2006-04-25

The Politics of Gas

I just love high gas prices. You know why? Because it exposes our politicians for what they really are - big bags of gas themselves. Let's see how our elected representatives (both Democrats and Republicans) have 1. caused our problems and 2. are about to make things worse for us.

First of all, gas isn't like Wonder Bread. There is only one kind of Wonder Bread - white. If there is a shortage of Wonder Bread in Tampa, FL and a surplus in San Diego, CA, the surplus bread can be moved from the market place with excess capacity to the high demand area and thus head off a massive price escalation (basic supply/demand). Unfortunately there are 17 different blends of gas. So when the great state of MA has a shortage of their mix, they cannot use the mix that their friends in PA can. The supplies are limited to specific geographic locales.

Secondly, gas, now, isn't like Peanut Butter. It used to be when the vast majority of the oxygenating additive was MTBE. The refininers could add MTBE to the mix before it went to distribution. Now the refiners need to move the gas without the new additive (ethanol) and mix it at the end point. That's like Skippy and Jiff only making creamy peanut butter at their factories and mandating that the chunky peanuts be added at the supermarket. Do you think that will have an affect on price? YES. Do you think they want to maintain stockpiles of peanuts all over the country? NO.

These first two points are the fault of our short-sighted elected officials. When I have more time I will address what these same officials are doing to make matters worse under the guise of making things better -- for them.

7 comments:

Robert said...

Great job, Mike.

Just to extend your simile, what would happen if the truck ran into a Hershey's van on the way to the supermarket?

Jennifer said...

Robert,

Is that an extension of the "Peanut Butter!" "Chocolate!" commercials of our youth?


Mike,

Good analogy. What is the reasoning behind the different blends for different states/regions? Or, I should ask, was there any reasoning behind it in the first place?

Robert said...
This comment has been removed by a blog administrator.
Robert said...

Jen, You're very perceptive, for that you get a Reese's.

Since Mike didn't have time to answer, I'll tell you that different states have different requirements depending on what EPA clean-air standards they have to meet. The dirtier the air, the more "oxygenate" required so that fuel burns cleaner.

It's a great example of how regulations impose great costs and confusion by distorting markets, in this case by turning the market for a single broadly supplied commodity into a fragemtned bazzar of several regionally supplied and, therefore, more scarce commodities.

Jennifer said...

Rob--

That assumes that lowered cost and ease-of-supply somehow trumps the regional or state-wide concerns of air-quality. Such protections have a cost; this is one of them.

How are these regulations any different from other states' rights lauded by fiscal conservatives in other areas?

Robert said...

Jen,

The regional regs are not state laws but regional implementations of federal laws and regulations under the Clean Air Act.

Presumably, the Clean Air Act relies on the feds' constitutional power to regulate interstate commerce. This constitutional provision was so that states would not hamper interstate commerce.

Ironically, the feds have, by requiring regional gasoline blends, hampered interstate commerce.

Jennifer said...

OK - yeah, I was reading quickly & skimmed over EPA. But even so, I think to say that this is solely an economic issue is probably one which could be debated all day and night & then some. Someone with a more fiscally-conservative leaning might argue that these policies are too cumbersome and that given the opportunity in the right market circumstances, businesses and citizens would opt for a cleaner fuel that was also more economically efficient to produce. That may be the case, but I'm not really convinced.

Mike's post served as a very good explanation of why a single-priced gasoline isn't available nation-wide (there are other reasons too, of course); I'm just not sure it really serves as an indictment of those reasons. And I think, ultimately, this is just where our ideologies differ. As I said above, I think there is a price we should be expected to pay for clean air--one we're not paying now. And if it costs more in Pennsylvania to reach those standards than it does in Wyoming, then--well, sucks to be in Philly, eh? (And oh, it really does--regardless of gas prices)

And as I'm sure you're aware, I'm a card-carrying tree-hugger who car-shares a hybrid, walks most places and is still thinking about buying one of those carbon-offsets. So, take my liberal ponderings with an even more liberal dose of salt.