Posts Tagged ‘gasoline prices’

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Loss of ethanol subsidy boosts gasoline prices a little, E85 prices a lot

January 10, 2012

Michael Giberson

The basic math is pretty simple: most gasoline in the U.S. has about 10 percent ethanol, so the the 45 cents/gallon VEETC subsidy reduced the price of gasoline about 4.5 cents. The subsidy expired at the end of 2011, so one reason gasoline prices have gone up a few cents since New Year’s Day comes from the loss of the subsidy. (World crude oil prices are up a bit, too.)

Normally, a subsidy would be shared by producers and consumers, so the loss of a subsidy would be shared. But the Renewable Fuels Standard quantity mandate protects producers from taking a hit. The main effect here is that the consumers’ mandated purchases of ethanol will no longer be subsidized by taxpayers, and therefore the price rises.

But lest you gasoline consumers feel too bad, consider the plight of the drivers relying on E85, a blend of 85 percent ethanol and only 15 percent gasoline. The math here is simple, too: 85 percent of 45 cents meant that E85 was receiving about a 38 cents/gallon subsidy, and now that subsidy is gone.

The Minneapolis, MN Star Tribune reports, “The Road for E85 Just got Rougher“:

The high-ethanol fuel known as E85 has gained a small foothold in Minnesota in recent years, thanks in part to a subsidized price advantage and the presence of major producers and blenders in the state.

Now, the federal tax credit that boosted the industry is gone, raising questions about the fuel’s future.

Without the 38-cent-per-gallon subsidy that went away Jan. 1, E85 prices are moving up. It’s still cheaper than gasoline, but the shrinking difference may not be enough to compensate drivers who get fewer miles per gallon because of the fuel’s lower energy content.

[Recall that ethanol has a lower energy density than gasoline, so drivers get fewer miles per gallon with E85.]

The post-subsidy era also brings tough choices for owners of flexible-fuel vehicles, including the state of Minnesota, which has more than 3,000 vehicles capable of burning E85, and in 2010 used 963,000 gallons of it.

They must decide whether to support a fuel that is 85 percent home-grown ethanol even it it’s no longer competitively priced. Minnesota is the nation’s fourth-largest ethanol producer, and leads the nation with 364 retailers selling E85.

[...]

Last week in the Twin Cities, E85 was 16 cents to 40 cents lower than regular gasoline, which also rose in price. That’s as little as a 5 percent price difference. E85′s price advantage has sometimes been more than four times better and averaged 17 percent last year, according to the state Commerce Department.

At Lerum Auto, the only E85 dealer in Richfield, owner Dean Lerum had another 1,000 gallons of E85 delivered on Wednesday — at the new, unsubsidized price.

“I am going to let the market decide,” said Lerum, for whom E85 once represented 25 percent of fuel sales, but now accounts for 5 to 7 percent. “If it drops a whole lot more, I will get rid of it.”

Two more related stories from around the web

Kevin Drum at Mother Jones makes the call: “Ethanol Subsidies: Not Gone, Just Hidden a Little Better“

As the Congressional Budget Office wrote back in 2010, ”In the future, the scheduled increase in mandated volumes would require biofuels to be produced in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included.” [Italics mine. -KD] In other words, the mandates have grown so large that the tax credits barely made a difference anymore. Demand for ethanol is driven by the mandates, not by the tax credit. When you take away the tax credit, nothing happens: Demand stays high because the law says so, corn prices go up accordingly, and corn farmers stay rich. The subsidies were a nice little fillip on top of that, but at this point it’s basically chump change.

The RFS mandates are the real reason that buffoons can ramble on about the history-making public policy magnanimity of the ethanol lobby. Drum cites Aaron Smith, of UC-Davis, writing in the American Enterprise Institute’s American.com: “Children of the Corn: The Renewable Fuels Disaster“

[W]hy did the powerful corn ethanol lobby let [the subsidy] expire without an apparent fight? The answer lies in legislation known as the Renewable Fuel Standard (RFS), which creates government-guaranteed demand that keeps corn prices high and generates massive farm profits. Removing the tax credit but keeping the RFS is like scraping a little frosting from the ethanol-boondoggle cake.

And Smith is just getting started, so if want more reasons to hate ethanol policy then read the whole thing.

ADDED, Here is a more complete analysis of the relationship between the Renewable Fuels Standard mandates and the (now expired) tax credit, and also see the list of readings at the end of the commentary: de Gorter and Just, “The Forgotten Flaw in Biofuels Policy: How Tax Credits in the Presence of Mandates Subsidize Oil Consumption,” RFF Weekly Policy Commentary (June 9, 2008).

Posted in Energy markets, Environmental policy, Politics | Tagged , , | 1 Comment »

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New York Attorney General proposes to prohibit use of business-related reasoning in gasoline wholesaling

January 2, 2012

Michael Giberson

It sounds kind of funny to say the New York Attorney General wants to prohibit business-related reasoning in gasoline wholesaling. After all, gasoline wholesaling is a business activity and generally business-related reasoning would be entirely appropriate. It sounds like asking a court not to act on law-related reasoning or asking a politician not to think politically. But read the report put out by the AG’s office, “Report on New York Gasoline Prices,” and see what it says on pages 37-39.

At issue is “zone pricing,” a practice by which wholesalers charge differing prices to retailers in different locations, usually based on an estimate of what the market will bear. A New York state law passed in 2008 tried to ban zone pricing for gasoline, but it didn’t seem to have much effect. The report noted, “Certain areas of the state that had relatively high retail prices before the law took effect in 2008, such as the South Fork of Long Island and northern Westchester, still tend to have relatively high prices.”

The problem, according to the AG’s report, is that the anti-zone pricing law prohibits only arbitrary price differences between different locations. (See New York’s General Business Law § 399-ee at 1 (m): “Zone pricing means the arbitrary price differences within the relevant geographic market.”) The report notes that wholesalers admit charging different prices to retailers in different locations, but say the price differences are not arbitrary because they are “based on business-related market and economic conditions such as operating costs, degree of competition, the specific location of a station, and other factors.”

The report says “the inclusion of the word ‘arbitrary’ in the definition of zone pricing renders the prohibition toothless.” The AG’s solution is to propose deletion of the word from the definition. Where the law now merely prohibits certain arbitrary price differences, the AG wishes to prohibit price differences. If the state legislature agrees, the law would then prohibit the use of all kinds of normal business-related reasoning in New York’s wholesale gasoline business.

The state legislature ought not to accept the AG’s recommendation, but rather ought to toss out the zone pricing ban.

As the AG’s report itself indicates, there is no evidence of any consumer harm from zone pricing. With zone pricing affluent consumers may pay a little higher price for gasoline than lower- and middle-class consumers, but there is no reason to expect consumer prices are higher on average due to zone pricing.  (As I put it back in November 2008, “anti-zone pricing legislation is essentially consumer protection for affluent customers unwilling to spend their time shopping around for lower prices”). The toothless zone pricing ban is apparently causing no harm either, so doing nothing would simply leave an empty law on the books.

On the other hand, prohibiting the charging of reasonable price differences by gasoline wholesalers in New York would serve to screw up the whole state’s wholesale gasoline market in an effort to keep customers in affluent areas from paying a few more pennies per gallon of gasoline. Seems like a too high price to pay.

 

[NOTE: The report also includes the AG's report on gasoline price movements in the state during 2011 and a discussion of price gouging. These other issues may be discussed here later this week.]

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The WSJ’s confused story on gasoline prices and crude oil prices

October 4, 2011

Michael Giberson

Caption: Change in retail gasoline prices vs. prices of two benchmark crude

WSJ Image: Change in retail gasoline prices vs. prices of two benchmark crude

The story in yesterday’s Wall Street Journal on the link between gasoline prices and crude oil prices was a bit frustrating. The article does a reasonable job explaining key pieces of the puzzle, but then fails to assemble the puzzle into something resembling reality.

The story is headlined, “Gas Stays High as Oil Drops: Prices at the Pump Have Yet to Reflect the Substantial Decline in Crude Futures,” and the first sentence repeats the theme: “U.S. crude-oil prices have hit the skids, but drivers aren’t feeling the impact.” The next couple of sentence fill in some details. In brief, the story says, the benchmark crude oil price is down nearly one-third since April, but U.S. gasoline prices are only down about 13 percent.

The mystery of the just-down-13-percent gasoline prices is almost entirely created by trying to treat the NYMEX price as the relevant benchmark, but it isn’t. (As noted here in February.) Currently the Brent price is a better indicator of the world oil market price for crude oil. Our story here, then, is that world oil prices have dropped 18 percent since April while average gasoline prices dropped 13 percent. Hardly a different warranting a headline.

The reporter fully recognizes this point, as he explains, “gasoline prices on the East Coast and even in the Gulf Coast track the price of Brent crude, which analysts view as a better indicator of global prices than Nymex. While Nymex futures are down 30% since April 29, Brent is down 18%.” And the story is accompanied by a graphic, above, which graphically illustrates the point that Brent seems to be the relevant reference point.

So why the struggle to cast this story about gasoline prices that are not falling fast enough?

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Gas price gouging on rise*

August 8, 2011

Michael Giberson

Gasoline stations are violating price regulations at a higher rate than any other industry under government price guidelines, an Internal Revenue Service survey shows.

About 20% of service stations checked were selling gasoline above the legal ceiling price, the agency said.

Federal energy chief William Simon told The Milwaukee Journal’s Washington Bureau Thursday that the Internal Revenue Service was intensifying its crackdown on price gouging. He said the IRS was training an additional 1,000 investigators – bringing the total number available to the Federal Energy Office (FEO) to about 2,500.

In addition, he urged consumers to complain to their local IRS office whenever they believed they were being overcharged. He said consumers should get receipts from service stations whenever possible so they could receive any refunds that were ordered.

Acting Atty. Gen. Robert Bork sent telegrams to 94 US attorneys last week advising them to seek restraining orders against gasoline price gouging, Simon said.

Most of the violation probably do not involve flagrant price gouging, in which motorists are charged $1 or more for a gallon of gas, an IRS spokesman said. But the number of such serious violations is increasing.

The spokesman said it appeared that an increasing number of gasoline stations were using various gimmicks to get around the government’s price regulations.

*Excerpt from “Gas Price Gouging on Rise,” The Milwaukee Journal, January 2, 1974.

You probably believe that consumers had to wait in long lines to buy gas in the early 1970s because of the OPEC oil embargo. Annual data on imports available from the Energy Information Administration indicate that oil imports from OPEC nations increased each year from 1968 through 1977. (I don’t find monthly data on a cursory search, though it would be more revealing of conditions during the months of the embargo.)

The newspaper clip above reminds us that U.S. government price controls were hampering oil industry adjustments to higher world oil prices and changing supply conditions. A little common sense is all that is needed to realize that consumers don’t stand in line to pay too-high prices, but will stand in line for underpriced goods (whether due to sales promotions or government price controls).

A related story, “Gas stations worst violators” (The Miami News, January 3, 1974), elaborated on gasoline retailers’ adaptations to price controls: “According to the [Federal Energy Office] spokesman, the gimmicks used include service charges for each gallon of gas, requiring consumers to get a car wash along with a full tank of gas, or making them buy other products at inflated prices.”

The rest of The Milwaukee Journal story is included in the continuation below.

Read the rest of this entry ?

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Do anti-price gouging laws help the victims of natural disaster?

June 2, 2011

Michael Giberson

At the LegalMatch Law Blog, Sonya Ziaja editorializes in favor of laws against price gouging:

Natural forces are blind to what they destroy. People aren’t. In the past month, tornadoes and flooding in the South and Midwest left behind crippled lives, destroyed homes, and eviscerated infrastructure.

Now as the victims of the tornadoes try to rebuild, they are left vulnerable to another foe—people who use the disaster for economic gain by price-gouging.

…

Thankfully, there are legal protections against price-gouging in many states…. [The] price-gouging statutes allows the attorney’s general to investigate and prosecute instances of price-gouging once a state of emergency is declared.

After some discussion of the difficulty of defining price gouging precisely and the resulting differences in state laws, Ziaja asks a very good question: “How does any of this help the victims of natural disaster?”

Her answer sticks to the simple intended effect of the laws: “In theory, the threat of these consequences will deter potential price-gougers from profiting excessively from the misfortune of others.”

That line is a fine beginning to an answer, but unfortunately, is this case, it is also the end of the answer. The editorial moves on to other issues. What should come next is any evidence on whether the deterrence theory actually keeps people from profiting excessively, however that is defined. After all, first we should assess whether the law actual does the main thing it attempts to do. Following that one should look at whether the law has any unintended consequences, positive or negative, for victims of natural disasters.

On the issue of unintended consequences it seems clear that price gouging laws has negative effects for victims. The laws discourage efforts by merchants to bring useful goods into disaster-affected areas. Stores have been fined by the state after going to extraordinary efforts to bring electric generators into areas where an ice storm left millions of people without power. Gasoline retailers sometimes refuse to resupply at higher wholesale prices during declared emergencies, afraid they’ll be accused of price gouging. Victims of disasters are worse off if the laws reduce the resources available to them for recovery.

I’ll provide a few more details and analysis in a subsequent post on the consequences of price gouging laws. (The interested reader should also check out my price gouging article in Regulation magazine.)

Posted in Economics, Law | Tagged , , | 5 Comments »

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Gasoline price gouging complaints spur Kentucky, Maryland attorneys general into action

May 19, 2011

Michael Giberson

Gasoline Prices for Maryland, Ohio, and Kentucky, April 20-May 19, 2011
Image: MDOHKYgasprices_APR20_gasbuddy hosted on Flickr. Chart created at GasBuddy.com.

Kentucky: Attorney General Jack Conway filed a motion last week seeking a temporary injunction to force Marathon Petroleum Co. to return its gasoline prices to April 26 levels, the date the state’s Governor declared a state of emergency due to flooding. From WLKY.com:

Attorney General Jack Conway accused Marathon of illegally raising the price of wholesale gasoline during a state of emergency due to flooding.

 ”The governor issued his emergency order on April 26 which put into place Kentucky’s price gouging law that says you can’t gouge on building supplies, you can’t gouge on hotel rooms and you can’t gouge on gas prices. Specifically we’re alleging they’re charging prices not based on their costs but instead based on their speculation,” Conway said.

… Conway wants an order forcing Marathon to roll back its wholesaler price to what it was before the emergency declaration.

On Monday a Kentucky judge declined to issue a restraining order against Marathon, saying he needed additional information. A hearing is scheduled for today. The motion was filed in Kentucky’s on-going price gouging case against Marathon, initiated in 2007 in response to gasoline pricing complaints post-Hurricanes Katrina and Rita in late 2005.

Kentucky law prohibits selling certain goods and services, including fuels, “for a price which is grossly in excess of the price prior to the declaration [of a state of emergency] and unrelated to any increased cost to the seller.”

Marathon claimed politics, as Tuesday this week was the state’s primary election and AG Conway was on the ballot; Conway dismissed the claim, saying he was unopposed in the Democratic primary. (Marathon noted that the 2007 case was filed by then Attorney General Greg Stumbo less than two weeks before the 2007 primary election in which Stumbo was seeking the Democratic nomination for Lt. Governor.)

In addition to the price gouging claims, the AG’s office has been pursuing an anti-trust investigation of Marathon. Coincidently, reports WHAS11 news, “Also Friday, the Kentucky Attorney General’s office announced it has completed its three year investigation of the 1996 merger of Marathon Petroleum with Ashland Oil.   Kentucky will forward the findings to the U.S. Justice Department.”

The Kentucky price is the green line in the chart above. More from LEX18.com, from WAVE3.com.

Maryland: Attorney General Douglas Gansler said Monday this week that he was “investigating a Rockville gasoline distributor after prices at the pump jumped 25 cents overnight last week.” Gansler noted, “Because Maryland lacks a price-gouging law… his office can do little beyond questioning distributors under consumer protection and antitrust law.” He doesn’t have price control authority, but he wants it:

Gansler said a state probe into gasoline prices could be stronger if Maryland had a tough price-gouging law. Twenty-seven states and the District of Columbia have passed such laws; efforts to pass one in Maryland have failed in recent years.

“It would allow an attorney general to issue subpoenas or issue inquiries to find out whether the price rise was justified or not,” and see what was behind it, he said.

My guess is that Maryland consumers are better off without state politicians having any ability or responsibility for deciding whether price increases are justified or not. (Note that Maryland does use it’s law enforcement powers to force gasoline prices higher when a store seems to be pricing too low.)

The Maryland price is in blue in the chart above. More on Maryland, from WJLA.com.

Elsewhere: In neighboring Washington, DC, “D.C. attorney general investigates gas station mogul” in response to allegations of anticompetitive practices. The DC AG said, “We have received allegations both from consumers and operators of stations that they are required to purchase at prices that are set on an anti-competitive basis…”

In New York, “A.G. Schneiderman Announces Comprehensive Review Of Gas Prices In Western New York.” The news release said:

Prices at the pump have led to an increase in consumer complaints to the Attorney General’s office, and Schneiderman has directed his staff to compile data on the prices charged by gas retailers, as well as information on the chain of distribution, to determine the cause behind the continued increases. Schneiderman cautioned that there may not be wrongdoing behind the price spikes, but said that if there is, he will take all appropriate action.

Another news release the same day said, “Attorney General Eric T. Schneiderman has been selected to serve on the federal Oil and Gas Price Fraud Working Group, joining a national team in monitoring the costs of energy commodities for consumer abuses.”

Elsewhere, price gouging enforcement Hugo Chavez style: “Venezuelan officials and soldiers inspected a warehouse of U.S. agribusiness giant Cargill Inc.  on Wednesday as part of a crackdown on alleged hoarding and price-gouging with foodstuffs. … Chavez over the weekend urged ministers to hunt speculators and said he would have no hesitation in expropriating any companies found guilty.”

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Two views on gasoline prices

May 16, 2011

Michael Giberson

1. Economist Mike Moffat, in the Ottowa Citizen, writing in response to news that the Competition Bureau would again take a look at gasoline prices, reports “There is no gas price conspiracy.” He said, “There have been six Competition Bureau examinations of gasoline pricing in the last 20 years. All six found no evidence of collusion or anti-competitive behaviour in the Canadian petroleum market.”

Moffat explains that world crude oil prices drive most of the changes in retail gasoline prices and notes a few other factors that play a role (including an explanation of the “rockets and feathers” phenomena, a product of normal retailer and consumer behavior seen in gasoline and other product markets and which has nothing at all to do with financial fraud or oil and gas price fraud or market manipulation. So why this?).

2. The Congressional Research Service was asked by Sen. Harry Reid to assess how much proposed tax changes on the oil industry would affect domestic gasoline prices. The May 11 memo issued in response concluded the changes would have little immediate impact on gasoline prices:

The price of oil is determined on world markets and tends not to be sensitive to small cost variations experienced in regional production areas. In the recent market environment, with the price of oil averaging approximately $90 per barrel over the period December 2010 through February 2011, and the current price over $100 per barrel, prices are well in excess of costs and a small increase in taxes would be less likely to reduce oil output, and hence increase petroleum product (gasoline) prices.

Even in the longer term, little influence of gasoline prices is expected. Domestic production may be reduced a bit, but not to worry the report says, we can always import more.

Note that the effects on the oil market would be likely small at the present, given current relatively high oil prices and prices determined in a world oil market. But the tax changes would also affect natural gas producers and the natural gas market is a mostly domestic and regional affair (we import some gas from Canada, but little from elsewhere).

The report said, “Natural gas projects are more likely than oil projects to be affected by the tax changes because they are experiencing low market prices due to the volume of non-conventional gas production that has entered the market in the past several years.”

(HT to (1) Tim Haab at Environmental Economics and (2) Robert Rapier at R-squared Energy Blog, Rapier provides substantial additional analysis of the CRS report.)

Posted in Energy markets | Tagged | 2 Comments »

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Oil speculator witch hunt, 2011 edition

April 22, 2011

Lynne Kiesling

Following up on Mike’s post yesterday about pandering politicians and their 2011 edition of the recurring petroleum price witch hunt … Others have weighed in on the idiocy of this “Oil and Gas Price Fraud Working Group”. Let’s start with KP’s go-to energy finance economist, Craig Pirrong:

… it’s an opportunistic effort to scapegoat others on the basis of zero evidence in order to distract attention from the real issues–but that’s cool!

Here’s a non-enabling professor’s take:

“Craig Pirrong, a finance professor at the University of Houston who specializes in commodity prices, says the task force is hardly needed, since the agencies already have the tools to monitor for fraud and take action. [Yeah.  It's like their day job.]

“This is a transparently political fishing expedition that insinuates that fraud or manipulation is distorting oil prices without providing even the flimsiest factual basis for such a suspicion,” Pirrong said. “This is part of a broad effort by the administration to deflect criticism with regard to gasoline prices.””

Actually, the “fishing expedition” characterization is probably optimistic.  Especially given Obama’s assertion of ownership of the issue, and his personal identification with the claim that speculators are distorting prices, there is a high likelihood that fishing expedition will give way to witch hunt.  Remember when Obama told bankers “[m]y administration is the only thing standing between you and the pitchforks”?   It is becoming increasingly clear that Obama won’t be standing between oil “speculators” and the pitchforks this time.  Indeed, he’s taking leadership of the mob.

And this from KP’s go-to journalist (and, I’m convinced, sometimes more-eloquent inhabitor of my brain), Reason’s Matt Welch:

Here’s your federal energy policy: Do nothing significant to increase domestic supply, create mandates to have XX% of future supply come from magical green leprechauns, then when prices (surprise!) go up, you know what to do: Blame the “speculators”.

Finally, Cato’s Jerry Taylor and Peter VanDoren in Forbes give a thorough, straightforward lesson on how futures market works to indicate how ludicrous the “speculators are raising petroleum prices” argument truly is:

If this is going on we would expect to see some sort of inventory buildup. While crude inventories in the U.S. are increasing, they always increase at this time of year, and this year’s increase is well within the normal range. More important, gasoline inventories are decreasing and decreasing much more rapidly than normal. Hence, there’s no evidence that speculators are reducing the supply of crude or gasoline through increased storage.

Producers, however, could react in the same way to higher futures prices by decreasing current production to allow more future production at higher prices. Alas, we see no evidence of suspicious reductions in producer output that might give this story credence.

They then go on to give a good, concise summary of recent research showing that both prices and quantities in petroleum futures markets are reacting to global factors, such as political unrest in Libya (shifting the oil supply curve to the left) and increases in economic activity (shifting oil and gasoline demand curves to the right). Even a basic understanding of introductory economics would enable the interested observer to conclude that, while the ultimate quantity of oil and gasoline transacted is ambiguous, the combination of a decreased supply and an increased demand will unambiguously increase prices.

Perhaps someone should inform the DOJ and the Obama Administration, assuming that they actually care about the underlying economic fundamentals …

Posted in Economics, Energy markets, Politics, Regulation | Tagged , , | 3 Comments »

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Zone pricing ban proposal advances in Connecticut, zone price ban law in New York still not working

March 2, 2011

Michael Giberson

Gasoline consumers in well-off Fairfield County, CT, pay gasoline prices that tend to be higher than prices in the rest of the state. The consumers don’t like it.

State legislators representing the region believe the issue is “zone pricing,” a practice by gasoline wholesalers which sets wholesale prices to different levels in different areas based on beliefs about how much consumers are willing to pay. These legislators are proposing to ban zone pricing in Connecticut.

Meanwhile, in New York, a law banning zone pricing went into effect about 2 1/2 years ago. It hasn’t had a noticeable effect on gasoline prices. (See WHAM-ABC 13: “Zone Pricing Law – Why it Didn’t Work.”)

Insight from economics: zone pricing may affect whether retailers or wholesalers capture a larger share of the profit, but a zone pricing ban probably won’t have much affect on retail prices. If the law has an effect, it will tend to raise prices in lower-income areas at least as much as it lowers prices in higher-income areas.

Question for proponent of a zone pricing ban: why do you think your law will succeed where a very similar New York law has failed?

NOTES:

  1. Current text of committee bill.
  2. More info from the CT General Assembly.
  3. Editorial from the Fairfield County-based Connecticut Post.

Posted in Economics, Energy markets, Regulation | Tagged , | Comments Off

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Did they really say that? Gasoline market stress coming to eastern Washington, so officials offer advice

December 14, 2010

Michael Giberson

One consequence of a 14-week project to replace several locks on dams on the Columbia and Snake rivers is that gasoline transportation costs will rise in the area. Some gasoline that would have traveled up the river will have to move by train and truck instead, a more expensive process and one much more exposed to potential winter weather. Gasoline prices are likely to rise, so what should consumers do about it?

According to a news report, the state of Washington is advising:

Drive less.

In a document on the fuel supply outlook during the closure, the No. 1 way the fuel shortage will be dealt with is “through reduced demand due to higher prices.”

“We’re going to have to see how it works,” said Mark Anderson, an energy analyst with the state Department of Commerce. “There may be some rough times.”

State officials are warning there could be gas shortages in Eastern Washington during the closure — especially if bad weather hits. Drivers are warned to keep gas tanks full and consider ways to cut down on driving. Officials also are discouraging people from topping off their tanks, as it could cause longer lines at gas stations.

So let’s get this straight, drivers should keep gas tanks full but not top off their tank? The only way I can see to do that is to fill it up and then park it – I guess that is consistent with the “cut down on driving” suggestion.

The Tri-City Herald said, “Normally, 1.47 million gallons of fuel are shipped from Portland to the Port of Pasco every day for delivery around Eastern Washington,” and this it the fuel that will have to take alternate routes during the renovations.  River traffic is subject to annual interruptions for planned maintenance, but typically just for three weeks at a time.  (Fun research project idea: see if you can find evidence of price effects in Eastern Washington due to the annual maintenance breaks.)

More information on gasoline markets in Washington.

Gasoline price gouging addendum: According to the news article, the Washington Office of the Attorney General said, “High prices due to low supply and high demand is not price gouging. Unconscionable pricing that bears no connection to circumstances is price gouging. High prices won’t get us moving. Unconscionable prices will.” Reportedly “consumers receive some redress in 60 percent of the complaints filed” with the Attorney General’s consumer protection office. These claims surprised me because, (a) Washington doesn’t have a specific anti-price gouging law, and (b) states with price gouging laws can receive hundreds or even thousands of price complaints, but typically only a handful become grounds for an investigation and fewer still lead to some sort of settlement.

Apparently the legal authority is the state Consumer Protection Act, which among other things: “Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.” Awfully vague – I wonder whether the law has been enforced in price gouging circumstances.

Posted in Economics, Energy markets, Regulation | Tagged , | Comments Off

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