2006-04-21

Petro Price Surge Facts

Sorry for disturbing the hysteria over the recent petro price surge with boring facts. Here we learn that the conversion of petro to include more ethanol (as mandated by the federal Energy Policy Act of 2005) requires costly and time-concuming procedures that have resulted now in shortages and the obligatory ensuing higher prices.

Whould those shortages abate faster if petro outlets could raise their rates even higher? This article doesn't mention "anti-gouging" laws, and the impact that they might have on extending the time that it will take for petro companies to complete their ethanol-conversion requirements. But as we see now, some petro stations are dry, their $3/gal signs rendered absurd by empty tanks. Would customers prefer $4/gal petro that existed to fantasy $3/gal signs? If they prefer the empty tanks advertised by $3/gal signs, might they even prefer the signs above empty tanks to read, "$1.50/gal"?

People angry about the higher petro prices include leftists who otherwise applaud and advocate higher prices, so long as those boosted prices result from enormous new taxes, "earmarked" for govt spending on developing non-petro energy sources, and conservation. Surely a more efficient means of improving our energy situation is to let market forces dictate prices, and permit market participants to build new refineries and nuclear plants, and explore and drill in US "protected" areas. Meanwhile, consumers will start choosing more smartly designed home and office structures and options.

2 comments:

Paul Hue said...

The evil petro companies make about 10 cents in profit per dollar you pay at the pump. That's 30 cents of a $3/gal price. How much of this profit do the anti-gougers want to confiscate? At best, they can take the full 30 cents. Questions for people interested in economic facts: If caring lawmakers could somehow take those 30 cents for each gallon, would the price really go down by 30 cents?

ANSWER: No, unless the caring lawmakers also imposed a price control. In that case the petro signs would read, "$2.70/gal", but the tanks would contain no gas.

republican brother said...

It's amazing how uninformed most Americans are. They are so busy lookng at what the CEO of Exxon/Mobil retirement package is, they fail to see the TRUE reason why gas prices are so high. All they have to do is open their eyes, look at the price of a barrel of oil. Speculators control the rice of oil. When oil was $30 a barrel gas was around $1.35. Now that a barrel of oil is trading around $75 a barrel, gas is around $3.00. Oil is a traded commodity just like gold or silver. Politicians blaming the oil companys is just for show. An excess profit tax is a bad step toward socialism. The same way the dotcom stock prices couldn't be maintained, the price of oil will be no exception.