In a loud voice so I can hear and using new Crayons, so I can see.
How it is that because Iran has shut off the Straights of Hormuz half way around the planet, stopping ships full of Crude Oil from getting to market, is a reason to jack the price of gas up 20 cents locally, for gas that has already been refined and has been sitting in the underground tanks at the gas station down the street for three days before any of this shit even started?
Because I’m not seeing a good reason for that but it’s the excuse they are using.
Commodities have always been hijacked by speculators and big money traders. Whether it’s oil, corn, lumber, or toilet paper if the greedy maggots can get in the supply chain they will manipulate prices “because of demand you know”. You can always tell if our lords and masters are making money on some scheme if they don’t have laws and regulations to stop something like this.
Pretty much nailed it, John – the “middleman” usually jacks up the prices based on fear so they can rake in the sucker’s money.
Commodity trading – look it up. Quite the scam.
Because they have to make enough off the product they have now to purchase the inventory replacement. This is known as the pricing mechanism in free market.
It is normal and you do it too (buying eggs and milk before a hurricane hits.)
Yeah that ^ x 100. It was $2.49 and shot up to $2.99 in a few hours. WTF man ! Total Boochit…
Say ya got 1000 gallon tank of gas, sells at current prices $2 you make 4 cent a gallon.
Block some oil routes the projected replacement cost for your 1000 gallons is around $3 .now you are gonna loose 92 cents per gallon on the next refill.
Gotta mitigate that inventory replacement cost increase.
Please note that the price rises RAPIDLY during these events, but falls SLOWLY (*if* at all!) after the smoke clears.
What doe this tell you?
Let me introduce you to my little friend called “profiteering”, otherwise known as “get it while the gettin’s good”.
Two thoughts on the “hey I got’s to pay for the next load” trial balloon, how do you square that with starting from the very first load they bought, it was an initial investment to get going, you can’t price that in and then suddenly make it responsible for paying off the next load? Each load pays back the money for itself, first, and anyone convincing you otherwise is blowing smoke to make it seem like a normal business practice, but it is anyways, but not for what we would consider straight line logic, refer to my initial statement.
The second part is “:hey I have to pay a lot for my next load so I don’t want to be holding the bag on sunk costs if the price suddenly drops” (and they don’t think that we remember that next load they are going to get is going to cost less, but they aren’t so quick to mention that flip side of the coin for our benefit, just the side with their boo-hoo-poor-me problem) but now you know how farmers get effocced by commodity price drops at harvest time, andd must use financial instruments to get your own price support insurances.
Each load pays for the next load, not the last one. Youve never run a gas station have you?
Who paid for the first one?
CT kinda glossed that over…
Your grub stake paid for that first tank of gas, the start up money.
It boils down to what is called the futures market. Oil is sold months or years into the future and contracts are written with hedges for supply disruption. If shit gets dicey, the contract values spike. The U.S. can pretty much supply all it’s needs but oil being fungible, that means you can ship it or sell it anywhere to highest bidder, the local refinery suppliers follow the same patterns.
My question is more as to why the U.S. does not have total control over the waterways and every missile site is already turned to dust on the Iranian side and that of any Iranian proxies on the other side. allowing tankers to move unimpeded. The good news is that Iran no longer has any naval assets bigger than a fishing boat. Of course, if you live in CA that is a whole other kettle of fish, you can thank the communist uniparty of CA for your prices and chasing out the two remaining refiners on the west coast. Prolly affects the whole west coast now.
The Iranian Navy base on the Straight was turned to dust yesterday, along with two frigate sized naval vessels. The only threat left to shipping in the Straight is mines. Rumor has it that Iran developed a type of mine that sits on the bottom of shallow water ways waiting for this type of action. It can be activated electronically to wait for a opportunity to explode under a ship big enough to block the route or at least mess with navigating the straight safely, like one of those humongous tankers when it’s inbound or outbound. The Straight has an average depth of around 100 feet.
Then there’s Lloyd’s of London and other maritime insurance companies that have already or are planning to drop insuring ships that pass through the Straight because it’s a war zone.
The mines you are referring to have been arounds for several decades. As a US Navy EOD Tech I was assigned to MCM (Mine Counter Measure) Detachments we hunted Italian Manta mines and others in the first gulf war. They are magnetic, acoustic and pressure mines capable of target discrimination. Meaning they wont go after fishing boats but will go after larger targets that fit the signature profile they are programed for. Now a days the MCM job has been relegated to Under Water Autonomous Vehicles. UWAV have two purposes mine detection and mine destruction. Detectors are sent into the AO and return with the data to support the destructors deployment. A 40 pound explosive charge is all that is required to neutralize a bottom or moored influence mine or destroy a moored contact mine. I would assume the Navy has already been mapping the straight and knows where all the hazards are and will, or may have already taken them out.
Let’s not forget that the Houthis are also lining the shores South of Iran, and they have been supplied with all kinds of surface-to-ship missiles. They hide them in caves, revetments, building, and especially among populations. Gonna be a while before every launcher is found.
However, the Bug Ugly Fat F***er is now able to fly unimpeded overhead, and it carries LOTS of ordnance to flatten said launchers.
See: ArcLight strike.
They can also unload lotsa JDAMs with co-ordinates locked in to make it more spicy for hte fools on the ground, no need to churn up everything in sight. Although, for the idiots along the coasts that might not be A Bad Thing. Just sayin’
Because they can.
I have my tank and jerries full at all times, when I hit the rack the sleep is deep knowing price spikes won’t affect me like those who think the normal will continue into the next day. If everyone kept their tank full with a few spare jerries filled they wouldn’t be beholden to the manipulation of the ‘free market’.
Your mistake is thinking prices are set by the cost of production, which is called a ‘labor theory of value’ (LTOV). Suppose someone drills a test well to see if their house is sitting over a sinkhole. Your LTOV predicts the sale price of the house will increase by the price it took to drill the well, no matter what they find.
Phil, the ships won’t go thru because nobody will insure them under the current climate.
Basic economics always works. Supply and Demand
Sorry Nemo, I didn’t see your post before I posted.
Not always. Basic supply and demand works when there is competition – lots of buyers and lots of sellers.
In the absence of sufficient competition sellers typically charge higher prices than would exist with competitive markets.
That is why we used to break up monopolies and prevent mergers that created monopolies and had very few billionaires.
Open your Econ 101 textbook and turn to chapter 2.
Hey, genieass, those are the things that affect supply and demand. Equal amounts almost produces equilibrium
Here’s one for you, why are monopolies no longer broken up?
“Equal amounts almost produces equilibrium” – Trumpian style jibberish
“why are monopolies no longer broken up?” – regulatory capture
Nice try genieass, it’s because there are sociopathic idiots like you in goobermint who love corporatism who will not pursue it.
I think love is in the air for you and the person seated on the throne.
Morning drinking again? You should stick to your namesake pastry before noon.
If I was in government there would be relatively few mergers. We real Republicans wrote and enforced the first antitrust laws – Teddy Roosevelt and John Sherman.
Trump sells permission to merge (Paramount) like he sells pardons.
As noted before, pump price reflects replacement cost.
Econ, Meet Production.
Some years back, I read a paper that argued that destroying Israel once and for all, and withdrawing from the Middle East militarily, would result in very low US gas prices for the foreseeable future. It was written shortly before the 9/11 attacks. and I don’t think it is on the internet. Unfortunately, I didn’t save a copy of it.
I still think that this would be a good idea(as well as increasing domestic oil and LNG production).
They make up for it by not lowering the price right away when things clear up
See my comment, above.
China is pressuring Iran to reopen the Strait of Hormuz.
There is one problem. Iran did not close it.
Seven insurance companies in London did.
China buys 80% of Iran’s shipped oil. Beijing has a $400 billion, 25-year cooperation agreement with Tehran. China is Iran’s economic lifeline. If any country on earth has leverage over Iran, it is China. And China is now using that leverage to demand the Strait reopens.
But the Strait was not closed by a sovereign decision. It was closed by the withdrawal of reinsurance capacity from five to ten firms, mostly in London, backstopping twelve P&I clubs that cover 90% of global tonnage. Iran did not order those firms to withdraw. Iran cannot order them to reinstate. Neither can China.
Even if Tehran capitulates entirely tonight and the IRGC stands down, not a single reinsurer reinstates Gulf war risk coverage on a phone call from Beijing. Reinstatement requires rebuilt risk models, voyage-by-voyage re-underwriting, repriced treaty capacity, and a threat environment that actuaries can quantify. None of that exists while 440.9 kilograms of weapons-grade uranium remains unaccounted for and the IRGC is still launching drones at Oman.
China has leverage over Iran. China has zero leverage over Lloyd’s of London.
This is the part nobody is modelling. The country with the most to lose and the most leverage over the belligerent cannot fix the mechanism that actually closed the Strait. Because the mechanism is not geopolitical. It is actuarial. And actuaries do not take calls from the Politburo.
read the whole article all here
https://open.substack.com/pub/shanakaans
And another good read you might find interesting.
FREEDOM FALAFELS
https://www.coffeeandcovid.com/p/freedom-falafels-saturday-february
The actual explainable reason for those types of increases is inventory replacement cost. Yes the gas in the tank costs $1.00 a gallon to pit there, but selling it makes them need to buy more, at a higher price.
If they sell you the gas at their normal markup (and taxes, lots of taxes) for $2.80, when the replacement gas is going to cost $1.20 a gallon, they will literally lose money by selling it to you.
Not the stations fault, and their actual profit margins on gas are typically on the level of fractions of a penny per gallon, and the price is set by either their franchiser (Shell, Chevron, BP, etc.) or their supplier.
The rise in oil? That is “justified” by the speculators because even though the US uses almost no Middle Eastern oil for fuel, choking off the supply to Europe makes the demand for ALL oil higher so prices can rise.
You could write a book about it, and people have. It is an interconnected web of logistics and silliness, but if you take all the silliness out, at the end of the day, they are artificially temporarily reducing the world supply of oil, so the price goes up.
Sure, sure, but be aware I learned about this in College Economics back in the ’80s…