The Free Market, price of gas, class warfare or socialism?

[70Chip]

Price controls are always a disaster. Nixon tried price and wage controls in the early 1970s at the urging of his chief economist Herbert Stein (father of that Bueller? Bueller? guy) and it only made inflation worse.

Commanding Heights : Nixon Tries Price Controls | on PBS

"Only one segment of the wage-and-price control system was not abolished -- price controls over oil and natural gas. Owing in part to the deep and dark suspicions about conspiracy and monopoly in the energy sector, they were maintained for another several years. But Washington's effort to run the energy market was a lasting lesson in the perversities that can ensue when government takes over the marketplace. There were at least 32 different prices of natural gas, a rather standard commodity, each of whose molecules is based on one atom of carbon and four atoms of hydrogen. The oil-price-control system established several tiers of oil prices. The prices for domestic production were also held down, in effect forcing domestic producers to subsidize imported oil and providing additional incentives to import oil into the United States. The whole enterprise was an elaborate and confusing system of price controls, entitlements, and allocations. It was estimated that just the standard reporting requirements for what became the Federal Energy Administration involved some 200,000 respondents from industry, committing an estimated five million man-hours annually. "

I use to think that our government should endeavor to overthrow Hugo Chavez. Then I read that he had implemented price controls and realized we didn't have to bother. His own people will end up stringing him up by his thumbs.

Chávez Threatens to Jail Price Control Violators - New York Times

[FRPLG]

Price controls simply do not work. They are a utopian idea that empirically always cause havoc and almost always make the situation worse for those that the price control is supposed to help.

[skinsguy]

Originally Posted by FRPLG

Price controls simply do not work. They are a utopian idea that empirically always cause havoc and almost always make the situation worse for those that the price control is supposed to help.

I agree. Out of everybody (off this board) that I have spoken with, nobody believes this is a good idea. And I've spoken to both staunch Republicans and Democrats.

[JoeRedskin]

More intelligent people have already made fine arguments for the positions I support:
a) price controls on gas are unworkable and would create havoc in the economy (and, of course, would create a HUGE bureacracy to enforce compliance); and

b) $.07 is an incredible amount of profit given the amount of gas consumed in a day by the US, that being approximately 9 Million Gallons a day. (This Week In Petroleum Gasoline Section). Alos for a breakdown of the costs that go into making gas see: Low profits mean gas station owners share your fueling pain (yes, I know it's an old article but you can see the various costs that go into the final cost of gas at the pump - and, please notice, that taxation is already a significant price inflator). Finally, remember, a lot of these oil companies own the downstream refining companies and I am not sure how this works into the $.07 profits.

One other point I'd like to address is the idea that all of a sudden we are going to be out of gas and/or we will end up with such expensive gas that it is simply not economical to use.

The REASON gas is in such high demand is precisely b/c it is an absolutely dirt cheap transportable fuel in comparison to anything else that is currently mass produced. As this ceases to be the case, competitive alternatives will be developed - Not overnight, but as the price escalates. Will there be a few bumps on the way? Sure. But trust that, even now, some innovator(s) is/are out there looking for a cheap way to mass produce and deliver cheap energy. At some point, quite literally, when the price is right, alternatives will be developed.

[Sheriff Gonna Getcha]

Originally Posted by JoeRedskin

The REASON gas is in such high demand is precisely b/c it is an absolutely dirt cheap transportable fuel in comparison to anything else that is currently mass produced. As this ceases to be the case, competitive alternatives will be developed - Not overnight, but as the price escalates. Will there be a few bumps on the way? Sure. But trust that, even now, some innovator(s) is/are out there looking for a cheap way to mass produce and deliver cheap energy. At some point, quite literally, when the price is right, alternatives will be developed.

Excellent, excellent post.

[70Chip]

The state Senate here in Virginia has just voted to increase the gasoline tax by five cents over the next five years. This means that by 2014 the Commonwealth's "profit" on a single gallon of gas will be 22.5 cents (+2% sales tax in localities that are a part of the NoVa Transportation District). And that's just the state tax. The Federal gas tax is an additional 18.4 cents.

Gas Taxes

[JoeRedskin]

Originally Posted by 70Chip

The state Senate here in Virginia has just voted to increase the gasoline tax by five cents over the next five years. This means that by 2014 the Commonwealth's "profit" on a single gallon of gas will be 22.5 cents (+2% sales tax in localities that are a part of the NoVa Transportation District). And that's just the state tax. The Federal gas tax is an additional 18.4 cents.

Gas Taxes

In fairness, the supply of gas to the public in a safe, uniform manner does involve some considerable expense by the government.

[70Chip]

Originally Posted by JoeRedskin

In fairness, the supply of gas to the public in a safe, uniform manner does involve some considerable expense by the government.

I didn't realize the federal government was supplying gas to the public. I thought that, you know, the companies that discovered, extracted, transported, refined, and again transported fuel products were the ones that took that risk.

A better response would have been:

"In fairness, nearly all gasoline taxes are used to pay for highway improvements, so we are actually getting a decent bang for our buck for THESE tax dollars."