Jens 'n' Frens
Idle thoughts of a relatively libertarian Republican in Cambridge, MA, and whomever he invites. Mostly political.

"A strong conviction that something must be done is the parent of many bad measures."
  -- Daniel Webster

Thursday, April 27, 2006 :::

This needs editing. It's not getting it:

Does buying something raise its price or lower its price? Does selling something raise its price or lower its price? If you're looking to blame someone for the high price of something, does it make more sense to blame people who are buying or people who are selling?

Suppose, now, that you're a politician. How do you handle unpopular high prices? Suppose that those primarily responsible constitute your electorate. Hint: if you're looking for scapegoats, remember that one particularly baffling (baffled?) strains of populist thought eagerly confuses profiting from an effect and causing it — even though, as illustrated in paragraph A, the opposite is much more often the case.

Incidentally, while no non-government oil producer is large enough to benefit much from trying to drive up prices by withholding oil — and most OPEC countries are running at capacity — it would make sense right now for anyone with storage capacity to sit on oil until Labor Day. Storage costs, to the extent I have a reasonable guess of them, and interest rates are both low enough that, combined with the degree to which futures markets have priced in oil increases, you'd be better off borrowing money and selling the oil forward than selling the oil now. This is part of the reason oil prices are high (though probably an overmentioned one) — the market is signalling to save up oil in fear that supply issues will get worse. (There may be other logistical wrinkles here. Oil companies have a lot of storage capacity, but may well have other infrastructural limitations on how quickly they could deploy it; it could be that they do better just pushing as much oil as they can through their systems and running up their profits now.)

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Idle thoughts of a relatively libertarian Republican in Cambridge, MA, and whomever he invites. Mostly political.

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