Monday, October 8, 2012

Power vs. Market in California

Chris Rossini
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Bloomberg is running a very instructive article on Power vs. Market.

The Market can be pushed around for awhile by petty tyrants. But, in the end, it always wins.

California is now facing $5 gasoline prices. And, wouldn't you know, crisis is forcing repeals:
Gasoline closing in on a record $5 a gallon prompted Governor Jerry Brown to direct California regulators to relax smog controls so oil refineries could increase supplies of cheaper fuel.
Great example of central planning hitting a brick wall.

Here comes another layer of bureaucracy:
The California Air Resources Board yesterday granted refineries permission to make an early shift to winter-blend gasoline, typically not sold until after Oct. 31. Due to the composition of the gasoline, refiners can produce more of the winter blend than the summer blend.
An "Air Resources Board" needs to 'grant permission'?

In the U.S.S.R California they do.

Here's another way that bureaucrats have boxed themselves in. And keep in mind that this is the state with the most motorists in the entire country:
California is dependent on its own refineries for gasoline because the state is mostly cut off from oil-products pipelines spanning the rest of the country. Refiners outside California are generally not equipped to supply the cleaner-burning gasoline required in the state.
Gas stations are also running out of gas!

I learned long ago, from reading Gary North, that whenever you hear of a shortage, ask the following question:

"At what price?"

In other words, are gas stations afraid of raising prices to an even higher market level? Will the central planners come after them for "price gouging"?

You can bet your last dollar they would.

So the market is once again roaring with a vengeance in California.

The U.S. Federal Government and Federal Reserve should take notice. They've rubbed the market's nose into the ground for an extremely long time.

At some point the market bites back...and it bites back hard!


  1. Ironic isn't it that California prides itself for leading the nation in progressive (fascist) legisoation is now feeling the pinch of $5 gas, a huge budget deficit, and a $10 billion monorail to nowhere. It was once said that what happens in the nation happens first here. Coming soon America!

  2. If consumers were truly concerned enough about the effect of gasoline quality on emissions and more aware of the effects that their spending habits have on what gets produced, cleaner burning gasoline MIGHT be an option at the pump.

    If that were the case, a disruption in the supply of clean gas could be dealt with by raising the price while still leaving the option of cheaper, dirty gas. The price of dirty gas would probably be pushed up too, but it wouldn't result in the kind of situation we have right now.

    It's the same with organic and non-GMO food.

  3. It's really a surprising news for California, the irony of the situation is just not surprising. They've been struggling for a year now but they just won't admit it yet.