Wednesday, April 19, 2006

Try investigating supply and demand 

So one guy in Brooklyn charges $4.50 for a gallon of premium gas. So what? The fellow must have some marketing savvy:
A Daily News reporter spent nearly 90 minutes outside the station yesterday evening before a driver finally decided to fork over an exorbitant amount of dough for some fuel.
The article quotes Chuck Schumer calling for an FTC investigation.
"It's not hurricane season, but the oil companies are just raising the price up and up and up," Schumer said. "And the question is are they doing this dictated on the laws of supply and demand, or is something else at work?"
Katy Delay would refer Mr. Schumer to today's Investor's Business Daily insights column, pointing four fingers back at Sen. Schumer for their assistance in crippling the supply response.
Yet a big chunk of our current gasoline price pain is in fact self-inflicted. The reason, say energy economists, is simple: Regulations of all kinds have reduced the available supply of energy to U.S. markets. That's especially true for gasoline.

Just last August, Congress passed an energy bill that requires oil companies to remove the additive MBTE starting this spring. Sounds innocent enough, but it's requiring a major, costly retrofit and cleanup that's taking money off the table for other badly needed investments.

Worse, U.S. rules have made it prohibitive even for low-cost foreign companies to come here and supply our market. As oil economist Philip Verleger recently noted, "the U.S. and the European Union have erected the equivalent of trade barriers by imposing increasingly tight specifications on petroleum products."

There is, for instance, the U.S. effort to cut sulfur content in gasoline, a move that began in January 2004. The EU adopted similar rules on diesel. As a result, foreign producers can't make money selling finished petroleum products here. It costs too much to comply with our byzantine rules.
First Fuel Banks, a prepay program here in St. Cloud, has had its price rise from $2.659 to $2.799 in the last three days, but there seems to be no end in sight to the bad economics and forecasting people perpetuate in talking about gas. It's gotten bad enough to reach Snopes.