quote:Because America's most-populous state gets none of its crude oil and very little refined product from the hurricane-devastated Gulf of Mexico, California Attorney General Bill Locker said, retailers should not be using the disaster to explain a spike in prices.
"Certainly the storm cannot be used to justify gouging Californians while thousands of our fellow Americans suffer," Lockyer said in a statement announcing the investigation.
"To unjustly profit from tragedy is unconscionable," he said. "I hope this investigation does not find that such greed has afflicted oil companies and gas station operators in California."
If we could spend less on gas, we could spend more on Hurricane Katrina aid.
Posts: 21182 | Registered: Sep 2004
| IP: Logged |
posted
Mr. Locker's logic doesn't quite work. The problem is that the oil that California would normally get is now also demanded by those who would have gotten their supply from the Gulf. Thus, the supply of oil that California does draw from remains constant, while the demand for it greatly increases, making the price rise. Thus, the disaster DOES explain a spike in prices.
More so, speculators are also driving prices up. They think oil prices will rise, so they invest in oil, driving the demand for that oil even higher, fulfilling the prophecy that oil prices will rise. This may or may not be an irrational reaction to the hurricane, but it is nevertheless caused by investors, not by retail price gouging.
Bottom line - it doesn't matter where you get your oil from. When oil from one source becomes scarce that legitimately increases the cost of oil from ALL other sources.
Posts: 8120 | Registered: Jul 2000
| IP: Logged |
quote: "We're always considered an island when we're getting reamed at the pump and we question whether we should now be integrated as part of the larger system (when that system is in crisis)," Lockyer spokesman Tom Dresslar said. "You can't have it both ways."
I think his logic is fine.
Posts: 9871 | Registered: Aug 2001
| IP: Logged |
posted
When you're the biggest consumer in the country, you DO have it both ways. Disruptions to supplies that go primarily to CA can affect CA more seriously than other states. This doesn't, however, prevent disruptions to other supplies from affecting CA.
For example, a refinery that supplies CA almost exclusively goes offline for three days. This will affect CA prices, possibly for a couple of weeks. However, such a small disruption doesn't make increase the price enought to make it profitable to divert Gulf-based supplies to CA. CA is affected, the other areas aren't. The impact of the disruption is felt exclusively in CA. This means it is higher per person than it would be if felt nationwide.
In the current situation, the disruption is going to last two weeks. Further, it affects areas that are between the two central supply points, which makes diversion of CA gasoline more profitable in this instance. This much bigger disruption will affect CA's supply and, consequently, CA's prices.
Posts: 26071 | Registered: Oct 2003
| IP: Logged |
posted
Also, other people have bought up tanker space (I believe there're 22 tanker trips that have just been bought up), which reduces the available tanker space to deliver petroleum to california.
Posts: 15770 | Registered: Dec 2001
| IP: Logged |
posted
But gas prices, which were already high, have been going up 7 times a day, up to a change of 17 cents a DAY. I expected some rise in prices. But they should be able to control it a little. What I've observed is, one station in an area raises their rates, and within two hours, every station in the area is within two cents of them. They take turns raising their prices first.
Posts: 21182 | Registered: Sep 2004
| IP: Logged |
posted
Oh, another reason the prices are going up is an increase in demand, oddly enough. People hear about gasoline price increases and buy more gas . . . which changes the equilibrium price at the intersection of supply and demand for gas.
edit: note this doesn't necessarily mean the volume goes up, but the volume people are willing to pay at a given price does -- that's what is meant by a change in demand.
Posts: 15770 | Registered: Dec 2001
| IP: Logged |
posted
I'm not saying there isn't gouging going on. I'm saying that the argument that the hurricane shouldn't affect CA prices isn't necessarily sound.
Posts: 26071 | Registered: Oct 2003
| IP: Logged |
posted
Gas prices near us have gone up 50 cents this week. (Fort Dodge, Iowa)
On the news the other day, they explained that the reason the price can go up even when there hasn't been a delivery is because they charge what it will cost them to replace the gas. So, if their next shipment would cost them more, they jack the price now. Can you imagine the chaos if everybody priced like that?
Posts: 2034 | Registered: Apr 2004
| IP: Logged |
posted
Prices are way up here in Canada too. Yesterday we hit $1.26-$1.33/litre (I think it's litres), which is about the same as you lot, perhaps a little higher.
Posts: 8473 | Registered: Apr 2003
| IP: Logged |
posted
kq: the high local and temporal variances in gas prices strongly suggest response to market pressures rather than gouging.
Posts: 15770 | Registered: Dec 2001
| IP: Logged |
posted
I don't know. I find it hard not to think of it as gouging when the refiners' margin - the amount of profit they make on each barrel of gasoline refined - has gone up from $14 a couple of months ago, to over $20 currently. That is, the refiners (note that I'm not blaming the guys that run the filling stations) are now making upwards of $6 dollars more in profit on each barrel of gasoline they refine than they were making a couple of months ago.
By the way, my source for this is various articles in the Financial Times, which I use as one of my sources for my work, just in case anyone decides I'm just pulling figures out of a hat. It's just that it's Saturday morning and I'm too lazy to go off searching for links.
Posts: 2454 | Registered: Jan 2003
| IP: Logged |
posted
They're not going to be able to for long, gasoline prices just fell according to the financial times, due to the massive release from the IEA.
Also, its not gouging to respond to shifts in demand and choose a new equilibrium price -- particularly as that profit is likely misleading, when counting the additional cost of rebuilding infrastructure. I suspect the costs for the owners of multiple refineries to rebuild will be significantly more than the amount of extra money they earned at a briefly imposed additional $6 profit/barrel.
Posts: 15770 | Registered: Dec 2001
| IP: Logged |
posted
I'm sorry, fugu, I think I wasn't clear in my post. That higher profit margin of $20 per barrel of gasoline refined was a result of prices before the hurricane hit and prices started skyrocketing from that.
Posts: 2454 | Registered: Jan 2003
| IP: Logged |
posted
Ah, gotcha. I still suspect its mostly a change in demand resulting in an increase in price.
edit: Particularly as, at 42 gallons per barrel, a change in profit of $6 amounts to a slightly greater than 14 cent increase in price per gallon.
Posts: 15770 | Registered: Dec 2001
| IP: Logged |
posted
We have instituted a gas price cap in Hawaii. It's been in the works for a couple of years and it went into effect on September 1st... right after Katrina hit. At this point, I have not seen an increase in gas prices since the cap began... we still have the highest prices in the state - $3.24 - but that's partly due to county taxes that the other islands don't pay. We are anticipating a large increase early next week, though. The (wholesale) gas cap is figured weekly, based on an average of prices in LA, New York and the Gulf Coast, so we'll be hit pretty hard.
There was a lot of controversy about the gas cap bill, and our republican governor is on record as being very strongly against it. Analysts predict that in the short term our prices will be higher as a result, but that in the long term it should be effective. Time will tell I suppose.
I'm mildly concerned because it doesn't take much here to cause "shortages". Just the whisper that there may be a shipping strike will cause a run on toilet paper and rice. There was a panic on Molokai a week or so ago because there was a rumor that the regular barge bringing gas would be delayed, and they did run out of gas for a couple of days. I'm being careful about how much I drive, and not letting my tank get too low, but I'm not buying gas cans or anything.
Posts: 2069 | Registered: May 2001
| IP: Logged |
Printer-friendly view of this topic
