Wednesday, May 9, 2018

Opuscula

Freeze gas prices
Necessary for
Part 2 of Iran deal

UNLESS PRESIDENT TRUMP FREEZES prices at the fuel pump, any long-term benefits of the Iran deal pull-out may prove expensive at the pump and cost the GOP control of congress.

Does anyone remember the fuel crisis on the mid-1970s? Inflation, inflation, inflation – and every long lines to buy over-priced fuel for their flivers.

Price controls, if not well thought out, can come at the cost of inconvenience.

According to Logos The Takshashila Community Blog1

    In the 1970s, when the price of crude oil tripled on the world market the then President of United States, Nixon imposed a price ceiling, on both crude oil and gasoline. There was a maximum price allowed by law to be charged for gasoline. Any gas station owner charging more than this maximum price would be guilty of fraud. Price controls were turned in to address the shortage of gasoline. This was done due to public demand to keep the prices low. But the artificially depressed pump prices imposed during the oil crisis of 1973 — which stayed in place in various iterations through 1980 — brought about lines at gas stations and an artificial shortage of gas.

Today, the U.S. has fuel farms to prevent a recurrence of the artificial gas shortage The question remains: Will the government release the fuel?

For President Trump, the question must be: Can he force the oil companies to meet consumer demand without price gouging at the well head, gouging that trickles down to the pump.

Following hurricanes, Florida’s governors have implemented laws preventing price gouging – at the pump and elsewhere – and enforces those laws with stiff penalties. The U.S. government would have to do something similar, even at the risk of offending Big Donors With Deep Pockets. Can it do this? Will it do this?

The Logos web site contends that

    Dealers sold gas on a first-come-first-served basis, and drivers had to wait in long lines to buy gasoline. The price controls resulted in a fuel-rationing system that made available about 5 percent less oil than was consumed before the controls. Consumers scrambled and sat in lines to ensure they weren’t left without. Gas stations found they only had to stay open a few hours a day to empty out their tanks. Because they could not raise prices, they closed down after selling out their gas to hold down their labor and operating costs.

Meanwhile, the cost of living soared.

MyBudget3602 includes a chart (below) that shows how many things were priced.

The chart shows 1975 prices in 1975 dollars and in 2015 dollars and then the cost of the item in 2015.

THERE IS A DIFFERENCE

In the 70s, it was not just one foreign oil provider that decided to try to strangle the U.S. economy, but an organization called OPEC: the Organization of Petroleum Exporting Countries.

OPEC.org3 describes the organization thusly:

    OPEC's objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.

    The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were later joined by ten other Members: Qatar (1961); Indonesia (1962) – suspended its membership in January 2009, reactivated it in January 2016, but decided to suspend it again in November 2016; Libya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) – suspended its membership in December 1992, but reactivated it in October 2007; Angola (2007); Gabon (1975) - terminated its membership in January 1995 but rejoined in July 2016; and Equatorial Guinea (2017). OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria, on September 1, 1965.

Today, in addition to its own reserves, the U.S. can count on several OPEC member countries to continue supplying crude to U.S. refineries since they feel threatened by Iran’s ayatollahs and hope to remain under the U.S.’ military shield.

Surprisingly (at least to this scrivener), according the US Energy Information Administration (EIA) the highest price of gas in the US was reached during the week of July 7th 2008 at $4.11 per gallon for regular grade fuel (note this is a weekly average price).4 A far cry from the days of gas wars and 25¢-a-gallon for regular.

According to the U.S. Bureau of Labor Statistics, prices for gasoline (all types) were 401.01% higher in 2018 versus 1975. 5

The site continues, noting

    Between 1975 and 2018: Gas experienced an average inflation rate of 3.82% per year. This rate of change indicates significant inflation. In other words, gas costing $20 in the year 1975 would cost $100.20 in 2018 for an equivalent purchase. Compared to the overall inflation rate of 3.62% during this same period, inflation for gas was similar.

    In the year 1975: Pricing changed by 6.83%, significantly above the average yearly change for gas, during the 1975-2018 time period. Compared to inflation for all items in 1975 (9.14%), price inflation for gas was lower.

The price of regular in south Florida now is nearing $3/gallon; in Los Angeles, it hovers close to $4/gallon.5

Mr. President, while most Americans probably agree with your cancellation of a bad agreement with the ayatollahs, those same Americans will be mightily upset if gasoline prices soar. Not only will the average driver suffer, but the retail industry will suffer as truckers park their rigs due to the cost of Diesel.

A smart president will get out in front of this with guarantees Americans will still be on the move at a price they can afford.


Sources

1. http://tinyurl.com/yd5aapw4

2. http://tinyurl.com/p2rb8uq

3. http://tinyurl.com/7cy58yq

4. http://tinyurl.com/y6vsuvmf

5. http://tinyurl.com/ybwhjgx4

PLAGIARISM is the act of appropriating the literary composition of another, or parts or passages of his writings, or the ideas or language of the same, and passing them off as the product of one’s own mind.

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