Gasoline

What a fricken topic.

Sadly, I'm seeing moaning and complaining, especially at the BBC, over the rise in prices due to Hurricane Harvey. Tremendously frustrating to see this, because its Economics 101.

And first off, to see complaining over prices, when gasoline has been as cheap as its ever been historically when adjusted for inflation, is just beyond me. Ya see so many calling the oil industry greedy, but who really is the greedy ones ? Some won't be happy till its free.

Anyway, we are seeing the laws of supply/demand working in a free market, when our gas price rise due to refineries shutting down. Supply is constricted, demand remains the same, which means the price rises. This is very basic economics. It creates a logistics problem of getting gasoline to meed demand in different areas, and it rearranges the entire global gasoline market.

Thread at BBC has a fella saying the Fed Govt needs to freeze prices when hurricanes hit the Gulf Coast. That is the worst possible thing that can happen for consumers, I'll explain.

There's a huge pipeline called the Colonial, that runs from Houston, across the south, and then up the east coast. It delivers a huge amount of gasoline all along that route. Right now, they have had to shut it down and might be a few days before it runs again.

But here in Oklahoma , and there's other regions who are similar, we are not dependent upon the Gulf Coast refineries. We have oil, we have refineries, we are outside of that loop. But our prices are rising also, because they are moving gasoline from our region to other regions who are impacted by shutting down GC refineries.

Now, what moves gasoline around, is price. If refiners here in Oklahoma, can make more money, even after paying transportation charges to move their gasoline, they will jump on it. With Fed price controls, they have no incentive to move their gasoline, which transportation costs alone would probably mean they sell at a loss. Someone in the Fed Govt would have to force them to sell their gasoline.

And its not just domestic, right now, every gasoline tanker in the Atlantic ocean has most likely changed course from Europe and is now pointed toward the north east USA , to take advantage of the higher prices there, caused by shutting down the Colonial pipeline.

With price controls, some regions of the country would end up with no gasoline until the refiners are back up 100%. Because it provides no incentives to move product where its most needed. The price of gasoline may not rise, but they may have to do without , altogether.

And with price controls, it means you have some bureaucrat in DC trying to make the decisions of what gasoline gets transported where. The free market is much better at allocating resources, its far more efficient and even though the price of gasoline may rise a bit, it will be for a much shorter duration if the free market is allowed to operate.

Why don't our schools teach this ? Is it any wonder that so many people today , readily accept socialism ?

 

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