High Gas Prices Are Blamed On You

There are numerous reports about gasoline supplies in Tennessee and other southern states, wildly divergent prices and accounts of the why and the how of the changes.

Gov. Bredesen released a statement to assure residents he's on the lookout for potential price gouging crimes:

"We will be very tough and very aggressive on people who take advantage of this situation. I hope people do not try to capitalize on the effects of these storms at the expense of Tennesseans, who are already struggling with high gas prices."

WBIR reports some complaints have been made but not very many.

Is it because of our location?

"The increase was the biggest one-day spike since the days following Hurricane Katrina in 2005 according to AAA. Then, the price of gas rose by 14 cents and 16 cents on consecutive days in the aftermath of Katrina.

Sharpest spikes were in states that lie at the end of Gulf pipelines. That included the Carolinas, Tennessee and Kentucky. In the Triad on Friday, gas prices ranged from $3.60 a gallon to $5.95 a gallon.

In Galveston and Houston, prices rose 3.6 cents and 4.8 cents to $3.525 and $3.544."

Is it your fault?

Let's see - oil prices are markedly lower at around $100 per barrel, at it's high mark of $144 a barrel, prices reached the $3.80 or higher mark. The summer saw major drops in retail gas sales, so companies kept stockpiles low. The last two hurricanes prompted the shutdown of production in the Gulf. Now that demand at the pump is higher, the wholesale prices of fuel supplied to your area went much higher and now you must pay for that rate, not the rate at which existing supplies were purchased.

AAA spokesman Don Lindsey in the Kingsport press:

"I think there’s little doubt that somewhere somebody is seeing an opportunity to take advantage of customers. I don’t think it’s widespread, though,” Lindsey said.

“I think there are stations that absorbed a lot of wholesale price increases over a period of weeks awhile back and watched their profit margin get squeezed and didn’t drop their prices down as quickly as others.

“Some station owners have got some tough decisions, and I think a lot of stations are in the business of keeping customers happy, not trying to take advantage of them and risk prosecution under state law for gouging customers.”

In some instances, Lindsey said stations may have increased prices Friday to stave off panic buying.

“If they’ve had a run on their supply and they’re seeing that they are about to run out, there have been situations where station owners have jacked the price up to slow that down. That’s not a good process, and I believe that some station owners were prosecuted for that (in 2003) before and during Hurricane Katrina,” he said."

Lindsey in the Knoxville press:

"At least through the end of September and possibly beyond, we can expect price increases."

Production may be affected for many, many months:

"The storm idled about 98 percent of oil production and 94 percent of natural-gas output in the Gulf of Mexico, the U.S. Minerals Management Service said yesterday. Gulf fields produce 1.3 million barrels oil a day, about a quarter of U.S. output, and 7.4 billion cubic feet of gas, 14 percent of the total, government data show.

"Ike is similar to Hurricane Alicia in 1983, according to Jim Rouiller, senior energy meteorologist at Planlytics Inc. in Wayne, Pennsylvania.

``It took them over a year to get their feet on the ground again,'' he said. ``The refineries were down for months. Basically, the whole infrastructure around the Houston metropolitan area was devastated.''

Hurricanes Katrina and Rita forced the temporary shutdown of at least 20 U.S. refineries during August and September 2005, idling 30 percent of the nation's capacity. Most of those plants resumed operations within a few weeks of the storms.

Gasoline supplies across the southern and eastern U.S. may be disrupted by Ike, Rouiller said.

``We could have this capability lost for a long period of time,'' he said."

So here's the deal - you, America, you dropped the demand for fuel over the summer, so supplies were kept at a bare minimum. As hurricane season approached (Aug and Sept), supplies were also kept low despite the near-constant likelihood storms would halt/slow production. Now, supplies are really low, production is at a bare minimum and likely to be so for months, and your demand is the real problem.

The rest is just business.

By stringing together various aspects of supply and demand, by ignoring the enormous reality that hurricanes shut down production in the Gulf, profits are maximized at the highest imaginable (and legally allowable) levels.