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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: i-node who wrote (228517)	4/9/2005 9:22:35 PM
From: neolib	Read Replies (1) \| Respond to of 1578485

I gave you an example refuting your logic that as long as gross margin was staying about constant, "obscene profits" or collusion must not be occurring. Gross margins can stay approximately flat while allowing profits to double. That's all I was trying to show. I'm quite pro free markets, and in the long run, we have not shown any better system AFAIK. But this in no way negates the fact that other factors can have very large, even dominant effects in the short term. The case you list is a classic example because there is a significant time lag as well as a large capital expense in bring significant refining capacity on line. It's precisely this lag in the system that allows speculation to impact short term dynamics spectacularly. Ask yourself what the price of oil and gas would be today if all it took was $ to bring additional supplies to market instantaneously. That would be more a pure market situation. Dollars flowing freely on both sides of the equation. Please note that the fact that one can play commodities either long or short and for various timelines does not in anyway eliminate the lag in bringing new capacity online, or the effect that has on price dynamics.

To: i-node who wrote (228517)	4/9/2005 10:13:42 PM
From: combjelly	Read Replies (2) \| Respond to of 1578485

"If profits are so good, why are no new refineries being built?" Have you seen a refinery? They are big and very expensive. And refineries are just the tip of the iceberg. Oil companies are very vertical, so not only would refineries have to be built, oil terminals secured, distribution established, etc. To get set up would literally cost 10s if not 100s of billions of dollars. And at any point the majors could cut any such fledgling competition off at the knees.