[Rhodes22-list] Shocking Truth - Reply to well educated slim (political)

[Herb Parsons]

You're right on both points. It works, and sometimes it's not pretty.

More recent than the price (and wage, btw) controls of the 80's - Right after Katrina hit, NOLA area of course had no electricity, thus no gas pumps. We had to drive to Baton Rouge for gas for our DUKW. Because of "gouging laws", they couldn't raise prices on gas. Prices at that time were in a flux, sort of like now but the other direction. So, while the rest of the country had rises in gas prices up close to $3.00, the Louisiana coastal area was locked in at lower prices (I THINK it was about $2.49). The results should have been predictable.

BR had just about effectively increased its population by 50%, between evacuees and workers. Of course, there was no immediate increase in the number of gas retailers. So there was an increase in demand. Without the interference of the "gouging laws", prices would have been higher there than anywhere else in the country (the laws of supply and demand). Fuel suppliers would have diverted supplies to BR area, because they could get more money for the gas there because of increased demand.

Unfortunately, the gouging laws had the opposite effect. Why send gas in BR for $2.00 a gallon wholesale, when you can get $2.50 for it in Dallas? You're not going to. You're going to make BR pay the same $2.50, or you won't sell to them.

But wait, if you're the retailer in BR, why do you want to pay $2.50 per gallon of gas, plus .40 in various taxes, selling it at loss of .41 per gallon, instead of the usual .09 profit you're used to.

So, you sell off your existing inventory that you paid the lower price for, and if you can find someone to sell you existing inventory at the old prices, you buy that.

No, if you're the consumer in the area, you look around at all the people buying, and hoarding (because that's what people do in disaster areas) gasoline, and you decide you better get your share. So, you run down to the understocked retailer and hope you get some. Of course, what you actually do is go wait in line, assuming you can find a line, indicating that the retailer has gas.

Now you're the retailer again. You want to be fair with your dwindling supplies (especially since you know you're not going to buy any more at to sell at a loss) so you limit the folks in line to 20 gallons each.

Now you've got people that are frustrated because they just waited in line for 30 minutes in order to almost fill their tank. Now they're even more frustrated because they can't fill their two 5 gallon tanks they brought with them, so they know they're going to repeat the process in a day or two, probably with fewer lines.

But, you can take consolation in the fact that if you DO find gas, you're getting it real cheap!

THAT'S the alternative to a system that works "ugly" - a "pretty" system that doesn't work.

>>> flybrad at gmail.com 9/12/2006 5:33:44 pm >>>
Ben,

OK, I've got an extra five minutes and I'm bored.  Here's what *probably* was
Ed's  thought process.  Capital markets work, very well!  It was painful at
$3 per gallon of gasoline but the alternatives started looking good and
people started to think about parking their SUV's and looking at smaller
cars. The market swung in a good direction quickly, just as it did in a bad
direction for a precious commodity.  Centralized economies always create
bottlenecks in the marketplace.  *Always*.  Carter, and Nixon before him,
(remember WIN, Whip Inflation Now) tried to place communist style price
ceilings in place with the all too predictable results. The goods were
priced right, they just weren't available.

China is a communist country in name only.  They, like all sane and rational
people, figured out that what worked for the first 4000 years and didn't for
the next fifty is probably not a good idea.  They (the Chinese government)
can still step in and wield the big stick when they feel it necessary.  We
have a few more restraints.  Adam Smith's 'invisible hand' works.  Anyone
who thinks otherwise is uneducated or a fool.

I see Ed's logic perfectly.  Capitalism works, but sometimes it ain't
pretty.

Brad


On 9/12/06, Ben Schultz <benonvelvetelvis at theskinnyonbenny.com> wrote:
>
> Um Ed, how did you get from, "How did gas prices drop 0.70 in a week,"
> to "do you really want to embrace communisim?"
>
> Ben
>
>
>
>
> Tootle wrote:
> > Slim:
> >
> >       Reread Brad's reply.  The Bush haters are pushing your arguement.
> > Unfortuantely, it is not the truth.  He does not control the situation.
> > Recall when we had Carter's solution instead of high prices for a time,
> we
> > had shortages and lines, or maybe you were to young.
> >
> >       Another aspect that Brad did not mention is the market threat of
> > ethanol to the oil companies.  At three dollars a gallon ethanol becomes
> an
> > attractive alternative in the gas market.  Big oil companies do not want
> to
> > loose market share to alternatives, so they are doing any thing they can
> to
> > prevent the spreading use of ethanol.
> >
> >        At three dollars a gallon for diesel, the use of coal as an
> economic
> > substitute for making diesel, worries the big oil companies.  The first
> big
> > plant in West Virginia is about to come on line.  Understand that the
> oil
> > comanies do not want to loose market share of diesel either.
> >
> >       Unfortunately , they do not usually teach these concepts in the
> study
> > of music and education.  Maybe you should consider going for a MBA
> degree
> > while you are still young enough.  If not maybe just some good books on
> > economic theory.  Maybe Brad can suggest some to you.  Another aspect of
> > this situation is studying socialism and the impact on individual choice
> and
> > freedon under Socialism.  Here you need to understand that Communism is
> > mearly the highest form of socialism.  Did you really want to live under
> a
> > communist political system?
> >
> >       Understand that those who espouse what we call liberal positions
> are
> > really advocating socialism.  That is government controls of individual
> > freedoms and social policy.  So advocating government control of gas
> prices
> > is just a fellow traveler of socialists.   Understand that non
> government
> > controls does not allow unjust enrichment through price fixing and
> > monopolies.  It merely means that the highest bidder gets the gallon of
> gas.
> >
> > Ed K
> > Greenville, SC, USA
> > ~~~~ _/) ~ ~ ~ ~
> >
> >
> >
> >
> > Brad Haslett-2 wrote:
> >
> >> Slim,
> >>
> >> Simple, supply and demand.  We're at the end of the summer driving
> season,
> >> crude prices (set by the world market) have fallen, and refineries have
> >> caught up with their 'boutique' fuel blends (required by individual
> >> states).
> >>
> >> No President or party has the power to set gasoline prices except  in
> >> places
> >> like China.
> >>
> >> Perhaps you are suffering from BDS - Bush Derangement Syndrome.
> >>
> >> Brad
> >>
> >>
> >> On 9/12/06, Slim <salm at mn.rr.com> wrote:
> >>
> >>> When I left Fort Wayne this morning I filled up the tank at
> $2.35/gallon.
> >>> Can someone tell me how the price can fall 70 cents/gallon in one
> >>> week--the
> >>> week before the primaries?  Is this supposed to make me vote
> >>> Republican?  Or
> >>> should I be angry about how obvious it is that GWB can fix the prices
> to
> >>> win
> >>> votes?  Hmmmmm...  What to do?
> >>>
> >>> Happy 9/11 everyone!
> >>>
> >>> Slim
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
> >>>
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