Posted on 09/08/2005 11:08:53 AM PDT by aynrandy
Gouging - even the word sounds frightening.
These days, there's been a near-unanimous call for the public to be outraged over price-gouging at gas pumps around Denver.
Well, I'm not outraged, and you shouldn't be either.
Here in Colorado, as elsewhere in the nation, high gas prices have generated hysterical, populist rhetoric from those who've forgotten the fundamental principles of supply and demand.
"Gas-price gouging is not illegal under Colorado law, and we think it should be," Colorado Speaker of the House Andrew Romanoff recently claimed.
I'm not sure what Romanoff meant by "we" - I would like to be excluded - but anyone who believes gouging is a concern will really have something to complain about if shortsighted price controls are implemented.
This week, Romanoff promised to pressure the state attorney general and the Public Utilities Commission to "investigate" the problem and "combat" gouging.
It's going to be difficult to "combat" the irrefutable fact that fuel supply is down and demand is up. And really there is nothing to investigate, unless you believe in conspiracy theories.
Hurricane Katrina destroyed 12 percent of the nation's refining capacity. This fact, coupled with rising demand from nations such as India and China, has put a tremendous demand on oil - a fungible global commodity.
Price controls bring lower fuel prices and increase demand. But when demand is outstripping supply, we can all look forward to shortages and lines.
Fact is, gouging is a myth. It's called making a profit.
"For many Americans outside of the Gulf Coast, the immediate impact of Hurricane Katrina isn't looting in the streets, it's looting at the pumps," says "Looting at the Pumps," a release by CoPIRG, a public-interest advocacy group.
I spoke to Rex Wilmouth, state director of CoPIRG.
So, was there gouging in Denver?
"We were seeing the prices go up in four or five days from 60 to 70 cents," Wilmouth explains. "Our take on it is this: We looked at how much money the oil industry was making and how much they were posting as profit; we were astounded that they felt the need to increase the price of gasoline in the time of a natural disaster."
Wilmouth, no doubt, is well-intentioned. He will apparently do anything to save us from the evils of Big
Oil - except actually learn about the oil business. "Last week, the stock prices of major U.S. oil producers ExxonMobil, ChevronTexaco and Conoco-Phillips have surged," he tells me as part of a long harangue about the success of Big Oil.
It took me a few minutes to comprehend that this was supposed to be bad news. Millions of Americans own oil stock - shouldn't we be happy for them?
I mean, higher gas prices mean increased stinginess on the part of the consumers at a time of low supply, right?
Isn't that positive?
Don't Americans have alternatives? A consumer can decide to travel less, take public transportation, or buy a fuel-efficient car or drive to a cheaper station.
Hybrids, Wilmouth understands. As you can imagine, he is very excited about hybrids.
Now, Romanoff and Wilmouth are entitled to espouse that government should have the authority to dictate the price of products in the free market.
But then, why stop at oil?
Today, for instance, a quick calculation revealed I had shelled out around 8 bucks a gallon for my bottled spring water.
But that's nothing. Last time I went to see a movie, I paid approximately $200,000 a gallon for soda - I'd need an infinity sign to calculate the per-pound price of popcorn.
Or how about this?
Why don't Colorado and the federal government cut or suspend the 40-50 cents we pay in taxes on each gallon, depending on where you live?
Funny, with all the concern for consumers, no one's proposed something that would actually help them.
David Harsanyi's column appears Monday and Thursday. Reach him at 303-820-1255 or dharsanyi@denverpost.com.
Smart move on your part, bad for anyone with a petroleum burning vehicle....
http://worldnetdaily.com/news/article.asp?ARTICLE_ID=46209
I could have bought a lexis suv. I bought a civic instead for 6.2k and invested the payment inusrance and taxes in the funds....
Not in the short period of time under study. It takes time to divert the oil in the pipelines and refine it. Once the oil is headed to a particular refinery area, it will be used in that geographic area.
The internal memoranda themselves have been made public before, in a 2001 investigative report by Sen. Ron Wyden, D-Ore., who this week said the primary reason for sky-high prices is that "the government isn't in the consumer-protection business anymore."
Sure, but markets move in anticipation of events. I.E. Markets are proactive, not reactive, to spot supply and demand issues.
Thanks for this. This, by the way, if proof that there is no price gouging. If there were, then Walmart would also be seeing massive profits as of late.. they are not.
Well, in this case, the consumers provided their own misinformation. That being said, regardless of the source, there is a real increase in demand at the pump. As a result, prices should increase.
Overall, your post is well thought out.
You made a subtle dig at me, so I'll fire right back: Get your head out of the textbook and take a look at this real world situation.
The overall demand did not increase significantly. We had people topping off their tanks, but not increasing their total consumption. Net = no increase in demand.
Which leads us to this: If Econ 101 is all you ever consider, you'll frequently get the thing wrong. You also have to consider the local money supply and acceleration. You can have all the product supply and demand cycles you want, but if the money supply isn't there, total purchasing as measured in dollars will not increase (ignoring the irresponsible use of credit cards).
But in this particular case, gasoline supply for much of the country did not decrease significantly, and total demand did not increase significantly. which blows your supply/demand theory out the window.
Hey, stop it. You're messing up Hendrix's econonic theories and clogging up his FReeper slander efforts. He is all over this board, relentlessly calling FReepers names and such.
Except of course that aspiring hillbilly's statement is just flat out wrong.
Just don't park that Silverado for too long! I own three small engines that will need to be worked on before they ever run again because I got involved in other things and let them sit too long without draining the fuel and setting them up for storage.
Total Demand = Total Consumption + Total added to storage. It is true that demand probably didn't pickup much, if at all, but storage did.
Plus, it is a simple reality that prices move in anticipation of changes in supply and demand. There was a lot of talk about major pipelines being down early in the week. Prices moved in anticipation of what that might mean.
Actually, I think you're wrong. Scarcity and shortages are not the same thing. A shortage of a product does not necessarily mean there is any less of the product. It means there is a shortage at existing prices. If the price was lower the demand would THEN cause a shortage. And as you probably know, since oil is a fungible commodity, prices are determined as much by the future (price of fixing the gulf area refineries) as by the past (high demand).
Hey Rodney. Do you beleive that the oil companies are totally operating on the "up-and-up" and that they would never purposely manipulate things so they get the most profit? Just wondering.
And that Henrix guy really is all over the place, calling FReepers names.
ConocoPhillips (Tosco-Flying J) 13.2
Shell (Motiva-Equilon-Pennzoil-Quaker State-Deer Park) 10.8
ExxonMobil 10.8
BP (Amoco-Arco) 9
Valero (Ultramar-Diamond Shamrock-Orion Refining) 8.4
ChevronTexaco 6.4
Citgo-PDV-Lyondell 5.8
Marathon-Ashland 5.6
Sunoco 5.2
Tesoro 3.4
Koch 3.1
Blackstone Group-Premcor 2.5
Williams Co 2.3
Chalmette Refining 1.1
TotalFinaElf 1
Top 15 in 2003 88.6
please note that this market is not concentrated per your point 2. At least for reatail gas.
Well, I think they operate in a competitive environment for starters. Now, I am willing to accept that on a certain street corner in a certain town that the stations might conspire to raise prices. But, on the whole, I beleive that the prices are much more of a result of supply and demand than they are by price-fixing, etc. As for oil executives, I think they are like any others. So no, I don't think they are heroes, but I don't think they are evil either.
No wonder Deer Park water tastes so bad.
I suppose if you're willing to change definitions mid-debate, you can reach most any conclusion you want to.
Your new definition seems to say that if suppliers increase the price, they simultaneously increase demand, regardless of actual demand. Clever argument if you can get away with it.
;-)
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