More reporting needed in Carlisle’s column | SummitDaily.com
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More reporting needed in Carlisle’s column

RE: Price gouging: When are we going to make them stop? (SDN Sept. 29)It seems that Mr. Carlisle is blinded by some species of hatred for capitalism, or suffers an inability to do proper research, or perhaps is affected by discacula and therefore cannot do sums adequately. Let’s review.A report issued by the Joint Economic Committee of Congress on the effects of Hurricane Katrina alone, places damage to refining capacity at “a little above 10 percent,” not at 4 percent. Following Hurricane Rita, another report, issued by the U.S. Energy Information Agency on Sept. 27, placed damage to gasoline production at 2 million barrels per day out of a total national consumption of about 7.63 million barrels per day – in other words, a 26 percent deficit, not 4 percent. This is based on a 314,160,000 gallon-per-day gasoline habit, at 42 gallons per barrel, which figures are also available from either the EIA or the JEC. For the latest, I suggest Reuters at “www.alertnet.org/thenews/newsdesk”. Interestingly, this 26 percents works out quite well to a 50 cents a gallon increase in price, assuming gas began its rise from $2 a gallon – actually a bit low, if I remember accurately. To completely reflect the scarcity inflicted by Katrina and Rita, gas prices should probably be somewhere around $3.25.Mr. Carlisle then proceeds from false calculation and bad information to attack the capitalist principal of price as a reflection of supply and demand. Consider his comment that the cost of gas already “in the system” did not increase in cost. What he fails to mention is that this gas did increase in value, as a commodity affected by scarcity. The owner of a filling station has only the gas on hand with which to generate enough revenue to purchase his next shipment and pay his other bills. If that shipment increases in value because it is in short supply (remember the 26 percent reduction in capacity, above) and if he cannot sell at a price sufficient to purchase replacement product, he is doomed to go out of business through a slowly dwindling supply. He must raise the price of what he has to sell, to survive. Simple economics, and sorry – no gouging involved.


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