Prius Price Gouging !!!!

In general I agree with everything you say, up to a point. One of the big issues (IMHO) in today's market is that when we, the people, cut back on usage one would expect the price to drop due to less demand. The problem, as I see it, is that when we cut back on usage, the "oil companies" cut back on the production of gasoline. Thus, the ratio of supply and demand stays the same. And, the price stays high.

Just my $0.02 worth...

Bob

 

nah, what happens is the developing world takes up the excess. China and India, in particular, are growing rapidly and have a voracious appetite for oil. They're becoming more like us everyday, and unfortunately, are making many of the same mistakes. Can't blame'em though. It's nice having personal transportation. In fact, that's so nice that I'm pretty hopeful that the demand for such luxuries will drive innovative technologies... because oil, esp the cheap and easy oil, is getting scarce.

 

Rick, I agree. The individuals got themselves in a pickle, but it goes far beyond that, as you know. The buying and selling of loans (think Merril Lynch, Bears 'n Sterns, etc) and corporate greed/stupidity is really causing the whole country a bit of economic pain. Now those asshats want a bailout after they snarled at the fed for wanting to regulate them. This latest fiasco and the Enron collusion/fraud shows the dark side of unfettered capitalism. Capitalism with gov't oversite (not over regulation) is a good thing. Completely unregulated capitalism is what created unions and labour laws.

I agree completely about the whinging about oil prices. It's basic economics. I'm not sure about the windfall taxes... those costs will just be passed on to us. On the other hand, massive gov't subsidies kept Exxon in business in the late 90's. They really shouldn't get it both ways. If we want free markets in energy we'll have to get rid of billions in subsidies to coal/gas/oil.

 

What we are seeing is similar to what we saw with the dotcom bubble. The difference being I can live without buying over priced AOL stock but I can't do without oil. Speculators are creating false demand for a commodity that has been finely tuned to stay in balance with demand. Because the oil market has little margin for error its easy to mess with supply and demand and have big impact on prices. Just like when OPEC cuts back supply, prices rise.
The whole deal reminds me of when Hunt brothers tried to corner silver market back in 80s.
Simply stated its a bunch of pricks screwing with the market.

 

Why is selling over MSRP "Price Gouging" and selling under MSRP "a Good Deal"?

Of course, if a person had a used Prius to sell, they would refuse the additional cash that they could make due to demand? I didn't think so.

 

It's called "scarcity economics". Because of the perception of scarcity, those investors are buying at any price now because of the fear that NONE will be available later to buy, at any price. There are also speculators on the market, to be sure, that are betting the prices will continue to go up- just as there were speculators in the housing market- betting prices would continue to go up and that all those wonderful "no down payment interest only loans" could actually be a good thing.

You stated "And by the way, with a higher price, supplies of oil will be preserved for the future instead of a relatively sudden major scarcity of the commodity." That is not necessarily true. If you've been watching the market as I have, you'll notice that while the prices go up and down within the space of a few days, the price for oil is way up, and NONE of the market commentators feel it will EVER go back down to what it was even a year ago.

You also stated "Yet you state you somehow have inside knowledge that there is no shortage of oil. You claim that the investors AND the buyers (Exxon, Mobil, Shell, end consumers, etc.) have it all wrong. You seem to be so sure..." The fact of the matter is that published numbers of both usage AND production between last year and this year at this time are virtually unchanged. Perhaps if you spent less time congratulating yourself on your uninformed opinions and actually spent some time reading MSN Money or even a newspaper you would know what I am saying is true.

As for whom I want controlling oil- I would much rather have the government control it than the oil companies, who only control it to make handsome profits for their executives and their investors. At least the government is mandated by law and the constitution to manage things for the public good. Of course, with idiots like the one currently in the white house, all bets are off on that.

:brushteeth:

 

Whether it's oil or Prii, the same general supply/demand free-market equations rule.


Yes, one difference is that there are fewer speculators or hedgers in Prii; although I'm sure there are a few on waiting lists intending to flip their Prius.

But many who blame speculators for high oil prices neglect to consider that there are speculators on the short side also, those who "bet" that oil prices will go down, whether in short or long term. Sometimes ths shorts get "squeezed" which puts upward pressure on price, but that is always temporary.

It's funny that the car business is different from many retail businesses for "durable goods", for example department stores. In a dept. store it's unthinkable that sales would be made ABOVE MSRP (Manus SUGGESTED retail price). It may not be law, but dept store policies are to ensure that nobody pays more than what head office says, even in a small town store part of a large chain. Yes, an individual store might offer an extra discount, but even that is rare among nationwide chains.


But it's a free market and each company makes their own decisions. Consumers don't usually complain too much when they get a $5-10k discount off of MSRP on a slow selling vehicle. (Like big trucks and SUVs now).

 

I did exactly what you are thinking of. I had my heart set on a Prius, but have never paid MSRP for a car. So, I took advantage of Honda's 2.9 financing to get an 08 Civic EX. The dealer was also willing to dicker on price, so I was able to come very close to what Consumer Reports listed as a target price. I will be keeping the Civic in as close to new shape as possible, then trade it in for a Prius a few months after the 2010's come out.

 

Boulder Totota is not dealing but Stapp Interstate Toyota (Longmont / Frederick) is. Ask for Bruce. $1000 difference between the two on a Prius with package #2.

 

It's the same reason as in high school.

"I got an A"
"She gave me a D"

It's all about perspectives...

 

While I make no claims regarding the competence of the current administration, I (and I trust even many of my far left of center friends on this board) find it incredulous you actually believe the likes of Obama or ANY other government entity would be able to control oil, oil production, distribution, and the literally thousands of other operations regarding the production and distribution of oil efficiently. And you really believe the government would run an oil operation (if they even could) and not make a profit? Foxes guarding the hen house come to mind.

Your stripes are really beginning to show. You criticize and show disregard for the "handsome profits" of those employed and those investors who risk THEIR own capital to even make such companies exist. Should we not have incentives to make profits? Should the government dictate how much profit one individual or organization can make?

Rick
#4 2006

 

As in every market, something is only "worth" what others are willing to pay for it. Your house (for example) is not "worth" what you paid plus some percentage if no one will buy it from you at that price. Similarly a Prius is "worth" whatever premium over MSRP someone is willing to pay. If no one is willing to pay a certain price, the price goes down or the item will not be sold. As to paying a huge premium over MSRP, didn't P.T. Barnum say there is a sucker born every minute?

 

Ultimately, the Buyer controls the process. If a buyer considers the cost excessive, the buyer has the option of walking away.

 

Actually I think the government COULD do better, if they tried. Other governments (think Mexico and several other South American countries for starters) actually DO control oil production and distribution, and their gas prices are quite a bit lower than ours. And I never said they shouldn't make a profit. I object to the obscene profits the oil companies are pocketing. Their own accounting documents show total profits in the range of 35+ BILLION dollars last quarter alone, with far less than 10% of those profits being plowed back into maintenance, construction of new facilities, and research and development into new alternative fuels and/or new drilling sites. They (and every intelligent person on the planet) KNOW that the day is coming when current wells will dry up. Oil is a non-renewable resource. Yet the oil companies went hand in hand with the car companies to kill the electric car years ago, when switching over to electric would have been much more beneficial to the environment and might actually have been able to help ward off global warming.

As for my "stripes" beginning to show- well you must need to put on your glasses. My stripes have been the same from day one. There's nothing wrong with being on the side of citizens and the consumers in general - especially when the ogre opponent is a money-grubbing, super greedy corporation with billions in profits they don't use for the good of their employees or customers. Those corporations don't need my advocacy- they've got greasy scum lawyers and lobbyists to plead their cases in court and in the halls of the government. And will Oil Men in charge in the white house, they don't even have to work too hard to get what they want- more profit for themselves at the expense of the lower and middle classes, the raping and pillaging of the land, and above all NO QUESTIONS asked about their business.

I'd say you are the one showing your stripes, and your lack of concern for our planet and its citizens.

 

This is true and not true. Actually there is NOT any less oil on the market this year as compared to last...but there is more demand on the market this year than last thus there is less for each and every one of us. There will be more demand next year and the year after and the year after that .... forever, as the world develops and grows.

But there will not be more and more oil available each and every year. That's the problem in a nutshell. Demand is beginning to outstrip supply so prices go up. It's not the demand from the western world, it's the developing world that wants our lifestyle. Look at the stats on OilDrum.com. Look at the charts. For the last two years our supply has leveled off but demand has continued to grow.

The producers and refiners are living on the cutting edge of balance. A small shift causes severe disruptions and imbalances.

 

IMO that's actually good business practices but with this latest surge in crude oil prices something else is at work. I too think that there's a segment of speculation in the price of oil today, but it doesn't matter to me because it's always been there and at some time it will balance out.

But speculation doesn't account for the entire increase, WE the users do. If an Ayatollah wants to jack the price of oil ( because it's they who benefit the most ) and you and I and the residents of China, India and Thailand all agree to pay the Ayatollah's price then that is the correct market price. They offer a price and we agree to pay it.

One scary thought to consider. It doesn't matter what you or I here do!!!

Aas Tripp noted previously, if we all saved 10% of our current fuel usage prices still wouldn't come down in the long term. India and Asia and China in particular are growing so fast that they'd suck up every drop we saved and we'd still be short of oil with demand outstripping supply.

The only way to get out of this cycle is to get off oil entirely. Marginalize it. Make it a non-issue.

 

Rick is my new hero. Well said.

 

Maybe you should check your history a little more thoroughly ... unless you consider the 1960's to be "fairly recent."