The Economy

More importantly ... just what in the hell does this mean?

 

“Stabilizing domestic supply” is doing what Biden has done: pumping the ever-living crap out of what we have. Taking our oil off the market would just be shooting our own dick off.

 

Maybe the time off made him less of a dickhead, he thought.

 

I don’t question your explanation of supply and demand affecting gas prices, Ragu (welcome back BTW).

But years of watching the local gas station jack up prices the instant something happens in the world (trouble with shipping in the Red Sea, for example) while taking their sweet time to lower the price per gallon when economic conditions improve doesn’t give the oil companies much benefit of the doubt.

 

The thing is, at your local gas station, "supply" doesn't change every day. What you have is in those huge tanks underground. You paid $X for that supply, which will last 1-2 weeks.

Demand doesn't go up and down and back up again from Tuesday to Wednesday to Thursday.

So why do the prices change every day?

 

He sold when the market was high and the citizens were pressuring him to "do something". They're replacing the reserve after a substantial price drop.

Frankly, I appreciate that he's trying to get this country to do something in the face of global warming besides continuing business as usual. He's about to get politically crucified some more over funding the hydrogen power industry's growth and adoption as a vehicle fuel. Burn hydrogen instead of gasoline and you get water instead of pollution, but it will take a lot of front end R&D to make it happen.

 

I think the textbook example of what you're talking about was the Sept. 11 terrorist attacks.

After the early-morning shock, fear and tears of the attack, the main thing I remember working in the newsroom of my small daily in northern Michigan were dozens of calls from people freaking out about gas prices. They went from (if memory serves) $1.69 per gallon to double that amount in less than 12 hours.

One older woman I spoke with was hysterical about it, saying how she lives on a fixed income and there's huge lines for gas and what is the current price at the downtown gas station near the newspaper. "Maybe I better run out and get some now, because they're only going to get worse!"

I asked her if her car was almost out of gas, and she said the tank was about half-full. I advised her to wait a few days. Not sure if she took the advice or not.

 

Imagine you're a small retailer, and just this morning you paid $40,000 for 20,000 gallons of gas (wholesale of $2 for the arithmetically challenged). Now there's news of some disturbance somewhere and you see market prices that suggest a current wholesale price of $2.25. Do you price the gas you have to sell based on: 1) what you paid for it; 2) what you'd have to pay for it right now if you had to replace it; or 3) what you think you'll have to pay for it when you have to replace it?

Anybody who answers "1" is ... foolish.

 

If you're a small retailer you're worried about shipping diversions, higher rates, shortages, and longer lead times around the Horn of Africa due to Houthi attacks in the Red Sea.

 

In a floating volatile market, if you are not working off of replacement cost you're a fool. You raise prices quickly as it rises to maximize profit and to keep up with replacement cost, and you lower prices as slowly as you can get away with without getting outsold by those undercutting you. 3) is a crapshoot, depending on how smart and well informed you are and how volatile the market is.