California’s Soaring Prices at the Pump

The popular media conclusion that California’s high gasoline prices can be blamed on the voting public and environmentalists is a classic case of using the facts to arrive at the wrong conclusion. As noted in articles digging into the rapid price hike, California has little inventory buffer to work with. When refinery operations are interrupted, there is no reserve to tide them over. This isn’t the voting public’s problem or a case of environmentalists blocking deliveries, it is a conscious decision the refiners have made, so they can maximize profits. Running out of inventory, when refinery operations are interrupted, has no negative consequences to suppliers, they just jack up the price and sell less for more money.

Gasoline is essential to the operation of our economy and should have price controls. With price controls, the onus of maintaining sufficient inventory to cover interruptions in refinery operations falls on refinery operators. Currently, there is no disadvantage to them, if supplies come up short. On the other hand, if supply shortages cut into their revenue and profit, there is an incentive to maintain sufficient buffer stock to handle emergency situations.

About jackdetate

Married, 2 children, retired, enjoying unstructured time: "And then he drank a dew From a convenient grass, And then hopped sidewise to the wall To let a beetle pass." ~ Emily Dickinson
This entry was posted in Socio- economics. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s