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EYE-BALL on – “Economists” – puppets following the Pied Piper …

September 26, 2011
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Title:
Economists – puppets following the Pied Piper …
The Commonwealth Banks Economist spokesperson has this to say about the falling A$ and petrol prices today.

Weak dollar to bring more petrol pump pain
Posted September 26, 2011 17:04:45

The national average price of unleaded fuel fell to 143.6 cents per litre, but could increase with a weakening Australian dollar. Photo: The national average price of unleaded fuel fell to 143.6 cents per litre, but could increase with a weakening Australian dollar.

The weakening Australian dollar is putting increasing pressure on petrol prices and will force motorists to pay more to fill up their cars in coming weeks.

Figures from the Australian Institute of Petroleum show the national average price of unleaded petrol fell by almost one cent to 143.6 cents per litre last week.

But CommSec chief economist Craig James says pump prices fell in only three of the eight capital cities – Brisbane, Sydney and Melbourne.

He says the falling dollar will lead to more expensive fuel.

“Certainly it’s heading the wrong way for motorists and it’s adding to more pain at the petrol pump,” he said.

“Back in late July the Australian dollar was sitting at around about $US1.10 at that time.

“Now, if we had have held at those sorts of levels, motorists would be paying probably around about 13 cents less per litre or around about $8.50 [less] to fill up the tank with petrol.

“In Australian dollar terms, the Singapore gasoline price has risen by about 1 per cent, so it’s fair to say that the low prices that we’re seeing currently at the petrol pump are going to end over the next week to fortnight.

“Not substantially so, but we are going to see the upward drift continue at petrol pumps around the nation.”

Mr James says there has been some extreme price volatility throughout the states and territories over the past fortnight.

“Canberra prices have risen by over 10 cents a litre – now you’d scratch your head to be able to find out some fundamental justification for that,” he said.

“At the same time, Melbourne prices have been very volatile and in the last week they were down by four cents per litre.

“It could be the fact of competition, it could be other things at play, but it certainly would be good to get the ACCC to ask the question about what is behind the moves.”

Where has Mr James been when the Petrol Retailers have creeped petrol prices 20-30 c/litre since before the GFC?

EYE-BALL Guru has monitored Petrol prices using the basic cost structures – TAPIS spot price, and the  A$vUS$ spot value convert to a A$  value at the Bowser.  Over a period since Mar ’11 – various spot checkers have been done to monitor whether the Jun/July 2008 parameters equating to a bowser price of $1.53 remained in proportional movements.

A table representing these ‘spot checks’ appears below: [link to TAPIS Spot Price] – [link to historical TAPIS prices] …

GFC: Jun/Jly 2008 10/03/2011 19/04/2011 21/08/2011 26/09/2011
Oil Price:TAPIS (US$) $145 $105.00 $128.00 $115.00 $115.46
$A/$US $0.9650 $1.0010 $1.0500 $1.0500 $0.9700
Converted Oil Price (A$) $150 $105 $122 $110 $119
Compariable Bowser Price: $1.53 $1.07 $1.24 $1.12 $1.21
Actual Bowser Price: $1.60 $1.30 $1.53 $1.45 $1.47
PRICE creep: N/A $0.23 $0.29 $0.33 $0.26
$Cost per/day of Price creep: $19,098,852 $23,776,552 $27,570,385 $21,245,234

[used 14million cars/50km p/day average/with 8.5km to litre]

As can be seen from the table above – the price creep equates to daily profit increases to the Petrol retailers in the $10’s millions per day.  Quite a rip-off – and nobody thinks that petrol prices should be on the ACCC watch list.

You would think that a ECONOMIST would be on top of this type of issue. Yet – Mr Clive James gets up in front of the camera each day telling his listeners his opinion on the markets and petrol price predictions. Why does he not do a decent job for his listeners highlighting the Petrol retailers rip-offs as disclosed above.

________________________________________

The EYE-BALL Opinion …

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  1. Herman
    September 29, 2011 at 9:09 am

    I find it particularly hard to take Bank economists. They are scared of being wrong, therefore tend to say little. They want free media, to be seen on TV or heard on radio, and too often confuse, as they try to not make a wrong prediction. They often refer to their econometric models which short and sweet is regression and testing for time series “significicance” or R squared. (Degree of correlation). They try to make out that econometric modelling is a unique science.

    When you can understand that all economics is social science, rational behaviour, then dealing what is either inversely rational or irrational, is the uncertainty. I much prefer pure math to applied math, but know that assumptions in applied math give up all errors because the assumption becomes a law, and disproving that thesis, is pure discovery. The very concept of a normal curve is quite preposterous.

    In the real world economics is not that far from philosophy itself. What is efficient?, What is rational? Why is rationality skewed? If rationality is skewed then what is normal?

    For several years as the External debt of the USA has grown owning gold has been an easy prediction. Instability in the USD where does money go for safe haven? In the last 2 weeks more people have predicted that gold will take out the price adjusted (for inflation) gold high of 1980. That is USD2100 (approx). Now that mainstream commentators are onto it, volatility has increased to the point where we observed a $100 price fall this week. Volatility is much tougher for manufacturing or household sector to deal with than constant increases. Volatility strips mid term confidence factors. It also foretells of bubbles about to burst.

    Since Black and Scholes, volatility is something that can be traded. The banks trade it, and profit from it. Your average wage earner has little idea. In fact to them it is antithesis. Do your job, earn your pay, lead a quiet life, find your real incentive elsewhere. Most of this is the work of Noble Laureate Daniel Kannermann. Daniel Kannerman wrote that markets are not rational, but are irrational in a predictable way.

    Newspaper economists like Ross Gittins are worth their weight in gold. They are not forced to discusss the aberrant ABS or RBA stat in their offerings, and can therefore highlight inefficiency. Much of what Terry McCrann writes is predictable, but too insightful. It offers alternatives. What if…..

    Banks actually fail us by presenting their analysts as Chief Economist or Senior Economists. They are actually trying to imply, “GURU”. They are analysts, analysing data and trying to gain insight.

    I for one will defend the proper use of the term Economist. Daniel Kannermann is a psychologist, and the first to apply psycho-analyst to explaining economic rationality. For that he deserves much fanfare.

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