Friday, November 2, 2012

Economic Ignorance Continues: Gasoline Shortages



Why there is no gas in the northeast – folks on twitter offer the answers:

Here are some of the (sensible) theories that came back:
•There's still no power in many areas, so everyone needs gas to run their generators (DEMAND)
•There's still no power in many areas, and gas stations can't pump without power. This has increased the load on the stations that do have power and sucked their tanks dry. (SUPPLY)
 •There's limited public transportation, so everyone has to drive (DEMAND)
 •Everyone's panicked that they'll run out of gas (DEMAND)
 •Refiners can't refine and deliver gas without power (SUPPLY)

Of course, the one item missing from the list?  Price.  No one in the supply chain is able to charge a price that would induce additional supply.  They are unable to charge such a price because they are threatened with ridicule at minimum, fines and jail more likely.

If suppliers of gasoline felt comfortable that free-market prices would be allowed to clear the market for gasoline, perhaps they would invest in the simple items necessary at times of such disruption.  Portable generators for gas stations, generators for refiners.

Trucks would be sent from the mid-west and the west if the price was right for gasoline.

At $10 per gallon (just to pick a number), I imagine all types of solutions would be developed to mitigate such disruptions – either in the form of investment beforehand, or alternate supplies in the aftermath.

It is certain that many individuals without gasoline would gladly pay $10 for a gallon when the alternative is to be stuck without the ability to travel.

Instead, everyone is stuck – both the people who would not pay $10, and the people who would.  In other words, those who would pay the $10 are worse off, while those who wouldn’t pay $10 are not impacted anyway.

What nonsense.

2 comments:

  1. Spot on analysis.

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  2. Saturday, November 10, 2012
    A Very Condensed Introduction to Currency Operations, for Erskine Bowles

    If you claim to grasp the concept of situational awareness then you have to go back and ask about the fundamental change in our currency situation that occurred in 1933, when we transitioned from a gold-standard to a fiat-currency-standard. It’s quite a fundamental change, with trivially obvious consequences. Anyone not at least looking into that situational change is doing their country a grave disservice.

    Would a military deploy soldiers who were not able to fully disassemble and reassemble their personal weapons in the dark? Similarly, no citizen should try to discuss fiat currency operations or fiscal policy without learning at least the simple rudiments of how they actually work.

    Read the rest here:

    http://mikenormaneconomics.blogspot.mx/2012/11/a-very-condensed-introduction-to.html

    ReplyDelete