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.

Why Focus on Electricity?

Every plan for long term transportation use involves moving cars and trucks to electric vehicles, powered by alternative energy sources. But why use electricity, a delivered by the bulk power system?

One reason could be that there’s possible efficiencies in making energy in bulk and distributing it. It delivers lower prices than would be done if everyone generated their own energy. Efficiencies of scale, in economic terms. There’s also the efficiency of generation of electricity in terms of getting the most bang for the fuel. Steam generators operate at a higher efficiency than internal combustion engines. So we would be able to use less energy for transportation needs from electricity than from automotive fuels.

However, this does not take into account for the transmission losses as electricity moves from the generator to the consumer. This takes alot of the generational benefit out of the electricity. But even saying that this is a wash, there’s a different, more political reason why people like moving to electricity.

Control.

Governments, generation companies and environmentalists are heavily represented in the process of setting electricity prices and what types of generation are allowed. Note that consumers, and in particular, small consumers are not represented very well in these proceedings. Those who have a larger stake in power have a greater interest in the proceedings. Residential consumers aren’t going to take the time or energy out of their day to attend a commission meeting on electric rates. States try to get around this by setting up consumer advocates in the government itself, but is at best an imperfect representative.

However, in gasoline production, prices and quantities consumed are determined by largely economic forces. This is opposed to electricity, where prices and quantities consumed are largely non-economically determined. This is because of monopoly control of the electric distribution and how electricity is priced, which is very secretive. Most people have little idea of how much they are paying for electricity, the units of electricity and how their actions determine how much it costs.

Contrast this with gasoline. Everyone knows what gas costs, how it’s delivered and how their actions affect them. Thus, it makes it easy to know how their actions are influencing the costs. Also note that government (outside of a flat additional tax) has little say in how prices are determined. They make plenty of investigations into how prices are determined, but doesn’t have direct say in the price. This is a good thing, as markets, especially the gas market, works when allowed to work.

So moving from electricity from gasoline would allow government more control over a very large segment of the economy that it has relatively little control over currently. Also, it allows for other actors to become more important as well. That’s why these people have been driving this change to electricity, instead of focusing on other solutions.

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.

The 60 MPH Challenge

Thanks to Senator John Warner of Virginia, we’re back on our way to re-living the 70’s. Warner, who’s on his last legs as a public servent, dipped into the Bucket List a second time (after coming up with the Warner-Lieberman climate boondoggle) and found the 55 MPH speed limit.

I guess he wants to have a lasting legacy, although I have no idea who’s going to want to remember Sen. Warner fondly as a result of government heavy-handedness. Here’s the money quote from his comments on the Senate floor:

He is a wonderful mechanic and an engineer on cars. He said the carburetion system–he argued with me about this when I spent the past weekend with him–shook his fist at me: I don’t want this 55-mile-per-hour limit. And that is good advice.

So what does Sen. Warner propose? The 60 MPH speed limit. That will go down much easier than a 55 MPH national speed limit, as that 5 MPH will make all the difference to travelers. (How does sarcasm translate on the internet?)

In typical senatorial fashion, Sen. Warner also requires the federal government to reduce gas consumption by… a whopping 3%. There’s no force behind this and there’s no concrete steps that his bill puts into place.

I have an idea Sen. Warner. Since you like the 55 MPH speed limit so much, why don’t you make the government try it out first. Basically require that all new gov’t cars be fitted with a 55 MPH speed governor. It’s not that hard, as most passenger cars have governors on them already (although they’re set at a much higher 120 MPH or so). Just have the engineers at GM/Ford/Chrysler cut that down and problem solved. Instantly enforceable gas savings. And the gov’t gets to be the guinea pigs.

Of course, this will never happen because, as with all laws, the government applies the law to itself last, if ever. Just try to think of the last time you saw a government car pulled over for speeding? If never comes to mind, you’re not the only one.

So in honor of the Senator’s idea, I’ve decided to make my own little study of the plan and see what it’s effects, if any are. You can see what I’m going to do below the cut.

Simple answers to silly questions

Question: How does the United States attain energy independence?

Answer: Ban energy imports.

Oh, you don’t like that answer? Well, that’s the only way we’ll get there.

Of course, it depends on what you mean by energy independence. First there’s the neo-mercantilist/conservative view, which is independent from foreign energy. Because the foreigners have lower labor and production costs, any reduction in cost as a result of moving to a different energy plan will drive out domestic suppliers first. Look to the 1980’s and remember all the wildcatters in Texas capping the wells. That’s what will happen when prices go down when demand decreases while supply increases (e.g. late 70’s to the early 90’s). So the only way to not let those dirty, anti-American foreigners get our money is to not buy their goods. So you have to ban energy imports.

Or you’re a liberal/environmentalist, who believes energy independence is being independent from any energy. Here, there’s a couple of ways of doing it. The most harmful is to tell people to not use energy. It’s anti-freedom and will be costly to enforce (you try being the one to tell people they can’t use their AC in the South during the summer). The second-best option is to make people want to use less energy. Right now, there’s the going green movement, which is basically a way of shaming people into using less energy. It’s working, but it can only go as far as people are willing to believe the guilt. The more powerful motivator is economics, more specifically prices. Using gas prices as an example, during the Hurricane Katrina aftermath, people were alot more willing to carpool and use less gas when gas was at $4.50 a gallon (remember this is 2005). More to the point, it was a sudden increase that forced people to change. Drivers can adapt their habits when the price doubles over a span of many years (prices went from $1 to $2 between 1996 and 2005), but are in much more of a shock when the price increases much faster ($2 to $4 between 2005 and now). When you’re in shock, you’re more willing to make more drastic changes. If you’re in favor of decreasing the use of gasoline, then faster increases are preferable to slower ones (Yes, I’m talking to you, Sen. Obama).

So no matter if you’re Sean Hannity or Nancy Pelosi, there’s one fast and easy solution to energy independence. Make the US an island. That is, if you’re really interested in the idea and not using it as a political point. Somehow, I think that may just very well be the case with “energy independence”.

Getting a consumer cost for Natural Gas Vehicles

I’ll have more to say about T. Boone Pickens’ plan on moving the US from an oil-based transportation infrastructure to natural gas based in a little bit.  But I first wanted to get the cost of Natural Gas to power consumers vehicles first.

In South Carolina, the gas cost for one million BTUs (MMBTU) of natural gas is $12.9787.  The only production natural gas vehicle is the Honda Civic, which has a fuel tank of 8.03 gallons of gas equivalent (GGE).  GGE is the standard unit for natural gas powered vehicles.  One GGE is 115,000 BTU so a fill up of a Honda Civic will involve 923450 BTUs of energy or .923450 MMBTUs.  So a fill up would be $11.95.  But that’s for 8 gallons equivalent, or a gallon of gas at $1.492.  Which puts us at where we were in late 2003/early 2004.

Keep in mind that this based on the local natural gas monopoly’s price for a vastly different market (primarily industrial use and consumer heating).  Very little is currently used for transport (other than the local bus system).  Moving to a mass consumption pattern like gasoline would be a very different animal indeed.