And I Thought OUR Governor Was an Idiot

Cafe Hayek has a fabulous fisking of Missouri governor Matt Blunt's letter to the editor explaining why his call for price controls on gasoline is consistent with his free market principals.  Its all good, I can't pick out any one quote.  Read it all.

But wait!  This just in!  Maybe our governor IS this dumb.

Our great benevolent leader, Janet Napolitano, has stated in press conference
the she is going to investigate these fuel prices of ours. Mostly she was
ruffling her feathers right after Hurricane Katrina shutdown a good 30% of the
domestic supply source. So of course prices increased slightly to account for
the lack of supply. This trend that followed exactly what even very simple
supply and demand theory would predict was not enough to convince miss Gov. J.No
not to call for yet another investigation. No way! She was not going to be
swayed by facts, reality or "assurances from the oil industry" that these were
fair market prices. Nope. An investigation was needed.

A little over a year ago, a pipeline broke and the only source of gasoline into Phoenix was stopped.  Due to EPA regulations, Phoenix requires a special gas blend made in only one refinery coming to us through one pipeline, so it is not surprising that if that source is interrupted, gas might be short here for a while and prices might spike up.  Which they did.  Governor Napolitano at that time blamed the whole situation on the oil industry and called for investigations.  Tellingly, she took only three policy actions:

  • Temporarily waived regulations for a special blend of gas in Phoenix
  • Temporarily waived regulations on truckers that were preventing them from filling in for the broken pipeline
  • Considered circumventing regulations that were preventing a local refinery to serve the Phoenix market from being built.

So the rhetoric at the time was "its all the oil companies faults" but the solution was "repeal government regulations".  Hmmmmm.  By the way, the Commons Blog created a nice chart showing how those filthy rich oil companies are making, uh, ahem, lower profits than average for US industry (click to enlarge).  I wish they were more profitable- we would probably have a lot more oil.

Margins1a

  • Ken L.

    What is fisking?

  • http://www.arizonawatch.com Jack Benway

    J.Nap learned her politics from the McCain guidelines for grandstanding. Whenever an item makes the news, call a press conference, call for an investigation, and above all, make sure the press picks up on this grand effort for the little people.

    The piece of this issue that causes me the worst distress is that GOP gubernatorial candidate Don Goldwater is missing in action when he has a perfect opportunity to demonstrate the free market ideals he's espoused and call J.Nap on her hollow rhetoric.

  • http://www.arizonawatch.com BridgetB

    Its true they are making smaller profit margin. Ive been saying this all along. Just because the price at the pump is increasing or higher than some other point in time does not necessarily translate into higher profits. Indeed it is usually quite the opposite.

    I mean you can price something at a million dollars profit margin but that doesnt mean you are going to sell it and make a million dollars in the process, no less.

    Thanks Coyote for making this even more obvious! Much needed facts of reality. Too bad the one person you would expect to capitalze on this political nonsense seems to be MIA (as Jack said).

    A bloggers work is never done :).

    $
    BB

  • http://ashish.typepad.com/ashishs_niti Ashish Hanwadikar

    I don't understand why there is so much obsession over profit margins. The actual returns to the investors depend upon ROI (return on investment). But I am pretty sure that oil industry won't have outsized ROI as compared to other industries.