Re: How are oil prices set? (Pls. answer my dumb questions) -- basics requested

On Jun 16, 7:09 pm, "msadkin...@xxxxxxxxx" <msadkin...@xxxxxxxxx>
wrote:
On Jun 16, 6:46 pm, allan.san...@xxxxxxxxx wrote:



On Jun 16, 6:18 pm, "msadkin...@xxxxxxxxx" <msadkin...@xxxxxxxxx>
wrote:

I was going to suggest a hypothetical in which a "Martian" asks this
question, but that seems superfluous since the average American (me)
knows about as much as an extraterrestrial might about this question.
Possibly less.

Oil is a commodity produced by many nations and often by many private
companies within each nation. So exactly how is "THE" price of a
barrel of oil determined?

I understand that there are different varieties and grades of oil, but
that price differences between "Brent, WTI, and the Opec basket" are
not large and that "crude prices closely correlate with one
another". For the moment then, rather than be overwhelmed with
detail, let's imagine we're talking about some generic but highly
sought after "oil" that is produced by many countries and many
companies within each country.

Why isn't there a variety of prices depending on who is offering the
product? Or is there?

I understand that the price of oil is denominated in U.S. dollars. Is
this correct, or are there significant exceptions? And is this the
same as saying that oil must be bought using U.S. dollars? I seem to
recall something about Iran requiring payment in Euros or Yen or
something.

I guess this ought to be enough for now, though many questions remain
to be asked.

Please answer directly (no hyperlinks) and as succinctly as
possible. The reason I ask for no hyperlinks is that everybody and
their uncle may have different answers to the question. I could
search the Net myself, but am trying to concentrate the answers here
in this thread. If you don't feel capable of answering this question
personally here, in your own words, then probably your grasp of the
matter is tenuous anyway.

Please note that (mirabile dictu) I have no agenda to advance. This
is not a trap, or a pretext for advancing my own opinions, since I
have none. I may ask pointed questions in response. I may express
puzzlement about apparently contradictory elements. I may request
more detail. I have no axe to grind because I have no basis for any
opinion as yet.

That's about it. Thanks in advance.

You called it a commodity - and the economist would define it as
such. In the most simplistic of terms it is set by supply and
demand. Commodity markets are as close to perfect competition in
terms of price setting as one sees in an imperfect world.

al- Hide quoted text -

- Show quoted text -

I'm sorry, but that's vague rubbish which doesn't begin to answer my
questions.

"Supply and demand" is a vague general principle.

Not to economists.

When different
countries and different companies supply the same basic product,
exactly what mechanisms set the price as demanded by each of these
independent (?) suppliers?

The suppliers are price takers, not price setters.

Why is a barrel of "oil" produced in one
country under one set of economic conditions (including production
methods, labor costs, local supply quantity, and proximity to the
buyer's market) the same price as a barrel of this same "oil" produced
in a different country under a different set of economic conditions?

Because no one gives a poop what it costs you to produce the oil.

Or is it? Why isn't oil produced by different companies, even within
a single country, offered at various prices, if these companies are in
competition with one another? Or is it?

Because its a commodity market - and the market observes the basic
tenets of perfect competition.

Why is there so far only one answer (and that one grossly inadequate)
to a basic question of fundamental importance, in an Internet thread
supposedly read by literally millions of persons all over the globe?

Your ignorance of the concept of commodity and perfect competition are
not indicative of inadequacy in the response.

al

.

Relevant Pages

  • Re: Our Best Wishes
    ... >>>You might recall it was the Democrats who fiddled with the energy bill, ... > farms being built by big oil. ... > Any commodity in demand gets a good price. ... > country that believes in government monopolies. ...
    (rec.outdoors.rv-travel)
  • Re: How to beat China
    ... EFFORTS to cushion China's citizens from rising oil prices are in disarray. ... Low government-controlled prices have led to a fuel-supply crisis in many parts of the country. ... The international price of oil is outside the ... replacement is honesty - honesty does not require policemen, ...
    (sci.military.naval)
  • Re: Can this fucking idiot McCain read a single fucking thing not on a cue card?
    ... American hating bitch reek havoc on this country. ... All the Democrats have done is increased unemployment and gas prices. ... Most of the increase in price of oil is due to the drop in value of the ...
    (alt.fan.howard-stern)
  • Re: Clinton: OPEC can no longer be a cartel
    ... Stop buying their oil? ... leading this country toward energy independence. ... to us at the price that we, not they, think is right. ... works in San Fran and lives across the bay. ...
    (soc.retirement)
  • Re: How are oil prices set? (Pls. answer my dumb questions) -- basics requested
    ... that price differences between "Brent, WTI, and the Opec basket" are ... sought after "oil" that is produced by many countries and many ... companies within each country. ... "Supply and demand" is a vague general principle. ...
    (sci.econ)