Repercussions for people outside New Orleans

The price of refined fuel has gone up because of the laws of supply and
demand - there is extra demand as people try to hoard, and restricted
supply because refineries are offline. It's just the free market you're
so enthusiastic about operating in its normal manner.

Anyone who thinks this is the "Free Market" at work clearly hasn't looked
closely at the issues.

Yes, in the very short term, prices shoot up when supply is diminished.
However, between regulation and taxation, there is practically nothing
"free" about the oil/gas market, from supply, through refining, to end-user
sales.
--
Jay Honeck
Iowa City, IA
Pathfinder N56993
www.AlexisParkInn.com
"Your Aviation Destination"

Jay Honeck wrote:
The price of refined fuel has gone up because of the laws of supply and
demand - there is extra demand as people try to hoard, and restricted
supply because refineries are offline. It's just the free market you're
so enthusiastic about operating in its normal manner.

Anyone who thinks this is the "Free Market" at work clearly hasn't looked
closely at the issues.

Jay. I'm as big a right-winger as anybody here, but you're talking
candyland stuff here.

Let's say you're a gas station in Atlanta and your supplier just told
you, "that gas in your tanks is all you're going to have for the next
15 days," and you normally get a delivery every 3 days. What do you do?
You jack the price up.

If you have to drive to New Orleans to look for your family, you'll pay
the $6/gallon and bitch, but at least you could buy gas. At $3/gal,
everybody will come and fill their tanks and leave them parked in their
driveways. Meanwhile, every station has run dry "just in case."
Meanwhile the guys who *need* a tank of gas can't get it at any price.
At $6/gal, you leave your tank half-full and decide whether you really
need to drive. This is exactly the free market at work, allocating
supply to the people who want (need) it the most.

Yes, in the very short term, prices shoot up when supply is diminished.
However, between regulation and taxation, there is practically nothing
"free" about the oil/gas market, from supply, through refining, to end-user
sales.

The only twig of truth you have to stand on here is OPEC, and they're
not really a factor at this point. No one's witholding significant
supply right now. As for shipping, refining, and sales, it's about as
free a market as you can get. There are environmental regs on refining
but they are far from decisive. One of the main reasons we haven't
built new refineries is that it's more economically efficient to
upgrade an existing one where you don't have to build everything from
scratch, not to mention not needing double the amount of labor to
operate it.

And what is regulated about end-user sales? That market is so
competitive that most gas stations sell the stuff at break-even if not
a slight loss. They make money on milk and Marlboros.

-cwk.

In article .com,
wrote:
The only twig of truth you have to stand on here is OPEC, and they're
not really a factor at this point. No one's witholding significant
supply right now. As for shipping, refining, and sales, it's about as
free a market as you can get. There are environmental regs on refining
but they are far from decisive. One of the main reasons we haven't
built new refineries is that it's more economically efficient to
upgrade an existing one where you don't have to build everything from
scratch, not to mention not needing double the amount of labor to
operate it.

Right now, as I understand it, there are two big problems with supply:
refinery capacity and delivery. Refinery capacity has been a growing
problem for some time, and the environmental laws requiring special
blends for certain parts of the country compound this capacity problem.

Delivery is a largely new problem spawned by the destruction of the
hurricane.

The bottom line is that environmental laws have a fairly substantial
financial impact on all industry, and the petroleum industry in
particular. New refineries could be built, but it would be so expensive
to build and operate them in compliance with environmental laws that it
would not be worth it.

On top of all of the other costs, most areas pay AT LEAST 50 cents per
gallon in state and federal consumer taxes. Suspension of these taxes
would help to ease gas prices, but those crafty politicians know that if
the gas taxes are suspended, it will be nearly impossible to bring them
back, at least to their current levels. And holy cow if government
might have to cut back on spending and learn to be more efficient.

On another note, anyone who lives near the ocean in a city that's 18
feet below sea level is living on borrowed time until the next disaster.
If businesses were refused insurance and government aid for disasters
such as this, and the poor were forced to work for a living, no one (or
very few) would live in areas like New Orleans because the financial
risk would be too great. Since the government swoops in to cover much
of the financial loss, there's less at risk for the individual, and
lives are needlessly lost.


JKG

Jonathan Goodish wrote:
In article .com,
ckingsbury wrote:
The only twig of truth you have to stand on here is OPEC, and they're
not really a factor at this point. No one's witholding significant


Right now, as I understand it, there are two big problems with supply:
refinery capacity and delivery. Refinery capacity has been a growing
problem for some time, and the environmental laws requiring special
blends for certain parts of the country compound this capacity problem.


As I understand it, refining is actually a pretty low-margin business,
which tends to discourage investing in one iota more capacity than you
can sell tomorrow. The issue of blends is an interesting one and I have
heard people with no dog in the fight take both sides. Broadly speaking
it is nowhere near as profound as the lead/no-lead aspect which affects
100LL production. Surely doesn't help, but I'm not convinced it's
anywhere near a primary cause.

Delivery is a largely new problem spawned by the destruction of the
hurricane.

It's also part of a wider dependence on highly-tuned supply chains.
Holding inventory costs money and these days most businesses are trying
to do Just-in-Time processes as much as possible. This is like filling
your car with just enough gas to make the specific trip- it saves the
weight of hauling around gas, but if the gas station at the other end
is closed, you'll run out of gas before you get to the next one.

The bottom line is that environmental laws have a fairly substantial
financial impact on all industry, and the petroleum industry in
particular. New refineries could be built, but it would be so expensive
to build and operate them in compliance with environmental laws that it
would not be worth it.

Tightness of refinery capacity leads to short-term price volatility but
is not the main reason. Gas prices had been relatively stable from the
early 80s until last year, despite (1) no new refineries being built
and (2) major growth in consumer demand for gasoline. In the short term
the loss of a pipeline or refinery can cause regional spikes but these
disappear the minute the production comes back.

However, refining capacity has absolutely zilch to do with crude prices
and they are the primary determinant of pump prices, 85% according to
this FTC study:

http://www.ftc.gov/opa/2005/07/gaspricefactor.htm

The root cause here is a major secular increase in demand for oil,
especially from China which has exploded in the past 2 years. We could
build ten more refineries next week and that would do nothing to
extract more crude
or reduce Chinese demand for it. There's little threat of running out
of oil anytime soon (at $80 extracting from shale/tar sands becomes
profitable, and reserves of those are enormous) but unless we find
major new easily-accessible reserves (unlikely, it's not as though
we're not looking) or the Chinese decide they don't ll want to drive
cars and have electric lights after all, prices aren't going back to
$1.50 in our lifetime.

On top of all of the other costs, most areas pay AT LEAST 50 cents per
gallon in state and federal consumer taxes. Suspension of these taxes
would help to ease gas prices, but those crafty politicians know that if

You know, I could care less about "the environment" (I mean, a 10-day
forecast fore one city is as good as a ouija board, but these guys
think they can forecast global weather patterns 100 years into the
future?) but reliance on imported oil is starting to scare me. All we
need is Iran to light the fuse on a nuke and some 10-cent Castro
impersonator in Venezuela to yell "f--k you Yanqui!" and our entire
economy skids off the cliff in a few months.

Compared to the 1970s we use about half as much oil per dollar of GDP,
which is why this run-up has not wrecked the economy. To the extent
that we reduce our dependence on oil or other foreign energy sources,
we increase our economic and ultimately military security. Every dollar
the price of crude goes down means millions less to finance Iranian
nukes and Saudi terrorists.

So, in my mind the high price of gas is the best way to spur
conservation. The government could mandate things but all of us as
individuals will figure out better and cheaper ways on our own. I would
not support a tax increase however, because I don't support increasing
the size of government, period.

On another note, anyone who lives near the ocean in a city that's 18
feet below sea level is living on borrowed time until the next disaster.

New Orleans developed into a metropolis long before there was insurance
for anything, not to mention the epidemics of yellow fever that killed
more than any hurricane. A much more interesting argument can be made
that the levees are the critical piece. Without them, the river would
have moved west and left New Orleans with a mud puddle instead of a
deepwater port. Without the port, the city loses a primary reason to
exist, and dries up like a midwestern town whose railway spur gets shut
down.

-cwk.

On 2005-09-01, wrote:
You know, I could care less about "the environment" (I mean, a 10-day
forecast fore one city is as good as a ouija board, but these guys
think they can forecast global weather patterns 100 years into the

You have a fundamental misunderstanding of the difference between a
meterologist and a climatologist.

Now imagine this analogy. You have a pan of water on a stove. The
meterologist is predicting where the bubbles will appear, and where the
convection will happen, and what it will do over the next 30 seconds.
The climatologist is looking at the flame, and noting that if you turn
the gas up, the water as a whole will heat faster leading to more
bubbles and convection. The climatologist isn't trying to predict where
the bubbles and the convection will happen, but just noting that turning
up the heat will certainly increase them. His job is quite frankly much
easier than the guy who has to predict the actual small scale
convections and the location of the bubbles.

In the same way, it is well understood and well known that increasing
the concentration of CO2 (and other gases) keeps more of the sun's
energy in Earth's atmosphere. It is therefore a certainty that if you
keep more of the Sun's energy, the Earth warms up, as certain as 1+1=2
or as certain as turning the gas up on the pot of water causes it to
heat more quickly. Just because the guy who predicts where the
convections are can't easily predict them 10 days from now, it doesn't
mean the guy who sees the heat has been turned up can't predict that the
whole system will contain more energy in 100 years time.

--
Dylan Smith, Castletown, Isle of Man
Flying: http://www.dylansmith.net
Frontier Elite Universe: http://www.alioth.net
"Maintain thine airspeed, lest the ground come up and smite thee"

I think the biggest issue here is what is the cause of the heating up. Most
climatologists say it is the CO2, but people in other fields have noted that
the earth goes through this all the time, heating and cooling.

In the 60's and 70's they were telling us to prepare for another ice age.
Now it is global warming.

The truth is we can't control the elements, as much as we would like to
pretend we can. Time and money invested in NO to keep the river there, thus
the industry means that we must accept the problems we create.

When Cyrus diverted the waters of Babylon, the river could no longer support
the city. The people moved on and the city disappeared.

As I understand it, refining is actually a pretty low-margin business,
which tends to discourage investing in one iota more capacity than you
can sell tomorrow.

Right -- and why do you suppose that is? It certainly didn't used to be.

Let's see. The price of crude is sky high. Oil company profits are sky
high. Yet oil refining is a low-margin business. Hmm.... What's going on
here?

Can anyone say "Regulatory Insanity"? That industry can't fart without
filling out reams of EPA paperwork, in triplicate. And each one of those
forms is filled out by a very highly paid person -- that you and I are
directly subsidizing at the pump.

So, in my mind the high price of gas is the best way to spur
conservation. The government could mandate things but all of us as
individuals will figure out better and cheaper ways on our own. I would
not support a tax increase however, because I don't support increasing
the size of government, period.

True enough. But what a stupid time to have this happen, when there's a
real surplus of oil on the market.
--
Jay Honeck
Iowa City, IA
Pathfinder N56993
www.AlexisParkInn.com
"Your Aviation Destination"

"Jay Honeck" wrote:
...
Can anyone say "Regulatory Insanity"? That industry
can't fart without
filling out reams of EPA paperwork, in triplicate. And
each one of those
forms is filled out by a very highly paid person -- that
you and I are
directly subsidizing at the pump.


OK, so say Exxon Mobil's U.S. sales are $100 billion So,
with the salaries of those few people in the numerator, what
effect on pump prices do you compute?

Fred F.

"Jay Honeck" wrote in message
news:duXRe.323227$xm3.46758@attbi_s21...
As I understand it, refining is actually a pretty low-margin business,
which tends to discourage investing in one iota more capacity than you
can sell tomorrow.

Right -- and why do you suppose that is? It certainly didn't used to
be.

Let's see. The price of crude is sky high. Oil company profits are sky
high. Yet oil refining is a low-margin business. Hmm.... What's going
on here?

Can anyone say "Regulatory Insanity"? That industry can't fart without
filling out reams of EPA paperwork, in triplicate. And each one of those
forms is filled out by a very highly paid person -- that you and I are
directly subsidizing at the pump.


Jay, I enjoy your trip and event reports but keep your job as an inkeeper.
You won't make it as a securities analyst. The regulatory paperwork burden
isn't even a rounding error to the energy industry.



So, in my mind the high price of gas is the best way to spur
conservation. The government could mandate things but all of us as
individuals will figure out better and cheaper ways on our own. I would
not support a tax increase however, because I don't support increasing
the size of government, period.

True enough. But what a stupid time to have this happen, when there's a
real surplus of oil on the market.
--

Yes and very true. We had the prefect opportunity five years ago when the
CAFE standards were scheduled for an increase but our brilliant new
president decided not of implement them. If he had, about 80% of the US
vehicle fleet would be getting a couple more MPG which, as it turns out,
would exactly match the reduced gasoline output from Katrina.


Mike
MU-2

Yes and very true. We had the prefect opportunity five years ago when the
CAFE standards were scheduled for an increase but our brilliant new
president decided not of implement them. If he had, about 80% of the US
vehicle fleet would be getting a couple more MPG which, as it turns out,
would exactly match the reduced gasoline output from Katrina.

So, of course, we wouldn't now be seeing a 30% increase in the price at the
pump if only Bush had implemented stricter mileage rules in 2000?

I'm afraid you're dreaming, Mike. We'd only have had more expensive cars
then AND the same, higher gas prices today.
--
Jay Honeck
Iowa City, IA
Pathfinder N56993
www.AlexisParkInn.com
"Your Aviation Destination"