The Law of Supply and Demand At Work

[Thomas Rogers]

"Collective bargaining" is collective bargaining. Union employees do it for better wages and benefits while Oil producing countries do it in order set prices and/or curb supplies. Regardless, both practices are the same in that they are both "collective bargaining" and both can have the same net effect in that they both influence consumer prices.



I don't see how you can disagree with what I am saying, Caymen, because it is simple, straightforward, factual, and unbiased. I am not pointing a finger or making an opinion, just stating facts.



You say OPEC is not "negotiating prices"...sure they are. They are negotiating the prices amongst themselves. You, the consumer aren't part of that negotiation, but that happens all the time in price setting. But, as you say, consumers negotiate prices all the time, and that price negotiation defines the market price. Conversely the market price of a good or service produced should be reflective of the salaries paid to the people who produce said and vice-versa. Now we are full circle:



Cost to Produce - Market Price = Profit



Since companies have to make a profit to survive, and since consumers in your opinion should be setting the market price, how much room does that leave for "wage and benefit negotiations" within a company, especially a company that hasn't been profitable for several quarters or years? Wages and benefits for most companies are the #1 cost components.



Unions that simply demand, demand, demand more, more, more from companies for their members without in turn helping those companies become (more) profitable aren't helping anyone, in the long run. I think that is what TrainTrac was saying. Unless you think all corporations, if left to their own, would simply screw the worker for the sake of profits.



TJR

 

[Tom Schindler]

Most companies, without the threat of a possible union coming in will do everything they can to "cut costs" for themselves to produce a bigger profit.



Look at Wal-Mart. I think that about says it all.



I used to love shopping at Wal-Mart. The more I read about them, the less I shop there. I have almost completely shopping there. I think it has been 6 months since I was there last.





Tom

 

[John Mastrocco]

It wasn't Tom, it was me.



That's exactly what I think. I think the recent past has proven that companies will screw whoever they can to make as much money as they can (profits) so they can line the pockets of the execs as much as they can in the shortest time they can. (And, yes, Unions try to do similar. So isn't it best to have them keep each other in check?)



The term "collective bargaining" as currently used refers to a large number of indivuduals that agree to bargain as a single entity (group/union) with another entity (consisting of an individual or a another group/management team.) OPEC negotiations are not collective bargaining in any way shape or form. Calling what OPEC does "collective bargaining" is like saying the Board of Directors of a corporation engages in "collective bargaining" when deciding issues. OPEC nations debate issues facing them and methods of maximizing profit, then vote on those issues and methods to set policies they all agree to follow. OPEC has more in common with a committee than a Union.



In relating OPEC to a union , what OPEC do is similar to a Union deciding the specific rules that will govern the Union and it's individual members. What OPEC does is NOTHING like Union negotiations with a company to determine salary and work hours.



Internal vs external.

 

[Thomas Rogers]

I stand by my original implication that:

OPEC is a bunch of countries that come together to maximize the price they get for what they supply. Unions are a bunch of employees coming together to do the same.

Anyone want to disagree with THAT statement?



TJR

 

[John Mastrocco]

TJ,



So, a publicly held company can be in the same category? A bunch of stockholders that come together to maximize the price they get for what they supply? How about a family owned company? A bunch of family members that come together to maximize the price they get for what they supply? That would only exempt an individual business owner from your defintion.



To me you statement is exatly like saying there is no difference between a Human Being and a Lobster because they both want the ability to live and procreate. It is too broad. The devil is in the details. And the details are much more significant than the broad category into which you try force both.



OPEC sets whatever production level they want to create the desired price and don't need the cooperation of anyone else. In the end it's no different than an individual making a decision.



Unions cannot set their own wages and work limits. They must come to an agreement with another entity (a company/owner) to acheive their goals, which limits their ability and so-called power. This is more like two individuals with different goals compromizing on common ground.



When it comes to OPEC the best we can do as consumers to gain some control is to stop using as much oil as we do - but real control would require all oil consumers to band together into an OPEC like organization. When it comes to unions, companies/owners have many more options available than the oil consumer.



Now, if all oil consumers were to band together and OPEC was forced to bargain with them, rather than dictate to them, then the paradigm would be much closer to labor/management, but still not as close as it would be to a business/customer relationship.

 

[Thomas Rogers]

Wow, Rocco, I don't know how to debate what you said. No, not stumped, just bewildered.



All I am saying is that there are key similarities between OPEC and a union.



You then talk about lobsters and humans, and differences between unions and OPEC. Okay, fine. Kewl.



My point is that at their "ROOT", both OPEC and a Union strive to do the same basic thing....Bring together many in order to get more for what they provide then they could if they stood alone.



Just because OPEC is viewed as a hostile organization and you may view Unions favorably please don't let that cloud the fact that they are simliar.Don't shoot the messenger.



Oh, BTW, Rocco, do you DISAGREE with the quote or NOT...here it is again?

OPEC is a bunch of countries that come together to maximize the price they get for what they supply. Unions are a bunch of employees coming together to do the same.

TJR

 

[John Mastrocco]

TJ,



No, I don't disagree with the basic statement. My opposing point is that the statement is so general it is stripped of any significance as a meaningful comparison between the two organizations. That was the the intended purpose of the lobster/human analogy.



Stripped to the basics the statement becomes:

(An organization) is a bunch of individual entities that come together to generate maximum return/benefit (maximize the price they get) for what they supply

.



Basically, the statement is so general it would cover every organization - even a business or a non-profit. Whether that organization is "good" or "bad" has nothing to do with it. However, I do suspect you were using the statement to manufacture a philosophical similarity between OPEC and Unions as a ploy to link an apparent 'bad' organization with a second organization, thereby making the second organzation 'bad' by association, (and the individual user can decide which is the 'bad' one in the pair! )



Looking back I could have been more plain with that point. Sorry.

 

[Thomas Rogers]

So Rocco, then you agree that the main purpose and objective that OPEC has is the same that Unions have, and that objective being that which I "generically" stated?



If so, that's all I was going for.



You also said:

However, I do suspect you were using the statement to manufacture a philosophical similarity between OPEC and Unions as a ploy to link an apparent 'bad' organization with a second organization, thereby making the second organzation 'bad' by association,

Nope, that wasn't my intent. My intent was to show the "purposeful sameness" of the two types of organizations. It isn't philosophy. The fact that you view OPEC as a bad organization and a Unions largely as good organizations is biased by many things, including your point of view, your life experiences and the relative value that each organization brings to you. Likewise, and for those very same reasons others view Unions as bad. Others, like Arab shieks for example view OPEC as good.



It's all perspective, and if we can't step back, and see things from another's perspective and see the "sameness" in things, without the emotion and the rhetoric, well, then we are just not going to move forward as an enlightened society.



As I said before, I am a student of human behavior and I am learning each and every day.



That's all!



TJR

 

[Tom Schindler]

OPEC does not bargin the prices until both parties are happy. OPEC does not set the price under a contract for the next 4 or 5 years.



A union does that. We set a price for our wages. We work at those wages no matter what happens. If the price of milk goes from $2.00 a gallon to $10,00 a gallon, we still get our negotiated wages. If the price of everything goes up 10 times overnight, we are set to work at that rate. If everyworker out there gets a 50% raise, we get our negotiated rate. Nothing more, nothing less.



We can't do "less work" and demand more money. OPEC can. They dictate the price. They pump less oil and the price goes up. They sell less oil and make more money. We, as a union, are unable to do that.





Tom

 

[John Mastrocco]

TJ,



Once again, the similarities must have significance to have any meaning.



If the comparison is generic enough everything could be made to appear the same. That is what you did - you made a statement so generic it applies to almost every single organization in the world. As such, it has no significance or meaning beyond the statement itself.



So one must ask what was the purpose of making the statement? The only motive I could see, based on the comments in the rest of this thread, was to use the common perception in the USA that OPEC is an evil organization intent on extorting as much money from non-members as possible (which your generalization also implies) and by comparing OPEC to unions you make the unions "guilty of the same evil" through association. This is a common tactic that, IMO, has no validity to anyone capable of logical thinking. But it is used often by some to sway the illogical - a tactic politicians have perfected over the years..



Personally I make no judgements on which organization is bad and which is good as there are good and bad points to both of those organizations and any individual could see either organization as good or bad depending on one's POV. I believe I indicated that was my belief with the portion of my post you decided to omit in the quote, that being:

(and the individual user can decide which is the 'bad' one in the pair! )

 

[Thomas Rogers]

Quotes and quotes...



First Caymen's:

OPEC does not bargin the prices until both parties are happy. OPEC does not set the price under a contract for the next 4 or 5 years.

Sure they do. OPEC bargains among it's members until the new supply level and thus the expected price level is agreed to by the members. That's a negotiation, and they typically set the supply level for a certain period (sure not 4 or 5 years, but usually in months) The fact that it's a different type of negotation than that with union reps and employers isn't really the issue. It's collective bargaining. And, let's not make too much of the negotiations betwene union reps and employers as if they are so "ideal". I have heard of too many "pay for play" schemes and union bosses on the take. Anyway, back to my point...In the OPEC case there are members that would surely like to sell more oil, cheaper as it might be in their best interest to get increased immediate cashflow, and there are other members that might want to sell less at a higher price maybe because their supply are lowering. Regardless, the negotiation is among the members. The result, however, is that a price/supply level is determined for a length of time through negotiation by parties.

A union does that. We set a price for our wages. We work at those wages no matter what happens. If the price of milk goes from $2.00 a gallon to $10,00 a gallon, we still get our negotiated wages. If the price of everything goes up 10 times overnight, we are set to work at that rate. If everyworker out there gets a 50% raise, we get our negotiated rate. Nothing more, nothing less.

That's the same thing as OPEC members agreeing to set the supply for the next 6 months. It's a contract among its members that will influence what they get paid. So, it is essentially the same, even though the parties negotiating are different.

We can't do "less work" and demand more money. OPEC can. They dictate the price. They pump less oil and the price goes up. They sell less oil and make more money. We, as a union, are unable to do that.

What is a walk out, or a work slow-down if not "doing less work in demand of more money"???



Again, I never said that OPEC and Unions negotiated the same way. I simply said that both organizations are made up of members that come together to try to get the maximum for what they produce. That's it and that's all.





Rocco says:

Once again, the similarities must have significance to have any meaning.



If the comparison is generic enough everything could be made to appear the same. That is what you did - you made a statement so generic it applies to almost every single organization in the world. As such, it has no significance or meaning beyond the statement itself.

What is more significant of a similarity than the FOUNDATION and REASON FOR EXISTANCE of two different organizations. That seems pretty signficant to me! Humans often ask the question "Why are we here?". That's a pretty fundamental, signficant piece of introspection. If OPEC and a union were to ask themselves "Why are we here?", invariably they would answer pretty much the same exact way:



"To collectively provide to our members benefits and income at a level higher than they could obtain individually".



Not every organization or group of people will answer that key question: "Why are we here?" in that way. Only those organizations share the same purpose as a union will answer that in that way.



So it isn't generic and it isn't insignficant. Both share the same purpose.



You keep questioning my intent, Rocco. Read my last post. I spelled out my intent. You either didn't read it or you didn't believe me and therefore questioned/accused again. If it is the latter, than frankly, I am a little insulted. I answered it once. My

 

[Jake Levin]

Okay back to the original thread of oil prices. Now that oil prices are dropping (finally) and yet still way above what they were 8 months ago, OPEC wants to cut back production to keep prices where they are. Is this fair? Why should I be stuck paying over $2.00 a gallon for regular when only a couple of years ago it was drastically less? They want to create a state of lower supply to increase money in their pockets!

 

[Thomas Rogers]

That's what OPEC does, jlevin.



They inflate the price you the consumer would pay through their collusion.



You ask "is this fair?"...I guess if you believe in a "free market society", you might think it isn't fair.



There are lots of things that I as a consumer pay for that I don't think are fair. For example, for the longest time here in the Philly area we didn't have Southwest Airlines. But, I as a consumer paid for high airline travel on carriers constantly being propped up and bailed out by govt tax dollars; all because "some group" thought it was in the best interest of those they represent to keep those airlines going, and to do everything they could to keep Southwest out.



So, I paid higher prices; competition was reduced, and to me, the consumer that just didn't seem fair.



But, if I were a US Airways employee working out of Philly you are DARN RIGHT I would think it was fair.



Fair is a matter of perspective.



TJR

 

[John Mastrocco]

And, I do agree with TJ on this one, what's wrong with that? Isn't that what we all want to do? What really upsets people about this, and how they are significantly different from a union, is that OPEC can do it without consulting the consumer (or their representatives) of their product.



TJ,



The point you seem to want to ignore is that unions do have to negotiate with their direct consumer - the employer - not just among themselves. Two totally different types of negotiations. For a union to be like OPEC they would merely talk amongst themselves, decide how much labor they want to supply and then dictate to the employer the level they will get without ANY input from the employer. This is not what happens with unions, but it is the case with OPEC.



While unions negotiate among the members (or their reps) to decide what they believe is fair compensation, this is not something they can automatically enact, as is the case with OPEC. Once a union decides what it would like to ask for (Demand) they then have to negotiate with the employer (their direct consumer) and any 'demands' must be scaled back to meet the expectations of the other party. Once again - OPEC does not have to do any of that. They dictate to, not negotiate with, the direct consumer.



A union negotiates to acheive two goals - maximum employment (supply) for maximum compensation. And those they negotiate with are trying to get maximum return for the minimum price. So a mutually agreeable compromise must be reached. Once again - nothing at all like OPEC.



Continuing, regarding unions, if the indirect consumer doesn't like the negotiated compromise they can either take their business elsewhere (in the case of a business) or they can elect different members to the school board that will negotiate better/harder/in a more popular way. The oil consumer doesn't have that option.



These are major differences and much more significant than the single similarity you presented.



Finally, I was reacting to the general tone of the thread - which I explained - and not just what you wrote. But I still contend that the description you presented is too general to have any but the most superficial significance.



BTW: I agree that on certain things - like arilines - artificially restricted limitations to competition should not be allowed. But the union can only petition the government to enact those barriers, they cannot negotiate something like that with their employers. And in this case, the employer and the union both have the same goal - restrict competition to protect them both. That same argument is currently being debated in Congress at this time over whether Southwest will have to continue operating out of Love field or be allowed to move operatios to DFW A/P. Personally, I think they should be able to move, but AA doesn't want the competition at DFW so they are fighting to keep the status quo (which was established by federal law originally.)

 

[Tom Schindler]

Rocco,



You seem to put exactly what I am thinking into words.



Some people just do get a union. They just can't, or maybe choose, to understand how it works.



If we walked into our employers office and demanded $50.00/hr and got it, I could understand. We take losses to get gains. We negotiate a lower wage for better health benefits. We take a higher wage for lower benefits. We work some holidays, for the record, I get 5 paid holidays during the year and the other 6 are between Christmas and New Year's day.



We negotiated those days. The union and our employer came to an agreement with that.



OPEC comes into no agreement with its customer. We, as a union, have a customer. That customer is our employer. We sell a service, and they pay us for that service.



OPEC says oil will cost xx.xx and that is the way it is going to be. Buy it or go without. It is up to you.





Tom

 

[Thomas Rogers]

So Rocco, you and Caymen "basically" boil the big difference between OPEC and the typical union in that OPEC doesn't really negotiate with the consumer, then Rocco said in many cases the consumer is the "employer" in the union context.



Okay. I think we have all been assuming that OPEC doesn't negotiate with their "consumers".



But that could be a flawed assumption. OPEC has to consider current demand, expected demand, and the feedback from nation-buyers in its collusion. Sure, they have most everyone "over a barrel" (hey, is that where that analogy comes from, probably not but a nice play on words), but I don't think they TOTALLY negotiate amongst themselves and without the input of their "consumers". Likewise, there are mostly "one-sided" negotations in many industries.



Anyone care to do the research or chime in on "JUST HOW" OPEC works, because I will admit, I don't know the intricacies, but I suspect they are not totally alone in their negotiations.



I hear on the news about Pres. Bush negotiating with OPEC to increase supplies. What does that mean? How does he do that, with what leverage? Seems there is a give and take involved.



Anyone?



TJR

 

[Tom Schindler]

Naybe they are using the term "negotiating" to freely. Maybe he is asking them to increase production to help his approval ratings.



One can never know for sure.





Tom

 

[John Mastrocco]

Like you said, OPEC takes into account many things when deciding production levels. These include their target PPB, the current demand, estimated future demand, and, minimally, world reaction. One of the fallacies of this discussion is they are ONLY trying to maximize the PPB. In reality, they are trying to maximize the net income of each member-country, regardless of the PPB. Too much oil available and their net income will drop because the PPB is too low and demand is not high enough to maintain the price. Too little oil and their net income will drop because demand will decrease as the price of oil and its products skyrockets. This last is how the President can appeal to OPEC to increase production for the common good (he doesn't negotiate - he appeals, usually through Saudi Arabia.) His and his advisor's main argument is to convince OPEC the PPB is reaching the point where their net income will begin to decline and it's in everyone's best interests to increase production.



BTW: Last month OPEC claimed their profit on a barrel of oil was only $5. No idea if this is accurate or not.



Back to OPEC - Each member country has a representative(s?) that listens to the 'expert' projections, the levels of production that can be maintained, the date those production numbers will take effect and the estimated price at the wellhead. They also consult their own experts on the same issues. Once the numbers are known, they begin negotiating. Some of the negotiations involve member-countries wanting to either increase or decrease the production total. But the main negotiation is deciding the percentage of the production total each member-country will be expected to supply - with individual countries jockeying to get a bigger piece of the pie, but still within their production capacity. (This is a MAJOR difference between OPEC and the internal workings of a union where members don't get to negotiate their piece of the total pie.) Once the total production level and the member-countries' piece of that pie is decided, they vote to see if it is satsifactory to the majority. If the majority agrees, the production total is approved, each member-country accepts their piece and on the agreed upon date the new production numbers begin. I THINK there is a small group of member-countries that have veto power (similar to the security council of the UN) over the decisions of the whole organization, but I am not sure. And if there is, I have no idea under what circumstances they may exercise that veto. But I believe Saudi Arabia is one of that group.



There is more to OPEC than just this - policy debates and decisions, diplomatic agreements, etc - but these are the basics of the oil part of their organization.



And they do take world reaction into account. But only in how it will affect total demand, which in turn affects their gross and net incomes. There is no negotiation with outside entities, although they will consider a plea from one - if that one is highly influential. I beleive they have been quoted as "cooperating" with the EU to keep prices stabile. But that is also in the best interests of OPEC - price stability, so I wouldn't exactly call that a negotiation.



This information has been gleaned over the years from new reports and such. I have tried to find something that spells out the process, but they are 'closed' meetings and what happens in those meetings stays in those meetings. Even their website doesn't talk about the process. Instead, it's all about PR.

 

[Thomas Rogers]

Yup, it gets back to what "negotiating" means, and how much one party can influence the other. Those are all gray areas, whether it is OPEC, or union A, or union B. Some unions are more powerful and their negotiations more one-side than others, while other unions are weaker with the scales tipping towards the employer.



The leverage, position, and strength that an organization has and their ability to use these when "negotiating" is the difference between OPEC and your typical union.



But, if Micheal Jordon and I play basketball together, we are each "ball players" just because he is stronger at the game doesn't make him a ball player and not me. The fact that we are both doing the same thing makes similar. Sure, almost anyone within the NBA would say that I am not a ball player, and they would be right, by their perspective. And, I am comfortable in recognizing that perspective and even agreeing with it.



That's why these debates often get down to perspectives. I agree that OPEC in so many ways is NOT like a union and that unions by and large do good things in the US; I never meant to say differently. I just hope that others recognize that there are similar purposes behind OPEC and the typical union, if not the same purpose. Furthermore, that by recognizing and appreciating that sameness it doesn't mean you have to make judgement decisions on one vs the other, but instead, it might mean that you can get a glimpse into the other organization through that sameness.



Later!



TJR

 

[John Mastrocco]

That's the difference between you and me, TJ. The way I see it, if Michael Jordan and I were to play basketball there would only be one player on the court.



And that's by anyone's perspective!



:lol: