Week in Review
The British economy appears to be turning the corner. Of course, they have an advantage over the American economy. They’re not stuck buying petrol with a devalued American dollar (see UK economy growing at fastest rate in the developed world by Philip Aldrick, and Steve Hawkes posted 10/3/2013 on The Telegraph).
And there were hopes tonight that the signs of life could help tackle the cost of living, with a strong pound helping to push down the cost of petrol, which is traded globally in US dollars.
There are two primary forces that determine the price of gasoline. Supply and demand. And the strength of the US dollar.
Thanks to the worst economic recovery since that following the Great Depression, gasoline is not in as great of demand as it once was. Before President Obama became president. With so many people having left the labor force people just don’t have the money to put into their gas tanks. Hence the ‘staycation’. Spending the family vacation at home. Doing fun things in the backyard. Like cutting the grass. And then when the kids’ chores are done there’s hotdogs on the grill. Can a week at Disneyland compare to that?
Even though we’re buying less gas gasoline prices are still pretty high. Why? Because unlike the British we buy our gasoline with devalued dollars. Due to all of that quantitative easing. Printing money to buy treasury bonds. To stimulate the economy. Where only the rich Wall Street traders who buy and sell these bonds are getting stimulated.
With more money in circulation chasing the same goods and services in the economy it takes more dollars to buy what they once did. Including gasoline. Especially gasoline. For the higher price of gas can be hidden in other products by reducing the package size of the product sold. Such as smaller cereal boxes. The prices may not be going up on cereal but we have to buy cereal more often. Spending more money in the long run. The higher price of gasoline (due to a weaker dollar) makes everything more expensive in the supply chain that ultimately puts those boxes of cereal on the supermarket shelf. Ditto for everything else that is moved with gasoline or diesel. But they can’t shrink the package size of gasoline to hide the added cost from the devalued dollar. Because they sell gasoline by a fixed measurement. We buy it by the gallon. We don’t buy it by the box. If we sold cereal by a fixed measurement we’d see cereal prices rising a lot higher than they are now. But they’re not. So the boxes are getting smaller.
The British pound is stronger than the US dollar. So when the British buy oil on the world market they exchange stronger pounds for weaker dollars. Getting more dollars in exchange for their pounds. Removing the U.S. price inflation (due to the devalued dollar) from the price of oil. Lowering the cost of oil in Britain. And lowering costs throughout the British supply chain. Which will help lower the British cost of living. Making life easier for the British consumer. Because the British are more responsible with their currency than the Obama administration is with the American currency.
Tags: British economy, cost of living, currency, devalued American dollar, devalued dollars, gasoline, oil, petrol, President Obama, price of gasoline, prices, strong pound, US dollar, weaker dollar
Week in Review
Gold and oil share something in common. We price both of these commodities in U.S. dollars. Which makes it difficult to hide inflation in these commodities. Food companies can shrink package sizing to keep from having to raise their prices to factor in inflation. But you can’t do that when you sell oil by a fixed quantity. A barrel. Or gold. Which we sell by the ounce. Which means if you depreciate the dollar (with quantitative easing where we print money to buy bonds to increase the money supply so as to lower interest rates to encourage people to borrow money and buy things) you have to increase the price of these commodities. Because if you make the money worth less it will take more of it to buy what it once bought.
But gold and oil also have a major difference. While an increase in the price of gold encourages gold mines to bring more gold to market environmental concerns have prevented people from bringing more oil to market. It is because of this that the price of gold has fallen while gasoline prices are rising again (see The Gold Standard by SARAH MAX posted 6/1/2013 on Barron’s).
Gold prices rise in times of economic malaise—hence its 23% rise in 2009 and 27% rise in 2010. When prices are rising, mining stocks have historically outperformed the physical asset. Yet gold-mining stocks have lagged over the past few years, even before the price of gold plummeted from its August 2011 high of roughly $1,900 a troy ounce to less than $1,400 today. “The main reason is cost inflation,” says Foster, explaining that a global mining boom has driven up the costs of labor and materials, while forcing miners to look farther afield for new gold deposits.
As the government inflates the money supply it reduces our purchasing power. This erodes the value of our savings. Making the money we worked hard for and put in the bank to pay for our retirement unable to buy as much as we hoped it would. This is why people buy gold. Because gold will hold its value. If they increase the money supply by 20% the price of gold should rise, too. Close to that 20%. So when the Federal Reserve finally abandons their inflationary policies people can sell their gold and put their retirement savings back into the bank. Adjusted, of course, for inflation.
The price of gold has fallen despite the Fed’s quantitative easing still going strong. So if the dollar is worth less how come it now takes fewer of them, instead of more of them, to buy a given amount of gold? Supply and demand. With the high gold price people mined more gold and brought it to market. Increasing the supply. And lowering the price. But because the Fed is still depreciating the dollar costs continue to rise. Making it more costly for these mining companies to mine and bring gold to market. Reducing their profits. And the cost of their stock.
If only the oil business was free to operate like this. For with the Fed depreciating the dollar they’re raising the price of a barrel of oil. Making it attractive to bring more oil to market. But wherever it can the federal government has shut down oil exploration and production. To appease the environmentalists in their political base. So, instead, gasoline prices continue to rise. While gold prices fall. And the dollar continues to depreciate. Which will one day ignite a vicious inflation. Much like it did in the Seventies. And then it will take a nasty recession to get rid of that vicious inflation. Like we had in the Eighties. But at least in the Eighties we had one of the strongest and longest economic expansion follow that nasty recession. Thanks to a strong dollar. Low taxes. And a reduction of regulatory costs. Something the current administration clearly opposes. So we’ll probably have the inflation. And the recession. But not the economic expansion. For that we may have to wait for the next Republican administration.
Tags: commodities, depreciate the dollar, dollar, economic expansion, Federal Reserve, gasoline prices, gold, gold mines, gold prices, inflation, inflationary policies, mining, mining stocks, money supply, oil, price of gold, purchasing power, quantitative easing, recession, the Fed
Week in Review
A generation or two ago people got married to raise a family. The husband typically earned the money. And the wife raised the family. On a single salary. A time when most children grew up in a two-parent household. Where boys grew up playing with toy guns. But never took a real one to school. Today it’s a lot harder to raise a family on a single income (see Cost of Raising a Child Up to $235K—Before College by Chris Wadsworth, special to USA TODAY, posted 12/24/2012 on CNBC).
According to the latest statistics released by the U.S. Department of Agriculture, parents will spend an average of $235,000 to raise a child born in 2011 to the age of 17. (And that’s not taking into account any savings for college).
Housing, food, clothing, health care, child care, schooling … the list of compulsory expenses goes on and on. Discretionary spending such as family vacations, birthday gifts, music lessons and the like are mostly extra…
The greatest share of these expenses is housing, which is 30 percent of the total. It’s followed closely by child care and education at 18 percent and food at 16 percent…
“Our day care expense for just our older son was over $1,000 a month,” Sutton says. “If we had put our younger son in day care as well, it would have been about $2,200 a month. That was more than our mortgage payment.”
We hear this all of the time. But we never really hear the why. Why is it that it takes two incomes to raise a family these days? Forcing parents to pay so much for day care that they could buy another house with that money. Why that house expense is so expensive. And why education and food costs so much. So let’s look at the why. And here’s why. Keynesian economics. And liberal Democrats.
Liberal Democrats champion Keynesian economics as it sanctions what they want to do most. Tax, borrow, print and spend. When Nixon decoupled the dollar from gold the great devaluing of the dollar began. In 2012 it took $8.21 to buy what $1 would by in 1955. A $15,000 house in 1955 would cost about $127,000 today. So that’s part of the reason why housing is so expensive. The other reason is that Keynesian monetary policy. Where the Federal Reserve (America’s central bank) kept interest rates artificially low to encourage people to buy houses. Which they did. In droves. Driving up the price of housing. Creating housing bubbles. The last one bursting into the subprime mortgage crisis. Giving us the Great Recession.
But it’s just not the Federal Reserve devaluing the dollar. Gasoline cost about $0.23/gallon in 1955. If you adjust that for inflation it would bring it up to $1.89 today. At the end of summer 2012 the average gasoline price was $3.72/gallon. Which is a $1.83 premium over the inflation-adjusted price. A 96.8% increase in price. What caused this near doubling in price? Well, the American Left has shut down a lot of oil drilling due to environmental issues. Raising the cost of crude oil. Which increased the cost of gasoline refined from that crude oil. Further, new environmental regulations have increased the cost of refining. Requiring a plethora of blends depending on the time of year. Further increasing the price of gasoline.
Higher gasoline prices make everything more expensive wherever gasoline is used. On the farm. The transportation from the farm to the food processor. Transportation from the food processor to the food wholesaler. Transportation from the food wholesaler to the food retailer. Transportation from the family home to the grocery store and back. High gasoline prices raise prices everywhere. And consume more of the family budget.
Education is the one industry no one every blames those in control of the industry for being greedy. No one every blames our universities for their high tuition fees. They blame the taxpayers who don’t approve higher taxes to subsidize the high cost of education. Which is high due to very generous pay and benefit packages for teachers, professors, administrators and support personnel. Much more generous than those found in the private sector. Why do they get away with this when liberal Democrats attack business owners for being greedy? Because business owners don’t have as their primary mission to produce Democrat voters.
So what is increasing the cost of raising children so much? Liberal Democrat policies. They depreciate the currency, inflate the cost of housing (and cause Great Recessions), add huge regulatory costs that increase prices throughout the supply chain and create and protect a privileged class. Consuming more and more of the family budget. Making it ever more costly to raise children.
Tags: children, cost of raising children, day care, devaluing the dollar, education, environmental regulations, family, Federal Reserve, food, gasoline, gasoline price, Great Recession, housing, housing bubble, inflation, Keynesian economics, Liberal Democrats, monetary policy, parent, price of housing, raise a family, single income, transportation, two incomes
Week in Review
President Obama’s energy policy has only hindered oil production and raised gasoline prices. Exploration and production are soaring. But only on private land. Any land that requires a federal permit is not booming with activity.
Despite the high gasoline prices and the poor economy President Obama won reelection. In large part thanks to those states with the big metropolitan cities. Those cities that border the heartland. Or flyover country as those on the left call it. Those cities that concentrate wealth. Have massive public sectors. And large social safety nets. Funded by that concentrated wealth. So people in the big cities approve of an expanding welfare state. And have the population to turn out on election night to keep that welfare state expanding. For awhile, at least (see Oil, gas boom lifts personal income in USA by Dennis Cauchon posted 11/27/2012 on USA Today)
The nation’s oil and gas boom is driving up income so fast in a few hundred small towns and rural areas that it’s shifting prosperity to the nation’s heartland, a USA TODAY analysis of government data shows…
Small-town prosperity is most noticeable in North Dakota, now the nation’s No. 2 oil-producing state. Six of the top 10 counties are above the state’s Bakken oil field.
Could this be the reason why the president’s energy policies hinder exploration and production? To keep people and wealth out of the heartland? Where they tend to vote conservative? Perhaps. For the last thing the Democrats want is for people to leave the big cities for good jobs in the private sector. Where they live well thanks to jobs in the energy industry that the president’s base wants to regulate out of business. So, no, an energy boom in the heartland would not benefit the Democrats. It would shift the demographics away from their strongholds. And into flyover country. Favoring conservatives.
Just something to think about the next time you’re expressing dissatisfaction over the high price of gasoline. That it would benefit the Democrats not to have good, high-paying jobs that could reduce the price of gasoline. And their political power in the big cities that help them carry elections.
Tags: Big Cities, conservatives, Democrats, energy boom, flyover country, gasoline prices, heartland, jobs, welfare state
We use Diesel Fuel in our Ships, Trains and Trucks to move Food from the Farm to the Grocery Store
People don’t like high gas prices. When the price at the pump goes up more of our paycheck goes into the gas tank. Or, more precisely, in everyone’s gas tanks. For even if you don’t drive a car when gas prices go up you’re putting more of your paycheck into the gas tanks of others. Thanks to oil being the lifeblood of our economy. And unless you’re completely self-sufficient (growing your own food, making your own clothes, etc.) everything you buy consumed some petroleum oil somewhere before reaching you.
Gas prices go up for a variety of reasons. The purely economic reason is the market forces of supply and demand. When gas prices rise it’s because demand for gasoline is greater than the supply of gasoline. Which means our refineries aren’t producing enough gasoline to meet demand. And the purely economic reason for that is that they are not refining enough crude oil. Meaning the low supply of gasoline is due to the low supply of crude oil. Which brings us to how high gasoline prices consume more of our paychecks even if we don’t drive. The reason being that we just don’t make gasoline out of crude oil. We also make diesel fuel.
Diesel fuel is a remarkable refined product. It just has so much energy in it. And we can compress an air-fuel mixture of it to a very small volume. Put the two together and you get a long and powerful power stroke. Making the diesel engine the engine of choice for our heavy moving. We use it in the ships that cross the ocean. In the trains that cross our continents. And in the trucks that bring everything to where we can buy them. To the grocery stores. The department stores. To the restaurants. Everything in the economy that we don’t make for ourselves travels on diesel fuel. Which is why when gas prices go up diesel fuel prices go up. Because of the low supply of oil going to our refineries to refine these products.
Oil is at a Disadvantage when it comes to Inflation because you just can’t Hide the Affects of Inflation in the Price of Oil
And there are other things that raise the price of gasoline. That aren’t purely economical. But more political. Such as restrictions on domestic oil drilling. Which reduces domestic supplies of crude oil. Political opposition to new pipelines. Which reduces Canadian supplies of crude oil. Special ‘summer’ blends of gasoline to reduce emissions that tax a refinery’s production capacity. As well as our pipeline distribution network. Higher gasoline taxes. To pay for roads and bridges. And to battle emissions. The ethanol mandate to use corn for fuel instead of food. Again, to battle emissions. All of which makes it more difficult to bring more crude oil to our refineries. And more difficult for our refineries to make gasoline. Which all go to adding costs into the system. Raising the price at the pump. Consuming more of our paychecks. No matter who is buying it.
Then there is another factor increasing the price at the pump. Inflation. When the government tries to stimulate economic activity by lowering interest rates they do that by expanding the money supply. So money is cheaper to borrow because there is so much more of it to borrow. Hence the lower interest rates. However, expanding the money supply also causes inflation. And devalues the dollar. As more dollars are now chasing the same amount of goods and services in the economy. So it takes more of them to buy the same things they once did. One of the harder hit commodities is oil. Because we price oil on the world market in U.S. dollars. So when you devalue the dollar it takes more of them to buy the same amount of oil they once bought.
Oil is at a particular disadvantage when it comes to inflation. Because you just can’t hide the affects of inflation in the price of oil. Or the gas we make from it. Unlike you can with laundry detergent, potato chips, cereal, candy bars, toilet paper, etc. Where the manufacturer can reduce the packaging or portion size. Allowing them not to raise prices to reflect the full impact inflation. They still increase the unit price to reflect the rise in the general price level. But by selling smaller quantities and portions their prices still look affordable. This is a privilege the oil industry just doesn’t have. They price crude oil by a fixed quantity (barrel). And sell gasoline by a fixed quantity (gallon). So they have no choice but to reflect the full impact of inflation in these prices. Which is why there is more anger about high gas prices than almost any other commodity.
Perhaps we can lay the Greatest Blame for the Current Economic Malaise on the Government’s Inflationary Monetary Policies
Current gas prices are hitting record highs. And this during the worse economic recovery following the worst recession since the Great Depression. Gas prices and the unemployment rate are typically inversely related to each other. When there is high unemployment people are buying less gasoline. This excess gasoline supply results in lower gas prices. When there is low unemployment people are buying more gasoline. This excess demand for gasoline results in higher gas prices. These are the normal affects of supply and demand. So the current high gas prices have little to do to with normal economic forces. Which leaves government policies to explain why gas prices are so high.
Environmental concerns have greatly increased regulatory policy. Increasing regulatory compliance costs. Which has greatly discouraged the building of new refineries. And making it very difficult to build new pipelines. Which tax current pipeline and refinery capacities. A problem mitigated only with their restriction on domestic oil production. The current administration has pretty much shut down oil exploration and production on all federal lands. Reducing crude oil supplies to refineries. These environmental policies would send gas prices soaring if the economy was booming. But the economy is not booming. In fact the U-6 unemployment rate (which counts everyone who can’t find a full time job) held steady at 14.7% in September. So an overheated economy is not the reason we have high gas prices. But the high gas prices may be part of the reason we have such high unemployment.
Perhaps we can lay the greatest blame for the current economic malaise on the government’s inflationary monetary policies. Inflation increases prices. Especially those things sold in fixed quantities priced in dollars. Like oil. And gasoline. The price inflation in refined oil products is like a virus that spreads throughout the economy. Because everyone uses energy. Especially the food industry. From the farmers driving their tractor to work their fields. To the trucks that take grain to rail terminals. To the trains that transport this grain to food processing plants. To the trucks that deliver these food products to our grocery stores. From the moment farmers first turn over their soil in spring to the truck backing into to a grocery store’s loading dock to consumers bringing home groceries in their car to put food on the table fuel is consumed everywhere. Which is why when gasoline prices go up food prices go up. Because we refine gasoline from the same crude oil we refine diesel fuel from. Oil. Creating a direct link between our energy policy and the price of food.
Tags: crude oil, devalue the dollar, diesel, diesel engine, diesel fuel, dollar, domestic oil drilling, domestic supplies of crude oil, economic activity, emissions, energy, environmental policies, food prices, gas prices, gasoline, high food prices, high gas prices, inflation, inflationary monetary policies, interest rates, money supply, oil, petroleum oil, pipeline, price at the pump, price of gasoline, prices, refineries, refining, ships, supply and demand, trains, trucks, unemployment, unemployment rate
Week in Review
The law of supply and demand tells us when prices rise demand rises. Causing supply to rise to meet that demand. And it typically works when the free market is left to market forces. Apparently that isn’t happening in the U.S. oil business. So if you ever wonder why gasoline prices are so high this is the reason (see U.S. rig count unchanged at 1,864 by The Associated Press posted 9/14/2012 on USA Today).
The number of rigs actively exploring for oil and natural gas in the U.S. remained unchanged this week at 1,864.
Houston-based oilfield services company Baker Hughes reported Friday that 1,413 rigs were exploring for oil and 448 were searching for gas. Three were listed as miscellaneous. A year ago, Baker Hughes listed 1,985 rigs…
The rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.
The president may say we are drilling for more oil than ever before but the number of active rigs fell this year to 1,864 from last year’s 1,985. A drop of 121 rigs. At a time of increasing gasoline prices. The rig trend appears to be trending in the wrong direction. Rising prices mean demand is greater than supply. So the number of rigs should increase not decrease. To meet that rising demand.
The last time gasoline prices were soaring like this was during the Carter years. Because gas prices were so high oil companies rushed in to meet that demand. So that by 1981 (the first year of the Reagan administration) the number of rigs peaked at 4,530. Which gave us the steepest fall in gas prices in U.S. history. Falling from a high of $3.31 to about $1.75 a gallon (prices are in 2007 dollars). All of those rigs (as well as others throughout the world) created a glut of oil in the market. And that glut of oil brought gas prices down.
Gas prices are about as high as they were in 1981. And yet we have fewer rigs drilling for oil. Far fewer. President Carter may have asked us to turn down our thermostats and wear a sweater to help in the energy crisis. But he at least allowed the oil companies to drill for oil. And they would drill today like they did under Carter for gas prices are as high as they were under Carter. And the only reason that they are not can be that it is not as economically beneficial for them today as it was under Carter. Or that the Obama administration is just not letting them drill. And with prices and demand being as high as ever it suggests the latter.
Tags: active rigs, Carter, drilling for oil, gas prices, gasoline prices, oil business, rigs, U.S. rig count
Week in Review
President Obama says he cares for poor people. But his actions clearly show that unless there’s something in it for him he doesn’t care for poor people. Even if they are going hungry (see White House offers drought relief, feels heat to waive ethanol mandate by John W. Schoen, NBC News, posted 8/13/2012 on Economy Watch).
President Barack Obama announced emergency measures Monday to ease the impact of the worst drought in half a century, but stopped short of waiving the government’s requirement that a large portion of the now-shriveled corn crop be diverted to make ethanol…
As the lowest yields in nearly two decades squeeze feed supplies, livestock producers are asking the government to waive a five-year-old requirement that gasoline sold in the U.S. contain roughly 9 percent ethanol. Because most ethanol in the U.S. is made from corn, roughly 40 percent of the corn crop, in a good year, is purchased by the biofuel industry…
With the rest of the world’s food chain already strained, the competition for each kernel of corn is going global. Last week, a United Nations food index jumped 6 percent, and the UN’s Food and Agriculture Organization warned against the kind of export bans, tariffs and buying binges that worsened the price surge four years ago. The U.N. food agency stepped up the pressure on the U.S. to ease its biofuel policies…
Ethanol production had already begun slowing before this summer’s drought, as fuel suppliers have approached the limit of demand for the biofuel. Though higher concentrations are sold in a few stations, most gasoline formulated with ethanol is limited to a 10 percent blend.
Cutting production, though, could produce a bigger political backlash from another key contingency in an election year: American drivers. Since other additives have been phased out over the past five years, gasoline refiners have overhauled their plants and rely on ethanol to produce high-octane fuel that burns cleanly enough to meet air quality standards.
Save the planet. Kill the people.
You know food prices are rising when the UN is asking the U.S. to ease its biofuel policies. These are, after all, the same people pushing for economy-destroying environmental policies on the entire world. Particularly on the advanced economies of the world. So this food crisis is serious. Which is why they are urging President Obama to stop using 40% of the corn crop for fuel. And to use this food as food instead. To save starving children in the less economically advanced parts of the world. But President Obama’s answer? “No.” Why? Does he not care for the starving children of the world? Apparently not. For he apparently cares more about the campaign donations from the ethanol lobby.
President Obama has shown he has no problem using executive orders to overrule the Constitution. So he clearly could use his executive powers to change policies he has the legal authority to change. Such as relaxing his EPA requirements during this hot and dry summer. Let the cars pollute for a year until this crisis ends. Then he can re-cripple the economy with his punishing EPA requirements later. He can do it by executive order. But he won’t. Because the ethanol lobby is too well connected. Besides a lot of his rich Hollywood contributors are all environmentalists who will never have a problem putting food on their tables. But they will have a problem putting campaign cash on President Obama’s table if he rescinds any environmental policies. So people will starve. So the president can please his cash-contributing friends.
Never before has one man caused so much suffering to so many for the benefit of so few. Well, actually, there have been a lot of people who have done this. But they were usually warmongering dictators. Not the leader of the free world. Which makes this especially sad. Unlike his republican rival for the presidency this fall, our president clearly takes care of his rich friends while poor people suffer in the United States from high food prices. And poorer people throughout the world suffer hunger. Because of President Obama’s EPA policies. Something that even the UN says are harmful to poor people everywhere. And is begging the president to stop willfully hurting these people.
Tags: biofuel, biofuel policies, corn, corn crop, environmental policies, EPA, EPA requirements, ethanol, ethanol lobby, executive order, food crisis, food prices, gasoline, high food prices, poor people, President Obama, starving children, UN
Week in Review
Venezuela is a lot like Iran in a way. They have lots of crude oil. But little refining capacity. Which is a problem because nothing really runs on raw crude oil. It’s what we refine from it that we use in our cars, trucks, buses and power plants. Causing a bit of a problem in Venezuela. Because in their socialist utopia they virtually give their gas away. Which was one thing when they refined it. But another when they have to buy it (see Chavez’s gasoline rationing plan causes uproar by FABIOLA SANCHEZ, Associated Press, posted 7/20/2012 on Yahoo! News).
As home to the world’s cheapest gasoline, Venezuela has long had to contend with the hemorrhaging of supplies as smugglers haul gas across the border to cash in where the fuel costs far more.
In neighboring Colombia, drivers pay 40 times as much as Venezuelans to tank up — $1.25 a liter ($4.73 a gallon), compared to 3 U.S. cents a liter (11 cents a gallon).
So much gasoline is being taken out of Venezuela illegally that President Hugo Chavez’s socialist government imposed rationing on motorists in one state bordering Colombia last year, and now it’s touched off a furor in a second border state by announcing it will ration gasoline there, too…
Venezuela is a major oil exporter but its refining capacity is limited, so the government buys gasoline from the United States, losing money by then selling it at home for almost nothing. Those imports have been steadily rising since 2009…
Ramon Espinasa, a Georgetown University economist, blames “operational problems” at some Venezuelan refineries as well as rising demand from power plants built in the past two years that burn gasoline and diesel fuel.
“They’re not producing specialized (petroleum) products and must import finished products,” Espinasa said…
“It’s not rationing,” [Hugo Chavez] said. “It’s a means of control, to give everyone gasoline, because the gasoline here is practically free, so the idea is to give everyone what they need.”
One of the problems of socialism is that there is no incentive to risk capital. Because if you invest and build a refinery the state will just take it away. So that leaves the state to build their refineries. And based on their refinery capacity shortfall that’s something the state just doesn’t know how to do. Or else they would have done it. And not have gasoline rationing.
Another problem with socialism is the whole ‘from those according to ability to those according to need’ nonsense. Something that requires some people to work hard so others can have more. Never a great inducement to get people to work hard. So they don’t. In socialism those who show the most need get the most. And if they show no ability they don’t have to work hard to learn and acquire skills that will advance the economy. So what can happen is that a chemical engineer with a college degree but no children may earn the wages of a janitor while a janitor with no college degree but with lots of kids can get the wages of a chemical engineer. From those according to ability. To those according to need. You know what this gets you in the long run? Gasoline rationing.
So socialism requires everyone to sacrifice for the greater good. And based on the very large black market for gasoline that isn’t happening. Which is why socialism fails as an economic system. For people always look after their own interests. Not the greater good. Even in the socialist utopia of Venezuela.
Tags: crude oil, from those according to ability, gasoline, gasoline rationing, greater good, Hugo Chavez, rationing, refineries, refinery, refining capacity, socialism, Socialist Utopia, to those according to need, Venezuela
Week in Review
Remember the movie Monty Python’s Life of Brian? If you haven’t seen it I highly recommend it. The politics they lampoon of the Roman occupation? Funny stuff. Yes there’s a bit of nudity in it and some may find it a bit blasphemous. So viewer discretion is recommended. At the end as Brian was being mistakenly crucified the guy being crucified behind him to his right tried to cheer him up in song. And told him to Always Look on the Bright Side of Life. And the people sang. From atop their crosses. If these fictional people can see the bright side in their impending long-lasting deaths then we, too, should be able to see the bright side in the continuing bad economic news (see Gas prices are silver lining as economy weakens by Sandy Shore, The Associated Press, posted 6/1/2012 on Economy Watch).
There’s some good news behind the discouraging headlines on the economy: Gas is getting cheaper. At least two states had stations selling gas for $2.99 on Friday and it could fall below $3 in more areas over the weekend.
A plunge in oil prices has knocked more than 30 cents off the price of a gallon of gas in most parts of the U.S. since early April. The national average is now $3.61. Experts predict further decline in the next few weeks.
If Americans spend less filling their tanks, they’ll have more money for discretionary purchases. The downside? Lower oil and gas prices are symptoms of weakening economic conditions in the U.S. and around the globe.
On Friday, oil prices plunged nearly 4 percent as a bleak report on U.S. job growth heightened worries about a slowing global economy and waning oil demand. The unemployment rate rose to 8.2 percent from 8.1 percent. Sobering economic news from China and Europe also contributed to the drop…
Phil Flynn, an analyst for The Price Futures Group, believes falling gas prices could give consumers a psychological boost. But that could evaporate if hiring doesn’t pick up and stock markets keep swooning.
“If you don’t have a job, it doesn’t matter if gasoline prices are $5 or $2 a gallon,” he said.
So President Obama may get his wish after all. To have low gas prices while he runs for reelection. And all he had to do to lower gas prices was to destroy the economy with bad economic policy. Shut down the oil exploration business when oil was in high demand. Stop the building of a pipeline that would have put hundreds of thousands of jobs into the economic pipeline. Unleash a wave of new regulations that have stunned small business. Especially Obamacare. Leaving them afraid to hire anyone as they fear what the Obama administration will do next to them. And President Obama’s open attacks on capitalism haven’t assuaged anyone’s fears in the business community that his next policies will only harm them more. The president has wasted trillions of dollars in stimulus and green energy subsidies that resulted in no net new jobs but in the bankruptcy of the businesses they backed. And massive new debt that we can’t afford. The future is bleak indeed. But gas prices are falling because of it. So there’s one thing the president can run on. Things could be worse. Gas prices could be higher.
It’s the one message President Obama can tell the American people. That we should, like Brian, Always Look on the Bright Side of Life. No matter how bad the economic news continues to be. Because he alone brought down the price of gas. It’s just a pity so few have a job or feel secure enough in their job to enjoy these low prices.
Tags: economy, gas, gas prices, jobs, oil, oil prices, President Obama, reelection
Week in Review
Take a look at an electoral map. Say from the 2008 national election. What do you see? Blue (i.e., Democrat) on the coasts. Red (i.e., Republican) in the middle. And blue in the union Midwest. Okay, now what else do you associate with the blue on the coasts? That’s where there are high concentrations of liberals. (The blue in the Midwest is more organized labor than liberal). And what is one of the biggest issues with liberals? That’s right. The environment. (I’ll just assume you said the environment). Especially in California. Where they have tougher emission standards than the federal government has.
They take their environmentalism serious on the coasts. So much so that they punish the use of fossil fuels through high taxes and excessive regulations. It is for these reasons you don’t see them building many new refineries in these regions. For there are few things they hate more than petroleum oil. From drilling it out of the ground. To transporting it. To refining it. Their basic attitude towards the oil industry is, “Sure, you’re welcomed to do business here. But you will pay. And pay. And pay.” So with that in mind here’s a little story about high gas prices on the West Coast (see Unlike the East, gas prices stay stubbornly high out West by William M. Welch posted 5/18/2012 on USA Today).
“We are seeing a tale of two coasts,” says Michael Green, spokesman for AAA, which monitors pump prices. “On the West Coast, gas prices are rising steadily, while on the East Coast they are steadily decreasing.”
Oil analysts blame a refinery slowdown in western states for sending retail prices in the opposite direction of wholesale costs.
In California and Oregon, the average price of regular gas has increased 20 cents a gallon so far in May, AAA reports. Average pump prices were down 19 cents in Florida and 18 cents in Virginia…
Tupper Hull, spokesman for Western States Petroleum Association, blamed unexpected maintenance and other problems at refineries…
“Our concern is a lack of competition at the refinery level in California,” says Charles Langley, gasoline analyst at Utility Consumers’ Action Network in San Diego. “We’re not saying there’s a conspiracy. It’s just that with this few competitors, it’s very easy to game prices by turning off capacity.”
Bob van der Valk, petroleum analyst in Terry, Mont., said gasoline inventories are at a 20-year low in California for May. Supplies will return to normal, he said, but perhaps not in time for upcoming holiday travel.
The high prices on the West Coast are of their own making. Prices have fallen on the southern half of the East Coast. Because they aren’t as blue as they used to be. They love their environment there. Which is why they live there. But they know they need petroleum oil and gasoline to live. And they know that there is a direct correlation between anti-oil policies and the price at the pump. Something they apparently don’t know on the West Coast. For they hate oil. Don’t want anything to do with oil in their state. And yet almost everyone drives a car in California.
If they want lower gas prices they have to make it easier to do petroleum business there. That means they need to make it easier to refine gasoline in California. Which means backing off on the taxes. And the excessive environmental regulations. They can do that. Bring the price at the pump down. And still have a beautiful environment. Like they do on the southern half of the East Coast.
Tags: blue, California, coasts, Democrat, East Coast, environment, environmentalism, gas, gas prices, gasoline, liberal, Midwest, oil, petroleum, petroleum oil, price at the pump, red, refineries, regulations, Republican, taxes, West Coast
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