Government Price Regulations

[HoosierHelen]

This topic is a spin off from another thread. It started with my concern that our agriculture products are under Federal Price Regulations and yet our oil & gasoline products are wide open for future speculators even though they also are recipients of Federal subsidies.


The Eau Claire Rule

The Wall Street Journal Interactive Edition -- November 25, 1997
Byzantine Method of Pricing Milk Won't Be Simplified Anytime Soon

By SCOTT KILMAN Staff Reporter of THE WALL STREET JOURNAL

The lowest price the Agriculture Department will allow

processors in these cities to pay farmers for

beverage-grade milk in December:


City Min. Price City Min. Price

Per Gallon Per Gallon

Eau Claire $1.19 New York $1.37

Minneapolis 1.21 Charlotte 1.37

Chicago 1.22 Atlanta 1.37

Kansas City 1.27 Boston 1.38

Denver 1.34 Tallahassee 1.41

Dallas 1.37 Miami 1.46


Source: U.S. Department of Agriculture


http://www.nd.edu/~mgrecon/datafiles...milkprice.html

Continued on next posting.....

[HoosierHelen]

continued from posting #1....


Nelson pushes for more regulation to lower gas prices

By MORRIS NEWS SERVICE
U.S. Sen. Bill Nelson says the key to keeping gas prices from climbing is tightening regulations on oil speculation.


The price of gasoline averaged $3.09 a gallon on Friday in Jacksonville, and prices have increased by about 50 cents in the past six months.


Oil prices are affected not only by supply and demand, but also by oil price futures, which are traded on the stock market. The value of oil price futures fluctuates depending on what investors think the price of oil will be in the future. When traders think oil prices will increase, they bid higher, and that causes oil prices to increase.


The number of people investing in oil has also increased since the housing market collapsed. Nelson and others have complained that commodities traders drive up the price of oil even when supply increases and demand falls.


Nelson, the only Democrat left in a statewide office, is pushing for more regulation on oil speculation. He argues that gas prices would decrease if the government made it harder to buy and sell a large quantity of oil price futures over a short period of time.
"This is going to be an important issue because people are getting upset again about the price of gas," said Nelson. "The price shouldn't be this high, and I'm trying to do something about it."


In 2008 Nelson sponsored legislation to ban unregulated speculative trading of oil futures and other energy commodities. He blamed gas prices, which were over $4 a gallon at the time, on the practice.


"Clearly, unregulated speculators have bid up oil prices to unbelievable and unacceptable highs," Nelson said in 2008.


That legislation did not pass, but Nelson is now asking the Commodities Future Trading Commission to impose regulations similar to what he proposed in 2008.

http://staugustine.com/news/local-ne...s#.T5FlebNjAUU

[Mr Douglas]

Oil prices are affected not only by supply and demand, but also by oil price futures, which are traded on the stock market. The value of oil price futures fluctuates depending on what investors think the price of oil will be in the future. When traders think oil prices will increase, they bid higher, and that causes oil prices to increase.

So, we can look to all the war drum beating toward Iran as a cause.

[HoosierHelen]

So, we can look to all the war drum beating toward Iran as a cause.

I can't help but wonder, if instead of linking the price of our oil & gas to future expectations based on war drum beating...we based it on an index similar to what we do a gallon of milk (federal regulations based on cost of production and known transport cost), how much less would our gasoline cost us? Also...how much less would our incentive for war be if we all draw that straight line between what we pay at the gas tank and the cost of war with our oil suppliers?

Do I favor Iran and their nuclear capabilities? Of course not! Do I believe we are still capable of influencing their nuclear ambitions? Yes! War with Iran will not benefit either Iran or the US.

I honestly believe there is no need for us to be paying the prices we are paying at the gas pumps if we just get down to basics....as we did with milk prices.

[armyda]

Price controls haven't worked so well in the past. Look at the 70's.

[Todd Ianuzzi]

Price controls haven't worked so well in the past. Look at the 70's.

Price controls work well at keeping prices up. Not so well at keeping prices down.

An idea I had was to establish a gasoline conservation parity price. So if gas is $3.75 per gallon, the conservation parity price would be pegged at $5.00 per gallon. The high price would incentivize conservation, reducing oil consumption. The difference between the $3.75 and the $5.00 would be used to develop replacement sources of energy and incentivize alternative technologies.

Prices would of course fluctuate, but the would always be maintained in the conservation parity price corridor. It would address the demand side and the supply side (other energy sources.)

[HoosierHelen]

It seems that no one chooses to base our price of fuel on actual costs incurred at this time and place of delivery to the customer. Does anyone else see a problem here? ...like...prices being based on fear of future international conflicts that have yet to occur? Geez!!!!

[Common-Tater]

It seems that no one chooses to base our price of fuel on actual costs incurred at this time and place of delivery to the customer. Does anyone else see a problem here? ...like...prices being based on fear of future international conflicts that have yet to occur? Geez!!!!

Well look at Halloween candy. A store pays about 8 cents for one bag of candy. Yet they charge well over 2 or 3 bucks for it. That' s a pretty sizeable profit.

[HoosierHelen]

Well look at Halloween candy. A store pays about 8 cents for one bag of candy. Yet they charge well over 2 or 3 bucks for it. That' s a pretty sizeable profit.

Certainly, Tater, we can compare the cost of Halloween candy to the pricing of a gallon of gas at our gasoline stations. Yet, I admit...I am scratching my head and trying to find this common denominator???

[blue adept]

Well look at Halloween candy. A store pays about 8 cents for one bag of candy. Yet they charge well over 2 or 3 bucks for it. That' s a pretty sizeable profit.

Being in retail, I can tell you this isn't so.

[armyda]

Price controls work well at keeping prices up. Not so well at keeping prices down.

An idea I had was to establish a gasoline conservation parity price. So if gas is $3.75 per gallon, the conservation parity price would be pegged at $5.00 per gallon. The high price would incentivize conservation, reducing oil consumption. The difference between the $3.75 and the $5.00 would be used to develop replacement sources of energy and incentivize alternative technologies.

Prices would of course fluctuate, but the would always be maintained in the conservation parity price corridor. It would address the demand side and the supply side (other energy sources.)

A good point on price controls.

[Common-Tater]

Being in retail, I can tell you this isn't so.

This was the case in 2001 when I workedd for K-Mart. That's been a while, but there's still an insane mark-up on items like this in retail. It's no different when we talk about oil/gas. What it costs to procure, process, ship... doesn't hold a candle to what we pay at the pump.

[blue adept]

This was the case in 2001 when I workedd for K-Mart. That's been a while, but there's still an insane mark-up on items like this in retail. It's no different when we talk about oil/gas. What it costs to procure, process, ship... doesn't hold a candle to what we pay at the pump.

Talked to a friend that sells candy, he says you should continue to be a security guard, as you do not have a clue as to markup. There is no bags of candy that sells for 2 or 3 dollars that costs 8 cents.

[HoosierHelen]

Ironic how price controls work better at holding prices higher, but not so well at keeping them lower. Yes, Army, I do remember the 70's :-(. It seems those who produce the oil will pick & choose their markets where they can sell at the highest price. This isn't working too well for us consumers.

Todd's idea on the conservation parity price holds my interest. Of course telling our consumers they will need to pay more now for that gas so that they can pay less in the future will be a difficult sale.

[Common-Tater]

Talked to a friend that sells candy, he says you should continue to be a security guard, as you do not have a clue as to markup. There is no bags of candy that sells for 2 or 3 dollars that costs 8 cents.

You can disagree without being derogatory. I did say this was in 2001... It's been 11 years. I'm sure the candy costs them a little more now than it did then.... But there are items in retail that have massive mark-ups. And there are items with little to no mark-up. It depends on what sells as a popular item and what's less popular. It's how stores protect themselves agasint items that don't sell well. If you had to ask someoen else, clearly you don't have any first hand knowledge. I do becuase I've done it.

[armyda]

You can disagree without being derogatory.

When you complain about someone else.

clearly you don't have any first hand knowledge.

I'd suggest not following up with attitude yourself.

I will also say I think this is becoming a tendency here. I don't intend to go searching through everyone's posts to show all the bad examples.

[HomeyG]

Blue, as a retailer I think you will agree with me, there are two fundamental thoughts when determining markup, "what the market will bear" and "what's needed to meet your profit margin". Although a hundred percent or more markup seems like a lot of money in actuality its needed to cover expenses and meet that profit margin of around 10 to 15 percent. This holds true if you are selling candy, jewelry or oil.

[michael medeski]

I will also say I think this is becoming a tendency here.

[blue adept]

Blue, as a retailer I think you will agree with me, there are two fundamental thoughts when determining markup, "what the market will bear" and "what's needed to meet your profit margin". Although a hundred percent or more markup seems like a lot of money in actuality its needed to cover expenses and meet that profit margin of around 10 to 15 percent. This holds true if you are selling candy, jewelry or oil.

I agree, and keystone, or 100% markup, used to be industry standard. The difference between keystone, which is basically doubling the money, and what Tater is saying, roughly 30 times as much, is huge. I believe he is either misremembering, or he is totally wrong. My Father worked for the Kraft Candy factory in Kendallville, and a bag of caramels back in the sixties would cost more than eight cents to make. I do not have to research this any more than that. And last but not least, I own and run a retail store, I do believe I know a little more about retail pricing than a security guard.

[HomeyG]

I agree, and keystone, or 100% markup, used to be industry standard. The difference between keystone, which is basically doubling the money, and what Tater is saying, roughly 30 times as much, is huge. I believe he is either misremembering, or he is totally wrong. My Father worked for the Kraft Candy factory in Kendallville, and a bag of caramels back in the sixties would cost more than eight cents to make. I do not have to research this any more than that. And last but not least, I own and run a retail store, I do believe I know a little more about retail pricing than a security guard.

Or there could be another option in that he was figuratively speaking and exaggerating his figures to prove his point.