More on the Gas Run

Gas prices surge as Ike moves in | ajc.com.

States warn gas stations against price gouging

These stories is just full of juicy quotes about indignant consumers (read: voters) about this gas run.  I’ll present some quotes:

Larry Ruiz of Duluth said it cost him $45 Tuesday to fill up his small pickup. Friday, it cost him $60. “It really is just too expensive,” he said. “The government has lost control of the gas.”

Larry, the government doesn’t have control over gas prices.  At all.  It controls one thing, the location and siting of oil refineries.  You know who has control over gas prices?  You.  But I bet you’re not willing to take responsiblity for your actions.  It’s alot easier to set blame on the government than yourself.

The wholesale price for a gallon of gasoline rose about $1, to $4.25, Thursday morning, topping the high price five years ago when hurricanes Katrina and Rita raked the Gulf Coast, said Tom Kloza, publisher of the Oil Price Information Service in Wall, N.J. It was uncertain whether that price spike will filter down to the retail level.

“It’s pure panic,” Kloza said. “It’s related to the fact that there are worries about whether there’s going to be enough (gasoline) in the distribution system to satisfy some of the September pumping needs on the Gulf Coast.”

More proof that this is a run.  People don’t know if there’s going to be supplies, so they hoard.  This will become a self-fulfilling prophecy.

“Every time there’s a hurricane this happens. They’re just doing this to rip people off,” said 19-year-old Megan Cohen, a South Carolina college student who settled for paying $4.11 a gallon after going to three stations.

Uh, this wasn’t the case in any other hurricane season except following Katrina, Megan.  It hadn’t happened with any of the hurricanes this year, including Gustav, which hit another large section of the oil and gas producing area of the country.  But Megan, you’re not helping by going to three gas stations and “settling” for $4.11 a gallon.  This means that you didn’t need gasoline (then why go to three stations unless they were out, and there’s an easy way to figure out if the station is empty: noone’s getting gas).  But Megan probably has never taken an economics class at her South Carolina college, otherwise she would know about SUPPLY AND DEMAND.  It’s not that hard people.  Less supply means prices go up.  Demand going up sharply because of panic buying means prices go up even futher.  Or, if they don’t go up quickly enough, there’s a shortage.

S.C. Gov. Mark Sanford asked residents to avoid filling up unless necessary. “Instead, this is a time to think of ways in which each of us can make a difference on what may come our way if refineries in Texas are significantly damaged,” Sanford said in statement. “It might mean riding to the football games with a neighbor or on Sunday riding to church with a friend. It might mean watching a video at home rather than going to the movies or riding to work with a co-worker.”

I know there’s not alot that can be done legally, but as the leader of a state, can’t Mark do something with a little more leadership?  Making a difference?  Throwing out silly suggestions?  This is wimpy politico talk here.  Man up, Mark!  Tell people to stop being so stupid and panicking, if this isn’t a problem.  If it is… be more forceful in telling them that this might be the case for a while.  But if this is his idea of leadership, then this state’s got problems.  This was also true of the Hanna situation, which was equally feeble in the public response.

In South Carolina – where gas prices increased about 20 cents a gallon on average Friday – Attorney General Henry McMaster said gas stations that price gouge would face criminal prosecution. He did not set a threshold, saying each case must be investigated separately to see whether prices were raised to an “unconscionable” level.

But putting the gouging laws into effect?  Now THAT’S going to make things better!  Making the suppliers walk on egg shells in pricing so that if some 19-year old tart with no clue of how things work gets pissed off and files a complaint, then you’ll have to deal with investigations for the next year.  Or you could price it so low that you’ll be out in 5 minutes, but you don’t have to deal with the state lawyers.  Or you could just go on vacation for the next 15 days until this expires.  Then you’re fine and it’s only the customers who get screwed.  But we already knew that about these types of laws.

North Carolina Republican Congressman Robin Hayes called for a federal investigation into some prices rising more than $1 per gallon in a day.

“I understand there is a substantial hurricane in a sensitive area of the country, but this dramatic spike in gas prices is breathtaking,” he said.

I just wanted to point out the party of the pandering politician here.  What’s a federal investigation going to do that the myriad of state investigations won’t?  Oh, that’s right.  Make it seem like you’re doing something about it.

Run on Gas in South Carolina

The State | Gas reaching $5 in Columbia

Everyone knows what a bank run is.  Someone gets word that the bank is close to failure, or doesn’t have enough deposits to carry through to the next business day.  So people want to get their money out before the well dries up.  One person sees this and thinks the same thing, and it continues until the bank actually runs out of money.  This could even be the case when the bank IS solvent and would have had enough money to stay open during normal operations, but the stampede action and groupthink mentality forces the bank to close because they couldn’t satisfy the demands of it’s depositors.

The same thing is starting to happen in South Carolina.

I first heard about the run this morning (shows how much I’m in the loop around here), but at that point, I was probably asleep when it started yesterday afternoon and into the evening.  When I got into work, two things caught my attention.  The first was that the Pitt Stop gas station had run out of gas, as evidenced by the bags on the nozzles.  The second was that I looked down the street to the Gator (independent) gas station and thought I saw a 4 in the dollar place.  I thought I was seeing things though at the time.  Then while at work, the supervisor notified all of us that we were to fill our tanks completely when we finished our routes, because there would be shortages of gas this weekend and going into next week.

The run was on.

By the time I left the city, gas was already at $3.73 to $3.92 and there were reports on the radio that there had been long lines in Sumter and Lexington.  Driving to Myrtle Beach was a mixed bag.  The truck stops (Pilot) along I-20 and I-95 were showing normal prices, at least the same as yesterday, $3.62 or so.  Then when turning on the local sports radio show, I was somewhat surprised when the announcer started off the show by going on a rant about gas prices.  Basically, he was saying that anyone charging over $4 a gallon was “gouging you” and that you should talk to the manager.  As he was saying this, he announced that the Markette convenience store he was broadcasting from dropped their price from $4.20 to $3.93.

Continuing on to Myrtle Beach, I saw a trend appearing.  Most stores had raised their price to $4, but the ones that had left them at $3.80 or so had nothing left.  At the Costco in Myrtle Beach, I saw about 15 cars getting gas (this was at approx 10:15 AM), not surprising for Costco on some mornings.  When I left about 10 minutes later, the amount of cars waiting had doubled, with cars beginning to block the entrance to the store.  The price was a relatively miniscule $3.52.  The cheapest in the state at the time, most likely.

For the rest of the drive, I could see that prices were in the $3.60 to $3.80 range but nothing out of the ordinary.  One store, the Petro United in Surside Beach, was at $3.58 and there wasn’t a line of cars there.  The remainder of the drive to Georgetown was uneventful in terms of long lines or high prices.

The trip back to Columbia was an entirely different story.  While local news didn’t have anything to say about the gas prices, the Fox News national report had an excerpt about how “one regional gas store that operated in 11 southeast states” was asking customers to limit this information, but nothing else was new here, as this was already reported locally.

When I arrived in Lake City, that all changed.  The first store I saw (a little mom-and-pop), had taped over their $3 with $4 sheets of paper.  It was $4.57.  I thought that this was just a little store taking advantage of the situation.  Not even close.  Getting into the downtown area of the town, I saw how relatively ;inexpensive; this all was.  One store was at $4.70 and a group of three at the main intersection of US-52 and Business 378 were all at $4.80 a gallon.  It was also the first time that I saw any price (including premium) at $5 as well.

Going from there to Sumter I saw a pattern emerge.  Anyone who was actually selling gas had their price set at $4.  Anyone not selling gas had a price below that (probably because they ran out at that price).  This continued all the way into Columbia.  There, prices were generally at $4 with the cheapest being $3.90 at a Murphy USA (read Walmart).  I was able to fill up at $4 at a Sunoco, although some of their pumps said that they only had diesel remaining.  I pumped regular, paid the regular price (vs. the cheaper diesel price), so I should have regular in my tank.  If I don’t, then I suppose Monday will be an interesting trip to the coast.

Getting back to my workplace, I saw that the two places that tipped me off this morning had changed their prices.  The Pitt Stop had raised their price to $4.30, but they had gas.  The Gators…$5.  The highest I’ve seen in the state.

And people are still flocking to get gas as far as I can see.

So while nobody is talking about it, there is a full-fleged run on gas in South Carolina, and perhaps in the Southeast.  And there’s no FDIC to backstop this run.

McCain Invents New Constitutional Power

Again, from John McCain’s acceptance speech:

We need to change the way government does almost everything: from the way we protect our security to the way we compete in the world economy; from the way we respond to disasters to the way we fuel our transportation network; from the way we train our workers to the way we educate our children. All these functions of government were designed before the rise of the global economy, the information technology revolution and the end of the Cold War. We have to catch up to history, and we have to change the way we do business in Washington.

I must’ve missed that part of the Constitution where it says that the government sets the standards for transportation fuel. Yes, yes, I know I’m in a minority opinion, where the Supreme Court has given the federal government carte blanche to do whatever it wants with the economy. Of course, no one has opposed the ethanol mandates, or the EPA gasoline/diesel requirements yet either, at least not successfully. Of course, as a nation, we have long accepted federal limits on economic freedom. Perhaps when you’re required to trade in your gasoline powered car for a T. Boone special, you might make a peep, or not.

Regardless, this is just another way that McCain is letting everyone know that he’s going to be fulfilling the Pickens Plan when he gets into office. He just doesn’t want to say it so directly. So much for that openness and accountability that he’s running on.

Wall Street Journal and Rush Limbaugh Pick Up on the Gang of 10

On Monday, I posted on the Gang of 10, a group of Senators seeking to bring bi-partisanship and results on the energy issue to the Senate. I looked at more of the spending aspects of the bill, but neglected both the drilling and political aspects of this issue.

So today, the political aspects were addressed by the Wall Street Journal in an article by Kimberley Strassel. So the cat is now out of the bag and how “bi-partisanship” is going to take a key issue off the table for Republicans.

The Institute for Energy Research did a thorough look at all aspects of the bill, as currently announced. Of course, we haven’t seen an actual bill yet, so it could be significantly different in certain ways and have impacts yet unforeseen.

One thing that I had completely forgotten about was the fact that the off-shore drilling ban is set to expire on September 30th:

Republicans are winning the energy debate and will continue to highlight the issue until Democrats are forced to either renew the existing offshore ban when it expires on September 30, or allow it expire. Democrats need to hope for prices to come down and stay down until the election. Whether they have a legislative way to bring that about (such as releasing fuel from the Strategic Petroleum Reserve) is unclear.

So this is a new wrinkle to the bi-partisan plan. Don’t do anything (let the ban expire) and you get what you want (more drilling) . Do something (pass the compromise) and you do less of something (limit the amount of area available for drilling).

So this came up big-time on Rush Limbaugh’s show today. So much that Georgia US Senator Saxby Chambliss called in. Of course Rush put him on right away. There were quite a few things that the Senator said but there are a few that I want to highlight… and pick apart.

RUSH: … The ban on offshore energy production is set to expire at the end of September if Congress does nothing, giving the American people exactly what they want. Now, here comes your bill, The New Era Bill, and it says that new production will only be permitted in four states, and the state legislatures are in charge of it, not the federal government anymore, and only 50 miles or further offshore in those four states, which eliminates the richest fields and things like ANWR. It has 84 billion dollars in tax credits, subsidies and federal handouts for alternative fuels and renewables. It basically, according to the Wall Street Journal today, will eliminate any effort for new drilling.

CHAMBLISS: Well, it’s actually designed to do just the opposite, Rush. First of all, our bill has nothing to do with whether or not the moratorium remains on after September 30. That’s going to be an up-or-down vote on either continuing resolution or some sort of omnibus bill. That’s where it will be included. I intend to vote to lift the moratorium. I think all five of us will do that. I’m sure all five of us will. This doesn’t have anything to do with that. What it does have to do with is we’ve got a commitment for the first time that I can remember in my now 14 years in the Senate, a significant number, although five may not sound significant, but it really is. We’ve got five Democrats who are willing to say, “Look, you know, we think we need to be reasonable and we need join with you guys, so let’s work on a compromise bill that will allow additional offshore drilling,” something we haven’t done in the last 28 years.

Three things I want to mention:

1. This has everything to do with the moratorium. If you replace law that is set to expire in two months with a new set of laws that keep the law in place, then you’re extending the moratorium. In this case, they’re just keeping the moratorium in place 50 miles off-shore and in. But it’s still in place. If you don’t do anything, the moratorium expires, and you get to drill EVERYWHERE. You win.
2. If Congress passes the moratorium extension in an omnibus bill, then Senators have two options: strip it out in an amendment (straight up or down vote) or have President Bush veto the bill and not override it. Even if the law is passed, Pres. Bush can still veto it, and the Democrats absolutely do not have the votes to override it. Just so long as Republicans keep playing the drilling issue up, which is a political winner for them. Especially if there are 5 Democrats willing to go along with drilling.
3. Since when did a “continuing resolution” have the force of law? If the President doesn’t sign it, it’s not law. Period. If that’s not the case anymore, then 216 years of a Constitutional Republic have just been blown up. And then we have a pretty good legal case on our hands. A continuing resolution that’s not signed by the President (that whole checks and balances thing, remember?) SHOULD NOT and DOES NOT have the power of law. If I’m an oil exploration company, I challenge that law as soon as possible.

Pretty much, the rest of the interview is mostly Sen. Chambliss defending his position that “his constituents want me to do something” and I’m doing something. Whether or not his something will amount for anything is a different matter altogether.

The entire conversation is below the cut.

Obama half-right, half-wrong

The last day or so has had alot of people jumping on Barack Obama for his “we can save enough energy by keeping our tires inflated and engines tuned to prevent drilling off-shore” comment. I, for one, applaud Obama, as a free market conservative, for suggesting that people can save money by reducing their own consumption. This isn’t the same as telling people not to drive or what to drive (ie his people can’t drive SUVs because the world hates them comment). It cuts waste, which isn’t a bad thing. The same thing with driving slower, having more aerodynamically efficient cars, and the like.

But that choice is for the consumer to make, not for the government to make. Which is where Obama then goes off the deep end, trying to use government policies to drive consumption patterns. But consumption of gas often flies in the face of what a politician wants to have done.

It seems that in the course of Obama’s Ivy League education, he never learned about the incidence of taxation. This basic part of public economics states: the tax burden of a tax on a commodity will fall on the group that responds less to price.

(Guess who that is for gasoline?)

Liveblog of T. Boone Pickens interview with Sean Hannity

I heard on the way home that Sean Hannity was interview T. Boone Pickens on the Pickens Plan. Since I was in the car, I couldn’t post directly to the internet, so I had to write it down and copy it now. As Pickens is a Republican supporter (he sponsored the Swift Boat Veterans for Truth), I can now look in hindsight that Hannity would throw softballs at Pickens. But I was expecting at least some questions that were more critical than were asked.

You can read the liveblog after the cut…

Honda Proves Me Right

In a previous post, I wrote that Honda has the most upside to any US automaker because of their relatively smaller model lineup, which enables them to shift production more quickly and keep R&D costs low.

Honda’s profit in the US grew 8.1%.

The article cites that other carmakers with model portfolios of smaller cars are doing better. Which goes without saying, given all the anecdotal evidence. It also means that people are adjusting and there isn’t the need for radical government policies to shift consumption data or gas prices. People are already doing that themselves.

Toyota will have similar but less impressive results because they have more models and are thus more exposed to gas problems than the sleeker Honda lineup.

Congress Considers Punishing Drivers for Politicians Mistakes

Call it the law of unintended consequences. Call it massive ignorance of cause and effect. Call it whatever you want, but Congress is getting ready to not cut the gas tax in the face of rising costs.

They would increase it.

According to multiple sources, Congress has not only rejected the gas tax holiday proposed by Sen. John McCain and others, but is now getting ready to INCREASE the gas tax.

The reason is that Congress’ eyes are starting to get too big for their stomach. Congress and their buddies in the road construction business are beginning to realize that there is actually a limit on how much pork they can hand out for roads. And after doing to budget crunching on the gas tax holiday, the government now realizes that they can’t keep handing out the goodies without something to back it up.

This is somewhat ironic in a government that has lived off of deficit spending for most of the 20th century and continuing into the 21st. By law, Congress is limited in their spending by the amount of money in what is called the Highway Trust Fund (hey, it’s like the Social Security Trust Fund!). Once the US completed the Interstate Highway system in the late 1980s. Money continued to flow from the gas tax as consumption increased, but highway construction came to a standstill. So with all this money to play with, Congress did what Congress does best: spend like it’s their last day on the job.

Of course, at the same time, under the guise of… something, Congress started putting fuel economy standards on cars. So people started to use less gasoline for their cars. For a while, the increase in the amount of drivers offset the decrease in the amount of gasoline purchased, so income grew (Again, like Social Security). But so did spending out of the Trust Fund (I’m seeing a parallel here). Now, revenues are decreasing, but Congress and their pork-addicted campaign contributors in the construction industry still want to spend more money (Somebody stop with the analogy to social security…).

So now they’re at a crossroads: they want to keep spending, but they won’t have the money to do so. Right now, this is where the comparison stops with social security, because SS will still have a surplus for the next 10 years or so. But the Highway Fund is about to run out of money. Congress, since they don’t have to pay for these things out of their own pockets, will do the honorable thing:

Increase taxes.

Instead of cutting the pork, they’ll make prices even more expensive for drivers in the months ahead. Instead of putting the money to good use, they’ll keep funneling other people’s money to their campaign contributors. Instead of weaning themselves off an unsustainable path, Congress will just keep enabling their behavior without consequences. (Ok, that’s more like social security again).

So what can be done about it? Since people don’t like voting out incumbents very much (thank you gerrymandering and campaign finance laws), we’re stuck with the same people. But if you speak up to your representative or senator, there is just maybe a chance that they’ll think they have a shot at losing an election. And that fear will scuttle any type of pork raising on the part of Congress. But they have to fearful of losing their privileged position before anything can be done.

So tell Congress to get their priorities in gear and stop making drivers pay for the politicians shortsighted policies.

Laws of Economics Still Work

Crude oil settled down at $128.73 today, completing a $14 fall over the past three days.

There are some out there who say this is because of George Bush’s announcement dropping the ban on oil exploration and development on the outer continental shelf. And by some, I mean noted political hack, Larry Kudlow.

One of the biggest problems with analysis out there is that everyone ignores the first rule of statistics: correlation does not mean causation. Just because A went up at the same time B went down, doesn’t mean that A caused B to go down. They could be completely unrelated items. Most medical “studies” do exactly this.

Saying that Bush caused oil markets to go down completely ignores other much more pertinent information. Such as demand dropping, more information coming available that was the opposite of what those evil speculators were betting including increased supply and oil imports, not to mention a strengthening dollar.

Note that in not one of those stories was the Bush did anything mentioned. In fact, all of those things happened independently of some inconsequential announcement that the President made. In fact, as long as the law on the books says that no new areas are open to exploration, then the price shouldn’t change one penny.

(Note: the fact that the President can make law is pretty much unconstitutional. If Congress repealed the ban and the President still had the executive order, then I’m pretty sure that the presidential order would be unconstitutional).

So the lesson to take out of all this is that, the markets still work, and the laws of supply and demand say nothing about what the role of a president at all.

The 60 MPH Challenge – Day 1

The results from Day 1 of the 60 MPH Challenge:

Distance Traveled Yesterday: 332 miles
Distance Traveled Today: 330 miles (down .60%)

Gas Purchased Yesterday: 17.439 gallons
Gas Purchased Today: 15.862 gal (Down 9.04%)

MPG Yesterday: 19.04 MPG
MPG Today: 20.80 MPG (Up 9.24%)

Time to travel to Conway Yesterday: 2:12
Time to travel to Conway Today: 2:32 (Up 15.15%)

Time to travel to Columbia (from Georgetown) Yesterday: 2:56
Time to travel to Columbia (from Georgetown) Today: 3:03 (Up 2.97%)

Analysis: