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Sick of high energy prices? You may soon have more relief than you'd like.
After two commodity price spikes in four years, $100-a-barrel crude and $4-a-gallon gasoline are starting to seem like the new normal -- the price we pay, unhappily enough, for an expanding economy. Every twitch in the Middle East sounds the alarm for a new oil shock.
But those cursing the wallet-thinning impact of high energy prices should be careful what they wish for. Sagging economic expectations, after all, are the likeliest route to lower energy costs, as we have seen with the recent decline in oil prices.
Retail gas prices haven't come down much yet, averaging $3.91 a gallon at last check -- a sign, says oil watcher Richard Soultanian, that "maybe even the refiners don't trust the pullback in crude prices." But if current trends continue, the pullback could go further than people expect.
There are plenty of signs economic growth is slowing. U.S. gasoline demand has fallen more than 2% over the past year, suggesting that high prices have already started to weigh on the economy. Uber-bear David Rosenberg cites recent declines in architectural billings, small business optimism, house price and manufacturing indexes. Goldman Sachs strategists note that while manufacturing employment has rebounded, recent gains are proceeding at just a quarter of the pace of the average monthly manufacturing job loss (a depressing 52,000) over the past decade.
Oil Price Drops Below $100 a Barrel: Gas Continues to Go Up
Gas prices continue to rise -- even while the oil used to make it drops in price, say analysts.
The national average price for gas this week is $3.96, according to the Department of Energy.
Hawaii still has the nation's most expensive gasoline as of today, but the nation's heartland is catching up. In Illinois, the average price is $4.32 a gallon, according to AAA's Daily Fuel Gauge Report. That's even higher than the average in California, $4.27, which is known for its high pump prices.
Indiana is catching up with an average of $4.24 for regular gas.
At least drivers in those states are facing cheaper prices than those in Alaska. At one gas station in that state, gas was selling for $6.79 a gallon.
To top those prices, just head to the car rental counter. You may face $9.29 a gallon if you don't prepay for gas or fill up the tank yourself. With an 11-gallon tank in one car, for example, car renters could pay about $100. For larger vehicles, it could cost over $280.
Gas prices going down? Not so fast
Updated: Tuesday, 10 May 2011, 9:47 PM EDT
Published : Tuesday, 10 May 2011, 9:47 PM EDT
ORLANDO, Fla. (WOFL FOX 35) - Some reports have indicated that consumers could see a roughly 50 cent drop in prices at the pump in coming weeks, but at least one central Florida economist says don't expect that to happen any time soon.
It happens every time the rising price of crude oil pushes a gallon of gasoline toward $4 in the U.S. -- the debate over the role of speculators in commodities markets grows louder and sharper.
Do speculators -- that is, traders who purchase futures contracts purely for profit and with no intention of taking delivery of the product -- play a necessary role in creating liquid markets for everything from oil to orange juice? Or do they manipulate prices for their own benefit often at the expense of consumers?
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι (oligoi) "few" + πωλειν (polein) "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market participants.
In an oligopoly, firms operate under imperfect competition. With the fierce price competitiveness created by this sticky-upward demand curve, firms use non-price competition in order to accrue greater revenue and market share.
"Kinked" demand curves are similar to traditional demand curves, as they are downward-sloping. They are distinguished by a hypothesized convex bend with a discontinuity at the bend–"kink". Thus the first derivative at that point is undefined and leads to a jump discontinuity in the marginal revenue curve.
Classical economic theory assumes that a profit-maximizing producer with some market power (either due to oligopoly or monopolistic competition) will set marginal costs equal to marginal revenue. This idea can be envisioned graphically by the intersection of an upward-sloping marginal cost curve and a downward-sloping marginal revenue curve (because the more one sells, the lower the price must be, so the less a producer earns per unit). In classical theory, any change in the marginal cost structure (how much it costs to make each additional unit) or the marginal revenue structure (how much people will pay for each additional unit) will be immediately reflected in a new price and/or quantity sold of the item. This result does not occur if a "kink" exists. Because of this jump discontinuity in the marginal revenue curve, marginal costs could change without necessarily changing the price or quantity.
The motivation behind this kink is the idea that in an oligopolistic or monopolistically competitive market, firms will not raise their prices because even a small price increase will lose many customers. This is because competitors will generally ignore price increases, with the hope of gaining a larger market share as a result of now having comparatively lower prices. However, even a large price decrease will gain only a few customers because such an action will begin a price war with other firms. The curve is therefore more price-elastic for price increases and less so for price decreases. Firms will often enter the industry in the long run.
Originally posted by ripcontrol
I see the challenger that calls this out on those in charge now having a new title in 2013...
President of the United States...