Price fixing among tire manufacturers

Jeff wrote:

> ...(as you point out, prices tend to shoot
> up faster than they go down).

If you're a mechanic, you call that the ratchet effect. If you're in
electronics, you call that the diode effect. If you are in hydraulics,
you call that the check valve effect.

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
address with the letter 'x')

Ted Mittelstaedt wrote:

> The reason is there's 2 kinds of cars in a wrecking yard. The first are old
> POS cars
> that engine failed. The people that ran those cars knew they were dying and
> so
> didn't maintain them worth **** - which means they put the crappiest cheap
> tires they
> could find on them.

With treadware ratings of 200 to 350.

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
address with the letter 'x')

"Jeff" > wrote in message
news:FlXej.8266$4m5.4851@trnddc02...
> Jeff Strickland wrote:
>>
>> "Jeff" > wrote in message
>> news:KrUej.8235$4m5.3013@trnddc02...
>>> Jeff Strickland wrote:
>>>> I believe that what yo are noticing is, "what the market will bear,"
>>>> pricing.
>>>
>>> Well, they said that about gasoline prices. They said that people
>>> wouldn't pay more than $2.00 per gallon. Oopsie. The market will will
>>> obviously bear $3.00 gasoline. An oil company can price the gasoline at
>>> $10.00 per gallon if they want. They won't have many takers, though,
>>> unless the gas station is the only one near an airport or in a wide
>>> area.
>>>
>>
>> ... or the other stations nearby also price their gas at $10. Sure, most
>> will not stop and pay that kind of money, but if that is the only number
>> they see, and they need gas, they will have to pay. Granted, they will
>> only buy a gallon or two at that price in the hopes they find another
>> station with better pricing before they get to the end of that load of
>> fuel.
>>
>> Personally, I do not buy into the idea that gasoline is priced on a
>> strictly supply & demand model. I think there is a huge, "why charge
>> $1.00 for one gallon if you can get away with charging $2.00 for a half
>> gallon?" mentality going on.
>>
>> Yes, the price of crude rises and this pushes up the price at the pump.
>> But, I'd suggest that prices at the pump rise faster than the price of
>> crude, and they rise occasionally when the price of crude is falling.
>
> We pretty much agree here.
>
> It takes a few months to go from well to gasoline pump. So the prices at
> the pump often reflect the prices from a few months ago, but usually only
> if the price is going down (as you point out, prices tend to shoot up
> faster than they go down).
>
>> I've even noticed crude prices go up and pump prices remain flat. But,
>> I've noticed on far more occasions that the price of gas shoots up a
>> quarter or so in a couple of days, then floats back down ten or twelve
>> cents over several weeks, all while crude prices have not moved.
>
> Yeah. Stations rise gasoline prices as soon as the cost of the next
> truckload goes up, even if they have enough gas for a week. However, the
> keep the price of the gas up as long as they can. What would you do?
>
>> Rising crude prices should have a fixed affect on prices at the pump
>> because crude is a fixed quantity of oil, and it produces the same
>> quantity of gasoline, no matter how much it costs. So, if a barrel of
>> crude is 55 gallons <or whatever it is> and this much crude can make 20
>> gallons of gasoline <or whatever it can make>, then a rise in crude
>> prices of a dollar should translate to a rise in gas prices of about 3
>> cents.
>
> That's pretty close. A barrel is 42 gal., but after refining, it makes
> nearly 50 gallons of fuel and other petroleum products, because ethanol
> and other additives are added. So each rise of $1.00 in the crude oil
> price should raise the cost of a gallon of gasoline by about $0.02 to
> $0.025.
>
> And the price does clearly stick pretty close to this:
>
> <http://inflationdata.com/inflation/Inflation_Rate/gas_vs_oil_price_comparison.htm>
>
> Obviously, there are other factors at play than just the cost of crude
> oil.
>
>> (I do not know how many gallons in a barrel, not how many gallons of gas
>> a barrel of crude makes, and it isn't really important here. I wanted to
>> illustrate that a dollar change in a barrel of crude works through the
>> system to affect a 3-cent change in a gallon of gas.) The bottom line is,
>> gas prices change for many reasons other than fluctuations in the price
>> of crude, many of those reasons come out of the refineries themselves.
>
> There are many reasons, not the least of which is the desire of everyone
> who sells crude oil and gasoline to sell it for the highest price
> possible. If they can keep the price up, they will. However, the people
> who don't make more profit is the gas stations. Their costs go up about
> $0.01 to $0.02 for every $1.00 the gas goes up, because the credit card
> processing fees are fixed (usually around $0.20 + 2% or so), so when the
> price shoots up by $1, it costs them $0.02 more to pump it when someone
> uses a credit card.
>
> They other things that do affect the price of gas are production problems
> (that's why the price of gasoline went up after the hurricanes in the Gulf
> two years ago), temporary or anticipated shortages when there are refinery
> fires or when the refineries change the type of fuel in the spring and
> winter (winter blend <--> fuel oil for heating houses <--> summer blend
> <--> diesel). Even where the gas station is located affects the cost that
> the gas station pays for fuel (gas stations near interstates or airports
> often pay more for gas than if they are located in small cities away from
> the interstate; gas stations in CA also pay more because it costs more to
> make the fuel mandated by CA law).
>
> Jeff

At least some gas is sold on the commodities market. That really sends the
price structure into the twilight zone.

mg



--
Posted via a free Usenet account from http://www.teranews.com

Edwin Pawlowski wrote:
> "Jeff" > wrote in message
>>> For most things we buy, the cost to produce an item has little to do with
>>> its selling price (companies don't spend billions on advertising every
>>> year for nothing, after all)
>>>
>>> <snip>
>> I would like to see your evidence for this.
>
>
> The evidence is all around you. Look at the clothing and cosmetic industry.
> Then stop off at the jewelry department. It is common in those business to
> have a dealer offer goods at a certain price, then ask what selling price
> you want them tagged and the variation can be 500%. How about the cost of
> making a bottle of beer or wine?
>
> I know a craftsman that makes a wood product. He started selling a
> particular box for $50. When the demand went up, he raised prices to $100
> and found ways to cut the production time from two hours to 30 minutes. Do
> you think he is going to lower his price?

Christ, I hope not!

Jeff wrote:
> Edwin Pawlowski wrote:
>> "Jeff" > wrote in message
>>>> For most things we buy, the cost to produce an item has little to do
>>>> with its selling price (companies don't spend billions on
>>>> advertising every year for nothing, after all)
>>>>
>>>> <snip>
>>> I would like to see your evidence for this.
>>
>>
>> The evidence is all around you. Look at the clothing and cosmetic
>> industry. Then stop off at the jewelry department. It is common in
>> those business to have a dealer offer goods at a certain price, then
>> ask what selling price you want them tagged and the variation can be
>> 500%. How about the cost of making a bottle of beer or wine?
>>
>> I know a craftsman that makes a wood product. He started selling a
>> particular box for $50. When the demand went up, he raised prices to
>> $100 and found ways to cut the production time from two hours to 30
>> minutes. Do you think he is going to lower his price?
>
> Those are particular businesses. In other businesses, like most
> utilities, energy, cars, computers, most services and many food
> industries for the cost to produce a product to be closely related to
> the cost at which a product is sold.

So it costs AM General 5x as much to produce a $100,000 Hummer than it
costs Honda to produce a $20,000 Accord (hey, back on topic!)?

You must be aware why the US automakers loved selling so many SUVs these
past several years - enormous profit margins. It obviously doesn't cost
twice as much to produce a $40,000 SUV than it does to produce a $20,000
sedan.

> Even in each of those industries, the cost of a product has little to do
> with the selling price (the cost of a 32 oz of soda that is sold at a
> fast food restaurant is less than 10% of what the restaurant gets for
> it), but for most industries, the cost of producing a product is a major
> determining factor in the cost of the product. Otherwise, more and more
> people would get into making the products, ultimately driving the cost
> of the product closer to the cost of producing the product.

This is fine in Adam Smith's world of free entry/exit from a business,
no other barriers, etc. The real world is quite different, of course.
What might be the startup cost for bottling soda, or opening a new car
dealership, etc.?

There are some highly competitive industries, of course, e.g., the
commoditized PC business that you mentioned, which is why I didn't say
"all" in my original post. But even in the personal computer business,
laptops and Apple are exceptions.

Finally, please don't claim any significant advantages to the consumer
from any putative competition in the oil & gas industry - Exxon Mobil
hasn't posted record profits the past few years because they're cutting
prices to the bone.

The recently retired CEO of Exxon Mobil had an attractive retirement
package, of course, in the neighborhood of $400 million.

http://abcnews.go.com/GMA/story?id=1841989

Edwin Pawlowski wrote:
> "Jeff" > wrote in message
>> Those are particular businesses. In other businesses, like most utilities,
>> energy, cars, computers, most services and many food industries for the
>> cost to produce a product to be closely related to the cost at which a
>> product is sold.
>
> I don't think that is exactly what you mean. The cost of raw material
> affects the cost of goods sold to some extent. Most industries have an index
> of some sort. If the price of a barrel of oil goes up $1, the price of a
> pound of plastic goes up 1¢ a pound. If the price of a bushel of wheat goes
> up $5, the loaf of bread goes up 6¢. That allows the company to maintain
> the same margins, but still may or may not be close to the cost of
> production.
>
>
>> Even in each of those industries, the cost of a product has little to do
>> with the selling price (the cost of a 32 oz of soda that is sold at a fast
>> food restaurant is less than 10% of what the restaurant gets for it), but
>> for most industries, the cost of producing a product is a major
>> determining factor in the cost of the product. Otherwise, more and more
>> people would get into making the products, ultimately driving the cost of
>> the product closer to the cost of producing the product.
>
> The cost of making the first Ritz Cracker or steel beam is what stops most
> of us from starting a business. Many items that sell for pennies require
> huge up front investments. It is laughable when people talk about corporate
> greed and obscene profits.

Which planet are you from again?

> Sure, some company fall into that category, but
> most do not. Corporations have an obligation to be profitable and maintain
> a safe workplace, pay their bills, etc. Our company maintains a large
> inventory of finished goods. People look at it and make the statement that
> "you guys must make a lot of money". Then we walk by the machines and I'll
> ask what they think the gas bill is to operate. Most guess at $1000 or so.
> Then I show them a $30,000 bill for the month.

Yeah, and?

clare at snyder.on.ca wrote:
> On Mon, 31 Dec 2007 23:47:33 GMT, Jeff >
> wrote:
>
>> I would like to see your evidence for this. For gasoline, most of the
>> cost is the crude oil, refining, transportation and cost of selling the
>> fuel, like operating the station and taxes. For electricity, it is for
>> the coal, oil, or carbon-containing substance or uranium or the cost of
>> the dam, windmill, or solar panels, the cost of transmission and the
>> cost of billing.
>
> Mostly taxes. And don't forget theprofit demanded by the shareholders.
> The price of Gasoline has VERY little to do with the cost of crude.
>> For computers, almost all the cost is the cost of the raw ingredients
>> (e.g., CPU, motherboard, disk drive) and putting the computer together.
>
> Don't forget the HUGE advertizing budget of companies like DEL, HP,
> APPLE and others.
> Today you are pretty close with your assessment, but 10 - 20 years ago
> you would have been SO off-base!! The price you paid for a computer
> had everything to do with what the public was WILLING to pay, and
> nothing at all to do with the cost. I was in the business then. I SAW
> the OBSCENE profits made by some companies - particularly in the
> higher end mini computers (bigger than PCs).

You need to chat with Edwin.

clare at snyder.on.ca wrote:
> On Tue, 01 Jan 2008 13:39:48 GMT, Jeff >
> wrote:
>
>> You're so full of crap! The price had nothing to do with the cost? I
>> hate to tell you this, but very few companies sell their goods for less
>> than it costs them. Those that do, don't do so for long.
>>
>>> I was in the business then. I SAW
>>> the OBSCENE profits made by some companies - particularly in the
>>> higher end mini computers (bigger than PCs).
>> The same thing is true today. If Dell could charge $4000 for a computer,
>> it would. But, the problem is that HP, Levono, Acer and others will sell
>> the same computer for about $2000. Guess where the costumers go.
>>
>> IBM and other companies are making a nice profit they way they made
>> profits years ago: in services (like web services) in addition to the
>> cost of the computers they sell.
>>
>> One of my New Year resolutions is not to keep responding to people who
>> say nonsense. When you are able to say something that makes sense, I
>> will respond. Until then, bye bye.
>>
>> Happy New Everyone!
>>
>> Jeff
>
> Not full of crap at all.
> I was in the computer business then.

So what? So was I and millions of other people, no one was *the*
computer business.

In article <coNej.16072$DG4.2865@trnddc04>,
says...
> Gene S. Berkowitz wrote:
> > After "consumption" by a mammal, water is excreted, but is combined with
> > salts, sugars, acids, and proteins. It is then no longer fit for human
> > consumption. You can't drink urine, at least not for long, without
> > destroying your kidneys.
>
> I disagree.
>
> You can drink your own urine or the urine of someone else. It is
> contaminated on the way our of the body in the urethra, but while in the
> bladder, ureters and kidneys, it is sterile, unless there is an infection.

I never said it wasn't sterile. Here's the problem:
The normal saline concentration of human blood is about 9,000 ppM.
The saline concentration of human urine is about 22,000 ppM.
If _all_ you drank was your urine, the saline concentration of your
blood would rise; normally your body deals with this by dilution,
adding more water (you get thirstier). So, you have another glass of
urine. Now, remember, you're also losing water via perspiration and
respiration. Sooner than later, you will collapse from dehydration.

> If you drink your urine, the stuff in the urine will further
> metabolized,

Excess salt doesn't get metabolized any further. It will just get more
concentrated.

--Gene

"Ted Mittelstaedt" > wrote in message
...
>
> "Duncan" > wrote in message
> ...
>>
>> "Ted Mittelstaedt" > wrote in message
>> ...
>> > Hi All,
>> >
>
> Chances of finding a decent set of FOUR in a wrecking yard are next to
> nothing.
> The reason is there's 2 kinds of cars in a wrecking yard. The first are
> old
> POS cars
> that engine failed. The people that ran those cars knew they were dying
> and
> so
> didn't maintain them worth **** - which means they put the crappiest cheap
> tires they
> could find on them. The second type of cars are new nice cars that got
> smashed up.
> What happens with those is if the tires are really nice, really expensive
> tires, the places
> that sell used tires (there's a few in our area) all have deals with the
> yards where they

They don't all have deals. Most wrecking yard sell their own tires right in
their own front office, at least the good sets.


> get called when those cars come in and they get first dibs on them.
> Otherwise they
> go right into the yards. And 90% of the time, 1 of the quadrants of the
> car
> is really
> smashed up bad, and that side wheel and tire are hashed.
>
> If the car has aluminum mags, the yards immediately dismount the tires and
> throw them
> into the big pile of old tires and they go off to the tire recycler, and
> the
> aluminum
> mags go to the smelter. My van has aluminum mags. If they have steel
> rims,

No such thing, you either have aluminum wheels or you have magnesium wheels
(mags) you do not have aluminum "mags" (magnesium) wheels. "mags" is short
for magnesium alloy wheels, not "fancy" aluminum wheels.

Magnesium alloy wheels, or mag wheels, are sometimes used on racing cars, in
place of heavier steel or aluminium wheels, for better performance.
http://en.wikipedia.org/wiki/Magnesium_alloy_wheel

> they sit,
> on the rims, until the steel price on mixed metal goes up, and then the
> wreckers start
> smashing cars and throwing the rims and tires in with the steel that goes
> off to the steel
> shredder.
>
> Sometimes you can find a set of TWO or THREE nice tires with less than 20%
> treadwear
> on them. You will be competing with the Mexicans in the yard who are
> looking for cheap
> tires for their beater cars of course. They will still
> be on the steel rims and your going to have to pay to have them
> dismounted.
> And, there
> will be no road hazard warranty on them so a year down the road if one
> goes
> flat, your
> going to be paying for a flat repair, and if one gets punctured to where
> it
> can't be fixed,
> your going to be headed back to the wrecker to find another.
>
> The wreckers are fine if your just looking for ONE tire that matches a set
> that you already
> have, for example, you ran over a pothole and destroyed the tire sidewall
> of
> a set of 4
> that are worn down only 15% or so. The alternative is of course buying a
> new set of 2
> tires to get even tread on both sides of that axle.
>
> Ted
>

Today, I would never purchase used tires, the safety issue is just not worth
any possible savings, period.