Thursday, July 3, 2008

do Beshear and Abramson not know?

Is it ignorance or just doing what "politicians have to do" in appearing "to feel our pain"?

First, there's supply and demand-- and the difficulty of getting around that in a competitive market. (Democratic politicans, especially, exhibit difficulty in understanding this concept.)

Second, whenever prices rise in a competitive market, you start with the presumption that it's caused by an increase in cost in cost (or sometimes, a marked increase in market demand).

Of course, in this case, the EPA is involved-- so that "the market for gas" is really the various markets for certain types of gas as mandated by the EPA. So, the market is less competitive-- but the possibilities for demand and supply yielding different results in Jefferson County vs. other counties should be none too surprising.

What the government officials will "find" is that it's not reformulated gas per se, but the demand and supply of that particular "boutique fuel" that happens to be at a higher price right now. People think of "the market for gas". But it's really "the market for our type of gas"-- with its refineries, suppliers, etc. The EPA regulations serve to fragment what would otherwise be a uniform, even more competitive market for gas. This can result in surprisingly large price fluctuations and at times, significant price differences between "markets".

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