Thursday, September 01, 2005

Excellent Neal's Nuze

Every day, Neal Boortz posts his running commentary, that are equal parts show notes, mini op-ed columns, and reading assignments. Today's is excellent, and addresses many things I would like to cover in the wake of Katrina given unlimited time and energy. The following is all from Neal Boortz. I don't usually cut such large portions of other's work, but this is so good and really, I would just be duplicating him, so I may as well just step aside and give Boortz the floor and the credit.

Boortz on looting:
I saw a picture on Yahoo News yesterday. The picture showed two people wading through chest-deep water in New Orleans. The lady has some food with her. The caption says "Two residents wade through chest-deep water after finding bread and soda from a local grocery store after Hurricane Katrina came through the area in New Orleans, Louisiana" Finding? They found the food? Sorry ... they stole it. Just because they're white doesn't mean they "found" food. Another picture on Yahoo News showed a black person with food taken from a grocery store. This person was
identified as a "looter." White, black ... whatever. It's stealing.

Fellow Hoosier Libertarian Rob Beck has excellent commentary on looting.

Boortz on gas prices:
There has never in the history of the world been a better way to allocate scarce resources than to simply allow the law of supply and demand to take its course. Whenever government steps in to interfere, shortages occur and chaos often reigns.

The way to handle the gas panic in Atlanta yesterday was to RAISE PRICES! It's not price gouging. It's the law of supply and demand at work. Today there will be people in Atlanta who might not be able to drive their own cars to work, to doctors appointments or to buy groceries who would otherwise be driving if gas stations throughout Atlanta had raised their prices in response to the increased demand and limited supply.

Let me explain:

As the panic spread, and the demand increased, the prices at the pumps were pretty much unchanged ... for a while. As a result people decided to top off every vehicle they owned .. .no matter how much gas remained in the tank. The predictable result was that stations soon ran out of fuel. The word spread, and more people hit the streets to fill more cars. Today people in Atlanta will find that many gas stations still have their pumps shut down. Throughout the night tanker trucks were busy trying to replenish the stations, but there simply aren't enough trucks to meet this demand. Another supply problem.

So .. what was the solution? For the politician the solution may have been to pander to the electorate by talking about imposing fines on gas station operators who "overcharge", whatever that means, consumers. The real solution, though, was to increase prices in response to the increased demand and limited supply. This is what the uninformed and the political class call "price gouging."

Let's take a look at what would have happened if the free market had been allowed to do what it has always done so well -- when left alone -- and that is to allocate scarce resources. If gas prices had risen strongly yesterday (as they in fact did at some stations) then people would have given a second thought to filling every car they own. If the prices were, say, $5 a gallon, consumers would have purchased what they thought they might need to get through the next few days, and would have started making plans for conservation., Certainly few people would have been shuttling back and forth filling up every car they owned. As a result, the gas that one consumer didn't pump into his second or third car because the price was so high would have been gas available for someone to put into the car they actually needed to get to work.

Keeping the prices artificially low encouraged over-consumption and hoarding.

This is why we can expect to find shortages in Hawaii, California, or any other place that puts artificial price caps on gasoline. A dear price makes you think carefully about use. This is one thing environmentalists understand about the mechanism of price when they call for artificially high prices. I hope those folks are happy now.

Boortz on "price records" and refining capacity:

At long last, we finally have a gas price record. The media has been reporting for years about "record gas prices," but they never have actually been records. The left, in their never-ending quest to demonize the oil industry, doesn't adjust gas prices for inflation. You simply cannot compare prices from one era to the next without adjusting for inflation.

So what was the record? In 2005 dollars, gasoline cost an average of $3.08 a gallon in March of 1981. It only took almost a quarter of a century to break the record. So what about bringing down prices now?

Prices have shot up in the wake of Katrina because 10% of the United States' refining capacity has been knocked out. Those refineries are along the Gulf Coast. Since there are only 149 gasoline refineries in the United States, and since none have been built in the last 30 years, knocking a few offline means supply doesn't meet demand. Thus the price goes up.

The answer is to build more refineries...and fast. If we had enough refineries to pick up the slack and continue meeting the demand, the rest of the country wouldn't be paying so much at the pump right now. So who is to blame?

Your friendly neighborhood environmentalist, that's who. It takes years to get a permit to build a refinery, if it can be done at all. We haven't built any in so long because Democratic, liberal, leftist, socialist enviro-wackos are preventing the permits from being pulled. No new refineries means every last one is running at full capacity in the summer. A hiccup of any kind means an interruption in supply. It's made worse by the fact that the oil companies have to refine dozens of special environmental blends to satisfy the politicians in various cities.

So as you fill up today and tomorrow for your holiday weekend, just know that you are paying so much because of the radical environmental movement in this country.

Thanks, Neal!

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