Monday, January 23, 2012

Monday Links

1. Want the Lowest Possible Airfare? Buy your ticket six weeks before your flight according to a recent study.

2. In one of the starkest signs yet that chain stores fear a new twist in shopping, Target is asking suppliers for help in thwarting "showrooming"—that is, when shoppers come into a store to see a product in person, only to buy it from a rival online, frequently at a lower price.

3. Aspen judge sentences 76-year old man to jail for 15 days for operating an unlicensed taxi service.  The senior citizen said he does not operate a taxi for profit but merely enjoys giving friends and service-industry workers a ride home late at night. The money he collects pays for gas and upkeep on his vehicle. (HT: Armin Ghazi)

4. Here's a link to Alltop, a pretty cool aggregating website for economics blogs (including CD).  You can register and customize your selections for only the economic blogs (or general news websites) that you want to read on a regular basis.

5. Chart below is from the WSJ showing how crude oil and natural gas prices have been diverging since the last week of 2008.


6. North Dakota's oil boom is fueling an energy-related education boom in the state.  The North Dakota State Board of Higher Education just approved the creation of a new department of petroleum engineering at the University of North Dakota in response to the needs of the petroleum industry, especially in western North Dakota.

18 Comments:

At 1/23/2012 2:36 PM, Blogger Buddy R Pacifico said...

When natural gas and oil prices diverge then:

natural gas producers are making money on liquids produced from natural gas production. Liquids such as propane, butane, ethane etc. are rising in price as proxies for oil.

 
At 1/23/2012 2:54 PM, Blogger Jon Murphy said...

In response to number 2:

I like how they're not even being subtle about it any more. They're just coming right out and saying it: We don't want you to shop around at other stores. I believe there is a bill before Congress right now (I could be wrong, it may just be a proposal) that would outlaw price comparison apps on smart phones.

 
At 1/23/2012 3:21 PM, Blogger Benjamin said...

On North Dakota education: I like it but...should not the private sector create schools that would give degrees or credentials in petroleum engineering?

How about students get education in exchange for apprenticeship at oil companies?

When you think about it, the public taxpayers pick up huge bills to educate workforces, nationwide....should be job of those who want to do the hiring....

 
At 1/23/2012 3:25 PM, Blogger Jon Murphy said...

I agree with you Benjamin. In my perfect Libertarian world, there would be no state schools.

But regardless, the state school system does exist and I am glad to see it adapting to an increased demand.

 
At 1/23/2012 4:39 PM, Blogger VangelV said...

When natural gas and oil prices diverge then:

natural gas producers are making money on liquids produced from natural gas production. Liquids such as propane, butane, ethane etc. are rising in price as proxies for oil.


Liquids production helps but only if there is sufficient capacity to handle the production and a way to transport it cheaply. In no particular order here are a few problems with the shale gas story.

• Even if we accept the most optimistic scenario we find that shale plays are marginally economic.

• The SEC filings continue to show that shareholder equity has been destroyed by operations even though producers have hedged at much higher prices.

• If you look at the 10-K filings you find that the marginal cost of production is around $7.50-$8.00 per Mcf.

• Most shale gas players are predominately working in core areas that represent less than a quarter of the total resource. At least 75% of the rest will have to be written down eventually. If the SEC rules are changed to reflect the pricing reality, the impact using boe equivalence will be close to 350% of the claimed reserve for the large oil companies that used shale acquisitions to mask their depletion problems.

• The above point does not begin to take into account that reserves have been over-stated and that the value of undeveloped reserves is extremely low.

• The hyped up moves to liquid-rich shale plays has not been producing very good results so far. Depletion rates are very high and well costs are astronomical.

I am sorry but there is no way to spin the shale results into something that is very positive. There are some very good core areas that are productive and profitable. But they are a tiny portion of the shale formations that are being hyped up and have a very limited life that is measured in years, not decades. Sadly, the hype that the producers are using to promote most of their worthless stated reserves is the very thing that is keeping their core areas from making profits.

 
At 1/23/2012 4:44 PM, Blogger VangelV said...

How about students get education in exchange for apprenticeship at oil companies?

The apprenticeship is their education. Knowing how to handle a welding torch or deal with machinery is far more marketable than the crap that most kids are taught in school. Of course, if the schools were private there would be a much better match between skill requirements and education. The kids that are better at school would go on and learn the math and science they need to become engineers while the rest become skilled pipe fitters, welders, carpenters, mill workers, etc. Everyone would be happier.

 
At 1/23/2012 11:57 PM, OpenID Sprewell said...

Jon, to be fair to the retail chains, they built those massive stores when there wasn't much online competition and it isn't fair for the shopper to use their stores to try out what they want, paying them nothing, then buy it online. I think the future is for these stores to become actual showrooms for the products that need to be seen in person, charging $5 to try out the latest smartphones and tablets and sofas, while the actual sale will take place online. There's no real need anymore to have a one-stop shop where you can both try something out and take it home with you, as the two are better off split up. Rather than make this transition however, the retail chains are largely kicking and screaming to stupidly maintain the status quo, which is why they will likely all go bankrupt, as Borders and Circuit City already have. They just have too much money invested in massive amounts of retail space, which a pure showroom would only need a fraction of, and too stubbornly cling to their existing process to think rationally about how to transition to this new market.

I actually thought the most provocative part of that article was how they claim Amazon has "reinvented the model." That analysis seems equally dumb, as Amazon does not and will never make enough money from online data storage to subsidize the rest of their business as a "loss leader." Frankly, there are too many dumb models out there masquerading as loss leaders, whether Google dumping billions into Android or Amazon losing money on the Kindle, when these businesses should be thinking harder about how to eke out some profits.

 
At 1/24/2012 8:28 AM, Blogger VangelV said...

Jon, to be fair to the retail chains, they built those massive stores when there wasn't much online competition and it isn't fair for the shopper to use their stores to try out what they want, paying them nothing, then buy it online.

Fair? The consumer has every right to pay the best price he can get. If the chains want to stay in business they need to cut their prices and offer value by improving their service.

 
At 1/24/2012 9:36 AM, Blogger Jon Murphy said...

From what I understand, Sprewell, this isn't about brick-and-mortar stores vs. online stores.

What Target and others are trying to prevent is consumers from looking on their smartphones and computers for the lowest prices in the vicinity. There are several apps that will tell you what local stores are charging for, say, an Xbox 360. At that point, all these other stores are nothing but "showrooms."

 
At 1/24/2012 2:06 PM, OpenID Sprewell said...

Vange, where did I oppose "The consumer has every right to pay the best price he can get?" As for the chains, that's precisely what they're trying to do: improve their value by getting more exclusives and the same prices as the online dealers. But just like the restaurants facing new competition from lunch trucks, the fact remains that the retail chains have a bunch of fixed costs stuck in their real estate and leases, not to mention a bunch of retail employees that aren't necessary anymore, so they're not going to make the transition well.

Jon, sounds to me like it's precisely "about brick-and-mortar stores vs. online stores." I don't think it's about other local stores, as price-sensitive consumers could always get local prices from other stores by calling them or through the ads they still stuff down your mailbox. The whole reason they're talking about "showrooming" is because the online stores have no showroom, so the local stores become their free showroom.

 
At 1/24/2012 9:05 PM, Blogger sethstorm said...


3. Aspen judge sentences 76-year old man to jail for 15 days for operating an unlicensed taxi service. The senior citizen said he does not operate a taxi for profit but merely enjoys giving friends and service-industry workers a ride home late at night. The money he collects pays for gas and upkeep on his vehicle. (HT: Armin Ghazi)

Now had he operated the service for the well-heeled members of that community, they'd have given him a license.

 
At 1/24/2012 9:07 PM, Blogger sethstorm said...

This comment has been removed by the author.

 
At 1/24/2012 9:09 PM, Blogger sethstorm said...


The kids that are better at school would go on and learn the math and science they need to become engineers while the rest become skilled pipe fitters, welders, carpenters, mill workers, etc. Everyone would be happier.

People would have less freedom due to the forced education banding. You would be condemning people to lifetimes of low-wage, low-freedom drudgery.

 
At 1/24/2012 9:15 PM, Blogger VangelV said...

Vange, where did I oppose "The consumer has every right to pay the best price he can get?" As for the chains, that's precisely what they're trying to do: improve their value by getting more exclusives and the same prices as the online dealers. But just like the restaurants facing new competition from lunch trucks, the fact remains that the retail chains have a bunch of fixed costs stuck in their real estate and leases, not to mention a bunch of retail employees that aren't necessary anymore, so they're not going to make the transition well.

No, they will not make the transition well. Consumers will demand the lowest prices and few of the high margin retailers will be able to survive.

 
At 1/24/2012 9:16 PM, Blogger VangelV said...

Except for the fact that it'd end up meaning that people would have less freedom due to the forced education banding.

Forced banding? I am talking about allowing kids to get an education that is useful to them. Just how much freedom do you think they have when they graduate without being able to read and write properly, have few marketable skills and the inability to think critically because the public school monopoly failed them?

 
At 1/25/2012 1:59 PM, Blogger sethstorm said...


VangelV said...

Except that the choice won't be directly made by them. But don't let that stop you from throwing some snark about them making the choice through some indirect/amorphous/unassailable criteria.

 
At 1/25/2012 2:14 PM, Blogger sethstorm said...


VangelV said...

Thus consumers are their own worst enemy; in the same construct, you make them unassailable in that anyone attacking is automatically considered fair game for tyranny of the majority.

The cheapness will make things worse off in quality and construction, whatever it is. Thus such must be stopped.

 
At 1/25/2012 5:01 PM, Blogger VangelV said...

Except that the choice won't be directly made by them. But don't let that stop you from throwing some snark about them making the choice through some indirect/amorphous/unassailable criteria.

In a free market the choice will be made by students and their parents. That is not the case in the government monopoly schools that are dominated by incompetent teachers and bureaucrats who don't care about the quality of education.

Thus consumers are their own worst enemy; in the same construct, you make them unassailable in that anyone attacking is automatically considered fair game for tyranny of the majority.

Consumers choose what they consider to be their preferred option. They are certainly more capable of guessing what that is than corrupt and incompetent bureaucrats that are not accountable to them.

 

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