Posted on 09/01/2005 4:22:37 AM PDT by chronic_loser
Understanding economics has never been a requirement to be a politician. With gas prices reaching $70 per barrel on Monday and hotels outside of the disaster area raising rates, "price-gouging" seems to be politicians' favorite phrase these days. In the coming weeks, as people living in the disaster area try to get everything from fallen trees removed to food, the outcry against higher prices will only get worse. Yet, if political threats of price controls and price-gouging lawsuits prevent prices from rising now, it is the consumers who will suffer in the long run.
In Illinois on Monday, Democratic Gov. Rod Blagojevich started pressing to prosecute gas companies that profit from the recent price hikes brought on by the hurricane, and he is concerned that some of these increases occurred even before the hurricane hit the oil fields in the Gulf. In Hawaii on Sept. 1, the state government is supposed to begin imposing price controls on wholesale gasoline. Michigan, Oregon, California, New York and Connecticut have also debated regulating gas prices.
Even the Bush administration has gotten in on the act by having the Justice Department and the Federal Trade Commission look for evidence of price-gouging and believes retail and wholesale gasoline prices are "too high." Congress is planning on holding hearings on oil company "price-gouging."
In Texas, Attorney General Greg Abbott is threatening legal action against what he called "unconscionable pricing" by hotels that took advantage of desperate people fleeing the chaos in nearby Louisiana. In Alabama, Attorney General Troy King promises to vigorously prosecute businesses that significantly increase prices during the state of emergency.
You would think that people had learned their lessons about price controls during the 1970s, though memories have surely faded. Price controls didn't stop the cost of gasoline from rising. They just changed how we paid for them. Instead of prices rising until the amount people wanted equaled the amount available, chronic shortages of gasoline had Americans waiting in lines for hours. Yet, the supposedly permanent shortages disappeared instantly as soon as price controls were removed.
The free advice being offered by politicians is that it was improper for prices to start rising before Hurricane Katrina disrupted production in the Gulf of Mexico. But waiting to raise prices means that consumers will end up paying even higher prices when the reduced oil flow out of the Gulf is finally felt.
Higher prices today reduce consumption and increase inventories and thus reduce how much prices will rise tomorrow. The overall increase in price will actually be less.
The possibility of higher prices when disasters strike also gives oil companies an incentive to put aside more gas to cover those emergencies. Storing gas is costly, and if you want them to bear those costs, you had better compensate them. The irony is that letting the companies charge higher prices actually reduces customers total costs when you include such things as having to wait in long lines because there will be more gas available when the disaster strikes.
The American oil industry is no more concentrated when prices started rising immediately before Hurricane Katrina hit than it was two weeks earlier, and oil companies possess no sudden increase in monopoly power. Neither have they suddenly become greedier.
Stamping out "price-gouging" by hotels merely means that more of those fleeing the storm will be homeless. No one wants people to pay more for a hotel, but we all also want people to have some place to stay. As the price of hotel rooms rises, some may decide that they will share a room with others. Instead of a family getting one room for the kids and another for the parents, some will make do with having everyone in the same room. At high enough prices, friends or neighbors who can stay with each other will do so.
There is another downside to price regulations. Companies in states all across the country, hoping to make a few dollars, are thinking of loading up their trucks with food, water and generators and heading down to Louisiana, Mississippi and Alabama. The higher the prices, the faster these "greedy" companies and individuals will get their products down to desperate customers. But their greed means less suffering. The more products delivered, the less prices will rise. Political grandstanding today means future disasters will turn out even worse.
What about the poor?
Making the companies pay for others' altruism not only creates the wrong incentives, it is also unfair. If we need to help out, make everyone pay.
Bashing companies may be profitable short-term political behavior, but the discomfort will be over far sooner and less severe if markets are left to their own devices.
There's a big surprise. Politicians can always be counted on to do things that earn political points, even if it hurts the country. Consider the economic ignorance of LBJ's reign, or Carter's, or Hoover's and Roosevelt's. That a president does something is not good evidence that it's the sensible thing to do--quite the opposite. And sadly, George "five years, no vetoes!" Bush is no exception.
As for the oil compaines, everyone wants new refineries, more drilling, pipelines, etc. but wants the products of this tremendous capital investment to be free.
It simply does not work that way.
About half of this problem comes from the ecowhackos regulating refineries out of business, restricting drilling, etc.
They even fought coalbed methane production the whole time they were demanding that power plants burn natural gas instead of coal.
Natural Gas is our main heating fuel up here (North Dakota), where heat is not optional, but the reserves have been squandered to run air conditioners in LA.
These same people will gladly blame "BIG OIL" right along with the Socialist media.
Funny how people will complain about service stations making a few (less than 10) cents a gallon on gas, but not carp aout the price of a can of wino wieners (vienna sausages) in the convenience store.
The well I am working on right now will cost the oil company about 3.5 million when it is completed. I expect it will produce about 400 bbls per day on average, for about 4 years (starts with more, but will decline). When that is done, the well will be sold to a smaller company who will wring more oil out of it, and eventually be plugged, and the site reclaimed and restored. In the end, you will not be able to tell there was an oil well here.
As the production from this well is declining, other wells must be drilled to replace the producing reserve that will be used up here. This requires a tremendous capital investment, just to keep up with declining reserves by replacing them with new discoveries and new wells.
Gaining on that curve, actually increasing the overall amount of oil available involves even more.
The money has to come from somewhere.
Ludicrous. If you steal my property, I am quantifiable worse off. If I offer to sell you my property and you decline because my price is too high, you are in EXACTLY the same position you were in before we met.</p>
That would mean that bush has taken another step away from the conservative principles of Reagan to the pandering of his father.
Disappointing, but not unexpected.
Actually, you are in serious error here. Socialism is predicated on the INvoluntary sharing of resources, by centralized mandate. There is nothing remotely resembling this anywhere in the NT, neither in Jesus's statements nor in the early Xn communities in Acts. In fact, Peter argued that Ananias HAD FULL CONTROL OVER HIS PROPERTY AND WAS UNDER NO OBLIGATION TO SELL IT in the scene in Acts 5.
"Compassion by proxy" is the name of the game in socialism. One can feel virtuous, not by personal sacrifice, but by forcing others to do so. This is not compassion, but evil.
You don't understand. If I want your property for $5, and you refuse to sell it to me, you've hurt and deprived me. I keep trying to explain this to women, but they keep refusing me what I keep asking for. They won't give me what I need for free, though several have said they would for a million dollars. I'm trying to get the governor to ban their "sex gouging", and make them give it to me for free. I'll let you know how that works out.
#3 for me!
I suspect you are one of the many people who bought a gas guzzler is upside down on the note and realize you can't afford to get rid of it or feed it...your anger is displaced...and I want to know...where were all your comments about the dessimation of the O&G comapnies dutring the 80s...when they went under or bankrupt...and laid off 10s of 1000s...where were your snide comments when the O&G struggled to stay in business with 10.00 a barrel oil?
You are hopelessly clueless about an industry that is heavily regulated and has been crippled by liberal pinko commies. THE O&G has to contend with MMS while offshore and have air requirements...they can't even build a refinery without the pinko commies giving persmission every step of the way...even the gasoline mixes are different for different areas of the US...THANKS to the pinko commie enviro wackos...AND finally the PINKO commies that have BRAINWASHED people like you who name call the OIL companies "big shots" and imply that they are EVIL...
I'll bet you think HOSPITALS are evil too...
You have misplaced YOUR anger...you need to save your nastiness for the PINKO COMMIES that have crippled the industry that YOU and I have to be dependent upon...NOT the O&G company that struggles to find new sources of oil, hire competent people, prevent spills, prevent the killing of personnel...keep wells running even when we have horrible weather...sir you no nothing about this industry.
The Bible also says that "everyone" shared with those who had need.
I am not quite sure now what the hell you are talking about?
I didn't read the thread before posting. I see you're carrying the banner of reason. ;^)
Where you located I work in O&G servicing...coiled tubing, wireline, fracing, stimulation and well control...Houston Texas...
There is a difference between charity and socialism. Show me where Jesus advocated socialism.
We are talking about government policy here. Here’s the deal. As a society, we have erected a giant wall between God and governance. You are talking about Christian charity. That is not allowed in our civil society. The BEST you can hope for from your government is efficiency. If you want Christian Charity you need to look to individuals. And you can’t expect to coerce it from them.
Yes, but it does not say they were compelled by the authorities to do so. It does not say the disciples told them to. It does not say the disciples took from them to force the sharing. Do you really fail to comprehend the difference or are you simply being obtuse?
What's so hard to understand? "X is illegal" is a stupid argument: many legitimate things are illegal, and many immoral things are perfectly legal. Self-defense is illegal in many locations, and abortion is perfectly legal. What does its legality have to do with the subject at hand, which is its morality?
That is the whole purpose of free market prices -- to convey realities to you in a form that you cannot ignore.
Unfortunately, one of the main purposes of contemporary politics is to shield you from these same realities.
None other than that smart guy again- Thomas Sowell.
The insinuation is that this mud sticks to President Bush. This President has been the epitome of another George -- George ("I cannot tell a lie") Washington.
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