Alarming News: I like Morgan Freeberg. A lot.
American Digest: And I like this from "The Blog That Nobody Reads", because it is -- mostly -- about me. What can I say? I'm on an ego trip today. It won't last.
Anti-Idiotarian Rottweiler: We were following a trackback and thinking "hmmm... this is a bloody excellent post!", and then we realized that it was just part III of, well, three...Damn. I wish I'd written those.
Anti-Idiotarian Rottweiler: ...I just remembered that I found a new blog a short while ago, House of Eratosthenes, that I really like. I like his common sense approach and his curiosity when it comes to why people believe what they believe rather than just what they believe.
Brutally Honest: Morgan Freeberg is brilliant.
Dr. Melissa Clouthier: Morgan Freeberg at House of Eratosthenes (pftthats a mouthful) honors big boned women in skimpy clothing. The picture there is priceless--keep scrolling down.
Exile in Portales: Via Gerard: Morgan Freeberg, a guy with a lot to say. And he speaks The Truth...and it's fascinating stuff. Worth a read, or three. Or six.
Just Muttering: Two nice pieces at House of Eratosthenes, one about a perhaps unintended effect of the Enron mess, and one on the Gore-y environ-movie.
Mein Blogovault: Make "the Blog that No One Reads" one of your daily reads.
The Virginian: I know this post will offend some people, but the author makes some good points.
Poetic Justice: Cletus! Ah gots a laiv one fer yew...
Refineries
Tom Sullivan is filling in for Rush Limbaugh today. He’s arguing that if we make it profitable for the oil companies to do so, they will build more refineries. Normally I’m biased in Sullivan’s favor, but on this one I’m going to have to show some reluctance. Jerry Taylor and Peter van Doren, a few months ago, put out an argument that I thought was pretty solid in spite of my initial inclinations toward the opposition: New refineries have not been built since 1976, because the speculative profits are simply not there to justify building those refineries.
The gasoline refining market is about as close to the model of “perfect competition” as you’re going to find outside of an economics textbook. Rents are competed away and little profit is left for producers, especially when compared to the profits available from investment in oil production. Conservatives believe that environmental regulations have a lot to do with those low profits. They’re wrong. A large oil refinery costs $4 billion to $6 billion to build. The installation of “best available control technology” is a very small part of that figure.
Where I part company with Tom, is he’s saying in a capitalist model “money will flow, like magic” to wherever it is needed and this includes the refineries.
Trouble is, the gasoline market is not typical.
Suppose two gas stations are 150 feet apart from each other. Gas station A charges $3.199 for premium and is franchised by Oil Company 1, which owns (or leases, or somehow has access to) Refineries Alpha, Beta, Gamma, Delta and Epsilon. Gas Station B sells premium for $3.189 is franchised by Oil Company B which has access only to Refinery Omega. It can get it nowhere else.
Refineries Gamma and Omega are hit by a hurricane. In a typical market, Gas station A would raise prices to $3.299 or so, in so doing making an adjustment to the market by which supply and demand find some sort of temporary harmony. In order to do the same thing, Gas station B raises its price to eight bucks or so, since now it’s selling gas out of a strictly limited inventory that cannot be replenished. Gas station B owner gets on the phone to his wholesaler and says, I need a break because this guy next to me is selling the same stuff for half as much. Wholesaler says, it can’t be helped. Gas station A ends up being the place to go. Gas station B has to make its money by selling soda, chaw tobacco and washer fluid.
But that’s not how it works.
Both gas stations hike it to $4.50 or so. The same day. They end up, once again, within a penny or two of each other.
This doesn’t act like a capitalist market and there is little reason to anticipate it will respond to capitalist forces. What it acts like, is a collectivist market: No farmer has his own 20 acres, instead we all wake up whenever we feel like it and harvest & sow whatever chunk we feel like out of two square miles. No competition.
The scary thing is, this is much more important than the price of crude, and more vulnerable to interruption. Crude could tumble to fifteen dollars a barrel tomorrow, and with the nation’s refining operations running on 29-year-old junk, gas would stay exactly where it is.
But what I drive gets dang near 40 miles a gallon, so Hakuna Matata for me. The rest of you have a problem.
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