Log in

No account? Create an account
Gas prices - Phil's Rambling Rants — LiveJournal
September 18th, 2006
05:50 pm


Previous Entry Share Next Entry
Gas prices

(7 comments | Leave a comment)

[User Picture]
Date:September 19th, 2006 04:48 am (UTC)

Re: How unamerican

First, E85 is tax-subsidized, so it doesn't reflect the true market price of the fuel. Second, you've neglected the portion of the price of gasoline that is federal, state, and local taxes. When you take those out, you'll see that the actual price of a pre-tax gallon of gas is a good bit lower than you might expect. (I went through this analysis about a year ago in someone else's LJ, but I forget whose.)

The spot market price of ethanol per gallon has been over $3 a gallon. In fact, this Reuters story indicates that ethanol peaked around $5.75 per gallon back in June when gas prices were much higher. Now it's down to $2.15 per gallon, because more supplies are available.

As far as pump prices tracking the current price for gasoline as opposed to the price when they bought it, that's a well-known phenomenon and I could go into an explanation of why it works that way, but it's not really surprising. I agree that prices are stickier coming down than they are going up, but that's a decision made by the individual gasoline station operators, many of whom are independents.

Congressional hearings have been held on the subject of whether or not gasoline prices have been manipulated. Not surprisingly, the answer is that they haven't been. Now, you may say that's because Congress is controlled by the evil Republicans, but have you seen any minority reports by the Democrats in Congress with evidence that contradicts the official report? I haven't, because there just isn't any such evidence.

I understand that it makes you feel more comfortable to believe that the gas prices are inflated only because of the evil Bush Administration and the evil Republican in Congress, because that would mean that if you can just manage to vote those evil people out, then you'll have cheap gasoline and the birds will happily sing.

But that's not the way that the market works. And if the Democrats decide to mess with the market, I have every faith that they'll find a way to make it worse. (But I suspect that they'll decide not to mess with the market. Much.)
[User Picture]
Date:September 19th, 2006 04:50 pm (UTC)

Re: How unamerican

E85 is not taxed as much as gasoline, and ethanol production in general gets tax subsidies, but I wasn't aware of actual subsidies for E85 that would make the retail price of E85 unrelated to the price refineries pay to blend E10.

I don't actually want to see the price of gas go down. I want it to stay at a level that keeps people thinking gas is expensive, which probably means continuing to increase over time as people get used to the price. But I want to see the price increasing because we're collecting more taxes, not because we're pushing the profits of Exxon higher and giving more money to countries in the Middle East that want to kill us. The increased tax revenue should at least postpone the financial collapse of the federal government. And I want to see price stability. People were just starting to get the message that maybe they should not buy an SUV when they go car shopping, and we see the price go down. It'll be back up, but we'll have lost valuable time in getting a more efficient vehicle fleet out there.

I never intended to claim that gas prices aren't influenced by market forces. I just don't think that market forces can account for all of the price volatility we see. There are a lot of individual gas stations but only a few oil companies for them to get gas from -- few enough that they retain meaningful pricing power. The fact that they have pricing power does not prove that they are using it to achieve a political end -- but I do find it fishy that the price changes have been very politically convenient.
Powered by LiveJournal.com