*Investors Blog*

[ArrestMeRedZ]

I would think that under the current and foreseeable political climate in California, it would be impossible to increase refinery capacity to what the free market requires. So you have an artifical shortage that results in high prices. The price rises until the amount of gas used matches what is available. Sure, the oil companies are making high profits, but blaming the high price of gas on corporate greed is more than a bit disingenuous.
Not being political, but this result does fit the Green agenda. More efficient autos purchased, less miles driven, etc. Not a bad thing. It does not fit a diversity agenda, as poor/disadvantaged people are disappropriately impacted. So politicians can't publicly embrace achieving their intended results, and they are left to disingenuously bash the "greedy" corporations.

 

[ZeeOSix]

The question is why are people paying? That’s the basics. All companies are greedy and all humans are as well. Would you turn down a pay increase from your employer? I highly doubt it.

Many high end goods are flying off the shelves, computer stuff like graphic cards that cost as much as an entire system used to cost, all gone the day of the launch. Cars the same. All these people working from home and not wanting to return to the office, why are they overpaying for new and used cars?

The list goes on and on. People are spending like there is no tomorrow and the recession that you think will stop corporate greed, will hurt the regular consumer far more than the corporations.

Yes, the other half of the equation is lots of people are still paying the higher prices, but IMO that's starting to change. People can only put up with so much and it builds to a point where they finally wake-up and say they aren't going to spend the money on frivolous items, or they will really shop for cheaper alternatives. That is the beginning of the tipping point, and could also the beginning of a mini recession when people start cutting way back on what they buy. They will switch to buying only what's absolutely needed, like food, shelter and transpiration.

I think people basically "hibernating" for two years during the pandemic caused them to literally go bonkers when they finally thought the pandemic was over and went wild with spending. That caused a big step function in the demand vs supply chain which pretty much triggered the inflation, but like I've mentioned before I also think it was seen by many companies to "jump on and ride the inflation train" just for the sake of greed and trying to reap as much profit as possible, just like shown in that YouTube video I mentioned earlier. It's all an ugly self-feeding situation where the economy is going to suffer more before it gets better, especially if people just keep on putting up with higher and higher prices and keep contributing to the corporate high profit reaping greed.

 

[JeffKeryk]

I would think that under the current and foreseeable political climate in California, it would be impossible to increase refinery capacity to what the free market requires. So you have an artifical shortage that results in high prices. The price rises until the amount of gas used matches what is available. Sure, the oil companies are making high profits, but blaming the high price of gas on corporate greed is more than a bit disingenuous.
Not being political, but this result does fit the Green agenda. More efficient autos purchased, less miles driven, etc. Not a bad thing. It does not fit a diversity agenda, as poor/disadvantaged people are disappropriately impacted. So politicians can't publicly embrace achieving their intended results, and they are left to disingenuously bash the "greedy" corporations.

Your position is flawed for 2 major reasons:

1. There is no gas shortage; I can buy all I want. There is no capacity problem.
2. Oil is not a free market commodity. The price is primarily moved by demand and manipulated by OPEC and OPEC+.

 

[4WD]

Your position is flawed for 2 major reasons:

1. There is no gas shortage; I can buy all I want. There is no capacity problem.
2. Oil is not a free market commodity. The price is primarily moved by demand and manipulated by OPEC and OPEC+.

seems they could of prevented the crash to nothing

 

[JeffKeryk]

Yes, the other half of the equation is lots of people are still paying the higher prices, but IMO that's starting to change. People can only put up with so much and it builds to a point where they finally wake-up and say they aren't going to spend the money on frivolous items, or they will really shop for cheaper alternatives. That is the beginning of the tipping point, and could also the beginning of a mini recession when people start cutting way back on what they buy. They will switch to buying only what's absolutely needed, like food, shelter and transpiration.

I think people basically "hibernating" for two years during the pandemic caused them to literally go bonkers when they finally thought the pandemic was over and went wild with spending. That caused a big step function in the demand vs supply chain which pretty much triggered the inflation, but like I've mentioned before I also think it was seen by many companies to "jump on and ride the inflation train" just for the sake of greed and trying to reap as much profit as possible, just like shown in that YouTube video I mentioned earlier. It's all an ugly self-feeding situation where the economy is going to suffer more before it gets better, especially if people just keep on putting up with higher and higher prices and keep contributing to the corporate high profit reaping greed.

No. Consumers can be thought of as the end link of the supply chain.
The supply chain was damaged by the pandemic, mainly by companies (especially with complex supply chains) incorrectly forecasting demand and cancelling orders. This rippled up and down the chain; many smaller suppliers (especially single customer suppliers) went belly up. Others laid workers off. Look at Shanghai, shutting down, opening and shutting down again. Truckers, long underappreciated in terms of compensation, found other work and many are not returning to the business.
The supply chain does not operate like a light switch. It is a huge, complex, world wide system. A disruption in any part of the chain has far reaching effects up and down its thread.

Look at the auto chip shortage. Foundries spend millions, even billions to set up runs based on order mix. Changover is very expensive and can take months. Renesas, in Japan, is a huge chip supplier to the auto industry. There was a huge fire that shut them down for an extended period.
Add to that the firmware component; the bare chip programming that defines functionality (think NVIDIA). Only Tesla programs their own chips which allowed for available chip repurposing.
And now Geo-Political issues are affecting the global supply chain. Not good.

You are right, demand has risen, due to low unemployment; as a whole more people have money in their pockets. But this coupled with supply chain and high profits have fueled inflation.

 

[ArrestMeRedZ]

Your position is flawed for 2 major reasons:

1. There is no gas shortage; I can buy all I want. There is no capacity problem.
2. Oil is not a free market commodity. The price is primarily moved by demand and manipulated by OPEC and OPEC+.

Hmmm, interesting points. I would counter that there is no shortage at the current 6 or 7 bucks a gallon, but if California gas was $3.50 a gallon like much of the rest of the country there would be a shortage of the boutique blend mandated there. I believe the current price has a significant impact on demand. I am open to a counter argument that consumption is independent of current pricing if supported by numbers.
As to oil not being a free market commodity because of OPEC, point taken. But saying "The price is primarily moved by demand..." seems to fit the definition of free market.

 

[ZeeOSix]

No. Consumers can be thought of as the end link of the supply chain.
The supply chain was damaged by the pandemic, mainly by companies (especially with complex supply chains) incorrectly forecasting demand and cancelling orders. This rippled up and down the chain; many smaller suppliers (especially single customer suppliers) went belly up. Others laid workers off. Look at Shanghai, shutting down, opening and shutting down again. Truckers, long underappreciated in terms of compensation, found other work and many are not returning to the business.
The supply chain does not operate like a light switch. It is a huge, complex, world wide system. A disruption in any part of the chain has far reaching effects up and down its thread.

Yes, that's basically what I said. Demand was like a light switch, and supply wasn't reacting to the demand. That is what basically set off the whole inflation snowball rolling. It just got uglier as time went on for other various reasons ... profit reaping greed being one of them.

 

[ZeeOSix]

... but if California gas was $3.50 a gallon like much of the rest of the country there would be a shortage of the boutique blend mandated there.

What's so different in the gasoline blend in CA vs much of the rest of the country? None, really ... it's mainly E10 just like most of the USA these days.

 

[JeffKeryk]

Hmmm, interesting points. I would counter that there is no shortage at the current 6 or 7 bucks a gallon, but if California gas was $3.50 a gallon like much of the rest of the country there would be a shortage of the boutique blend mandated there. I believe the current price has a significant impact on demand. I am open to a counter argument that consumption is independent of current pricing if supported by numbers.
As to oil not being a free market commodity because of OPEC, point taken. But saying "The price is primarily moved by demand..." seems to fit the definition of free market.

There has been no shortage at the pump since the Saudi embargo starting in 1973.

"The price is primarily moved by demand..." refers to oil companies manipulating supply in regard to demand as well pure demand. The key point is, there is no viable alternative to gasoline. The world runs on oil. Oil is not a free market product; it is how everything gets around.

 

[JeffKeryk]

What's so different in the gasoline blend in CA vs much of the rest of the country? None, really ... it's mainly E10 just like most of the USA these days.

There is a summer blend and a winter blend. Our govenor has asked the refineries switch to the cheaper winter blend a month early. Will it help? Well, I hope so.

 

[ZeeOSix]

The key point is, there is no viable alternative to gasoline.

Horses, but have you seen the cost of feeding and caring for horses these days?

 

[alarmguy]

Your position is flawed for 2 major reasons:

1. There is no gas shortage; I can buy all I want. There is no capacity problem.
2. Oil is not a free market commodity. The price is primarily moved by demand and manipulated by OPEC and OPEC+.

Gas is cheap, $3.14 a gallon yesterday.
One has to do their homework why gas prices are higher in other states and ask why almost 50% less in other states.
Simple explanation and very easy to research but cannot be discussed in this forum however it’s not OPEC or gas wouldn’t be so cheap in SC.

 

[ZeeOSix]

There is a summer blend and a winter blend. Our govenor has asked the refineries switch to the cheaper winter blend a month early. Will it help? Well, I hope so.

There's a summer blend and winter blend in many parts of the country. I was just wondering what this special "boutique blend" is as mentioned by ArrestMeRedZ. CA gasoline blend isn't anything special that would justify the prices they are charging for it.

 

[JeffKeryk]

Horses, but have you seen the cost of feeding and caring for horses these days?

A few people I know have chickens in their back yard; I am pretty sure this is not really legal but we Californians are fiercly independent.

 

[JeffKeryk]

Gas is cheap, $3.14 a gallon yesterday.

Send me some, pretty please.

 

[ArrestMeRedZ]

What's so different in the gasoline blend in CA vs much of the rest of the country? None, really ... it's mainly E10 just like most of the USA these days.

It doesn't have to be a lot different. Just different enough that nobody else will make it.
In Vegas we get our gas from California refineries, mostly via pipeline. By default, I believe we get California blends. While our cost isn't as high as Cali, we have to pay close to $2 a gallon more than the rest of the country.

 

[alarmguy]

Send me some, pretty please.

Transportation costs are part of the reason that I can’t !

What really annoyed me today with this inflation was that I just paid seven dollars for a gallon of organic skim milk, in Walmart no less! Eggs up 50% too, (picked those up for my wife)
I’m going to do my due diligence and buy the non-organic next time at half the price LOL and need to take off a few pounds anyway so I’ll cut back on buying fruit too

 

[ZeeOSix]

It doesn't have to be a lot different. Just different enough that nobody else will make it.
In Vegas we get our gas from California refineries, mostly via pipeline. By default, I believe we get California blends. While our cost isn't as high as Cali, we have to pay close to $2 a gallon more than the rest of the country.

Why would the CA refineries cut their profit greed for gasoline that isn't anything special or different just because they sell it to AZ?

 

[4WD]

Shortage ? Been no shortage of money printing …

 

[ArrestMeRedZ]

Well, now I'm going to argue a little against myself. Saying corporations are greedy is like saying the sky is blue. It's a given. Maximum profit to the shareholders, and maximum bonuses to the execs. Counselor, I will stipulate to the greed of corporations.
If the primary factor in the cause of inflation is corporate greed, then it will settle down soon and competition will return prices to pre-C19 levels. If government policy is to blame, prices will keep going up. My bet is on the latter even though I wish it were the former.
My high school economics teacher predicted 70s inflation in the late 60s when he told us we could have guns or butter, but not both without it. In today's environment we are not only getting guns and butter, we are getting butter on everything. Heck, we're getting popcorn sized bowls of deep fried butter. Butter for everybody. If Mr. Russell is still alive I think he would tell us to batten down the hatches because the inflation storm is just getting started.