, storage, quality adjustments etc. if the commodity isn't traded at a hub/delivery point.

For many other things, including clothes, jewelry, etc. in the US, if you are willing to risk being told "no" and whatever embarrassment you associate with that, then you can often get big discounts if you're spending a moderate amount of money at a place which isn't already into low prices, like a big box store. So if you go to a decent middle-of-the-road department store, for example. But you do have to ask. Example, if you're buying a couple of mid-priced sport coats and you remark that you'd be interested if the prices were about, say, 30% to 40% lower, I've had the clerk call his/her boss, and offer me the coats at the price I wanted right away, no haggling required. My girlfriend's dad used to haggle over shoes, ties, etc. If you don't ask, then you pay whatever price is posted, which is whatever the seller thinks the market will bear.

Now, for a lot of consumer staples where the market is highly competitive and the margins are low, the price will have little wiggle room and will be based on what it takes to make a profit AND be competitive. Staple groceries (vs. the fancy stuff like the deli prepared foods) tend to be this way. When you compare the prices at many big box stores, many items are that way. I'd be quite surprised if you can negotiate such prices very often. (I've never tried, so I can't say for sure).

tita wrote:That makes me think that the displayed price we are used to when we buy stuff is just a convention to make things easier.

This also reminds me of something I've been noticing for a couple/few months, which may be collusion (and therefore, possibly illegal), so I thought I'd mention it. I only want to try to do something about it (like write my state's Attorney General) if folks think it's worth my time.

I SUSPECT (I don't know for sure) that internet retailers may be using the pricing information on the internet to collude on some popular items. Then, they can jack the price up quite a bit, and lo and behold when you do the price comparison that used to yield widely differing prices, you see that the price is IDENTICAL on various popular internet sites.

YMMV, and I'm NOT saying this happens anything like all the time -- but I'm noticing it more.

Example. I have a cat which can be picky about using the box at times. Thus, I buy a natural litter attractant that generally solves the problem, even though it can be kind of expensive. (Pets, what are you going to do?).

So, the last several times I've looked at this product on Amazon and several other sites including today, using Google searches to find what look like decent retail sites or sites I already am a regular customer at, I find the price is always identical. (It used to differ by enough that I'd switch sites if I could get free shipping. It also used to seem to hop around at random on various sites instead of moving together).

The product is called "Precious Cat Dr. Elsey's Ultra Litter Attractant".

(I am NOT assoicated with any retail outlet except as a customer and I am NOT endorsing or advertising this product and if I am violating the COC is some way, I apologize. Please mods, let me know if so, and I won't do this any more).

So today I see the price is $8.99 on Pets.com, Jet.com, Chewy.com, the first three places I usually look for pet stuff online. The bottom line for me is I used to be able to look around and find this product for roughly $5.00 or $6.00, and get free shipping if I'd buy it in some volume, also buy something else, etc. Now, I generally see it for a price from about $8.00 to $12.00 (for months). That's a hell of a big increase in a world of near zero inflation, where there are lots of competing products.

...

Now, this may just be big internet retailers monitoring competitors online and matching prices. And they may not be discussing it with each other at all. If so, I can imagine they would deny collusion.

OTOH, taken to its extreme, if every discount retailer online did this generally for everything they sold, they could all charge whatever the highest price they thought they could get away with was, and screw the customer, or force them to shop elsewhere.

Obviously only so much of this could occur without being flagrant, and it would open the door to other discounting competitors if it were done too much. It's just interesting to me. Usually the customer is seen benefiting from the information on the web. Perhaps the retailers are starting to fight back?

OTOH, retail gasoline prices display a behavior that frequently seems just like this. (Many stations from various companies all switch to exactly the same price, the same day, very consistently. Obviously they are utilizing some common posted/suggested price. So far, I don't see major lawsuits stopping this).

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Price control are fine , if set properly with production control
, but there always is the marginal market for the odd rogue producer and the small operators ,
Opec worked up to the point when Russia, Mexico ,fracking and others
rode the Opec gravy train and broke the production limits , such as they were .

to stabilize price a better way would be to close the speculative trading of crude ,
the ratio of real crude delivery versus future contracts churn is about 1/50 , that's plain ridiculous

trading only real oil would make the market way more stable

Well, da! The obvious just occurred to me: what f*cking price are we talking about: the price the producers charges or the price the refiner pays?.IOW how is the US govt going to force an exporter to charge only $X/bbl? Can't be done. It can limit how much a US buyer pays for oil. Tried that years ago: remember "old oil" vs "new oil". I'll skip the details of that giant cluster f*ck. Research if you like. I knew oil traders making $30k/year that became millionaires in a year. The systersysterm was gamed so badly because the govt " experts" were so ignorant or found a easy to cash in themselves.

But let's say the get it right this time and no US rerfiney can pay morer then $X/bbl. But the same price for domestic as imported oil? If different would that violate numerous trade agreement? TransCanada is using the US govt fgor $15 BILLION over the Keystone permit: they might not get the whole pop but the smart money says they have a good chance at something. Both Canada and Mexico have lost similar cases to private companies over NAFTA violations.

So the US producers also only getggetg the lower price: what does that immediately do to their stock price? Stock owned by millions of middle income citizens (including union members) that have retirement accounts tied up in public oil companies. And lastly the lower the price of domesdtic oil the less future oil production and an increasse in imports...if those countries accept the lower price.

ROCKMAN wrote:Well, da! The obvious just occurred to me: what f*cking price are we talking about: the price the producers charges or the price the refiner pays?.IOW how is the US govt going to force an exporter to charge only $X/bbl? Can't be done. It can limit how much a US buyer pays for oil. Tried that years ago: remember "old oil" vs "new oil". I'll skip the details of that giant cluster f*ck. Research if you like. I knew oil traders making $30k/year that became millionaires in a year. The systersysterm was gamed so badly because the govt " experts" were so ignorant or found a easy to cash in themselves.

But let's say the get it right this time and no US rerfiney can pay morer then $X/bbl. But the same price for domestic as imported oil? If different would that violate numerous trade agreement? TransCanada is using the US govt fgor $15 BILLION over the Keystone permit: they might not get the whole pop but the smart money says they have a good chance at something. Both Canada and Mexico have lost similar cases to private companies over NAFTA violations.

So the US producers also only getggetg the lower price: what does that immediately do to their stock price? Stock owned by millions of middle income citizens (including union members) that have retirement accounts tied up in public oil companies. And lastly the lower the price of domestic oil the less future oil production and an increases in imports...if those countries accept the lower price.

If you go back and read the initial post at the start of the thread you will see I created this topic during the rah rah price is going to $20/$15/$10 a barrel hype earlier this year. What I posted back then I proposed Russia setting their own benchmark of $40/bbl to see if they could still sell all their oil at that price and make more money than the then current $30/bbl range prices. The idea was to explore just what people though would happen under those circumstances, nothing complicated. Just a nice straight forward thought experiment. For better or worse prices went above $40/bbl by the first week of March, so it certainly wasn't a long term valid question as it turns out.

Tanada wrote: Last 4th of July I was thrilled to be filling my tank for $2.00/gallon for the first time since late 2008, at the time WTI was contracting for about $52/bbl on the exchanges. I am fairly confident, though I hold no Economics degree, that $2.00/gallon gasoline would be quite a boon for Ohio compared to the $3.25 we averaged around these parts in 2013 and 2014.

Well whatever else happens WTI closed yesterday around $49.26/bbl, which is pretty darn close to year ago prices if you think about it.

The really odd thing is, gasoline prices around Toledo have been bouncing all over the map, from as low as $1.95 to as high as $2.75 for the last month. Not steady or gradually changing either, wild swings of half a dollar overnight with no pattern I can figure out.

T - Thanks. But doesn't that confirm the point I keep making: Russia couldn't force buyers to pay $40/bbl at that time. IOW all they could control was how much they sold. So take that angle: Russia refuses to sell any oil for less the $40/bbl...how much oil do you think they would sell? Let's say none because therer's just enough oil demand in the market that can only pay $36/bbl.

Now a serious thought experiment: if Russia exports no oil what would happen to the price of oil at that time...say $28/bbl? It would likely increase...but how much higher? Let's say it jumps 30% to $36/bbl. Great for all the other oil sellers. But Russia still sells no oil by holding to their $40/bbl price. Hmm...maybe they back off and offer it for $36/bbl. But what would the other sells due to prevent losing their newly acquired market share?

And thus the dance goes on. But an added complication: the price buyers are able to pay isn't fixed. IOW if there aren't enough buyers that can afford $36/bbl then sellers might not get that price even if Russia didn't export a single bbl.

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that's the Saudi conundrum , if we throttle back, price rise , if we let go we screw down other parasites
that's the pure description of negotiations ,
both parties sitting face to face smiling and crushing each other testicles under the table ,
the first one which stop smiling loose .