The Declarer (Floyd McWilliams' Blog)

Saturday, May 08, 2004

A gaggle of economic illiterates wrote letters to the San Jose Mercury News -- but to the Mr. Roadshow column, not to the opinion page. I cannot be deterred by such evasive maneuvers. (However I can be slowed down by drinking beer and listening to heavy metal into the wee hours of Saturday morning after the Oakland A's win a game in the 13th inning.) I will provide financial advice along with my criticisms because that's the kind of nice guy I am.

Friday being gas price day, let me defend higher gas prices.

- Petroleum is the raw material for fertilizers, plastics, electricity and many other key products.

- Everybody knows that there is a finite amount of petroleum, though actual numbers can be argued.

- Though there is some denial, everybody knows there is a problem with pollution and global warming caused by production and use of fossil fuels.

- Though there is some denial, a great deal of world unrest revolves around the availability of petroleum. The only steps we can take now to protect these resources for our grandchildren are careful conservation and a search for alternatives.

The most effective mechanism to create conservation is the popularity of hybrid vehicles. I believe prices should soon be raised to a minimum of $4 per gallon, by taxes if necessary. That is the only way we will even get started on more efficient cars and trucks and on renewable and alternative energy and transportation sources.

Bob Snively
Morgan Hill

There is a finite amount of pretty much everything on Earth. Many raw materials have multiple uses. Should we jack up the price of every natural resouce -- iron, diamonds, titanium -- because of this? In the past century we have seen what happens when people are given the power to make drastic alterations to the workings of the market. A planned economy is not a lovely thing -- and tends to have horrible pollution problems.

Noe that if oil is made artificially expensive, one adjustment will probably be increased use of coal, which is hardly best for the environment.

Financial advice for Bob: Buy oil futures, because you are the only person in the world smart enough to figure out that oil will eventually run out. (Of course, if people really were as bad at planning for the future as Bob believes, there wouldn't be any future markets in the first place.)

I realize that the price of gas is rising and will continue to rise through the summer and years as global demand increases. What I object to is the huge one-day or two-day increases that have no justification. When demand was waning late last year, I heard an interview with an oil executive who was asked why gas prices weren't dropping very fast. His response: ``We have to exhaust our high-priced inventory before prices will fall.'' Why don't they ever exhaust lower priced inventory before prices rise? Answer: Because they use these transitions to gouge Americans out of billions!

Brad Howald

Financial advice for Brad: If you think gas costs too much for one or two days, then wait for a few days to buy it.

Wait a minute, I think I came up with a brilliant idea: Buy Low, Sell High. Clearly my talents are wasted on blogging.

As I read about gas prices rising due to various supply and demand factors and the price of crude oil, I couldn't help but get disgusted at the assumption by the oil industry that we're all idiots. Yes, the price of crude has to have an impact on the price of refined product; that's obvious. And yes, short supplies in the face of increasing demand also result in rising prices. But how can the price of gas that's in the underground tank right now go up because of the price of crude, which won't be refined into gasoline for several days or weeks, or the availability of gas in the future? When prices at the pump jump the same day as the price of crude on the commodities market, or a spill or refinery mishap, etc., it can only be a result of speculative gouging. If this isn't price fixing, what is?

Michael Singer

The problem is that the gas station owners have these labels for "cheap gas" and "expensive" gas that they apply to their underground tanks. But they can never remember which is which and they get mixed up! Silly gas station owners!

Financial advice for Michael: When Dr. Evil announces that his invention will turn 90% of the world's precious metals to lead, you might not want to sell that gold for the $300 an ounce you paid for it.

I know you get an abundance of these letters but this is getting ridiculous. The oil companies use every excuse in the world to jack up prices. Other than the price of crude oil going up, they are just that -- excuses. Just because there is less of something in reserve, why does the price change on a daily basis? I haven't seen a station out of gas since the '70s.
Pete Furman
Foster City

Q If oil companies are passing increased costs, how can they explain that they're all reporting record profits? I smell a rat here, and it's not to difficult to tell where the rat is.

Warren Serkin

Financial advice for Pete and Warren: Buy stock in oil companies!

Better yet, all the whiners who complain about oil prices, and pester the media and the government to do something about it, should invest in a new oil company that would undercut all the existing corporations' "gouging." Then they could make money and help consumers!



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