Class Warfare Blog

April 30, 2018

Cynicism Comes Naturally Now

Filed under: Business,Morality — Steve Ruis @ 9:48 pm
Tags: , , ,

 

As I was perusing The Guardian this morning, I saw the following headline: “Big Bang: An oil refinery exploded in Wisconsin, forcing thousands to evacuate.”

My immediate thought was “Hmm, gas prices must be trending into the “too low” zone.” This thought stems from the U.S. oil community’s common practice of taking a refinery off line for “maintenance” or “service” and because we have a deliberate paucity of refining capacity (no refineries have been built in the last 40 years or so), every time a refinery goes “off line,” supplies of refined petroleum products, e.g. gasoline/petrol, go down and prices go up.

The industry often talks about how difficult it is to get a new refinery approved for construction (Aw, c’mon, even in Texas?) and how important regularly scheduled maintenance is, but these “problems” always seem to happen fairly shortly before the summer driving season, when prices are expected to be higher anyway. By making these “changes” a fair bit before the summer driving season, by the time motorists are filling their tanks in the summer, they will have forgotten the “issue” that “caused” the price increase.

Possibly there have been too many arbitrary “maintenance” breaks or possibly the site was in dire need of retrofitting and the company felt the insurance company should pay for a substantial part of it. I just have a feel that it “weren’t no accident.”

I used to view cynicism to be negative, but now I consider it to be a rational approach to the common behaviors of corporations, politicians, etc.

6 Comments »

  1. I don’t think the economics works on this: if it were profitable to take a refinery offline, it would be taken offline permanently or long term – the prices for oil may go up and increase the profits for all other refiners, but to the company that closes the refinery, it would mean a loss of revenue and likely loss of profit, too.
    If the refining business was a monopoly, or a cartel, then it probably be more profitable to take a refinery offline – but even then, if the profits go up, why bring it back online?

    Like

    Comment by List of X — May 1, 2018 @ 7:35 am | Reply

    • You do not understand. This has been done time and again. A refinery is taken off line for whatever purpose and prices rise and the refinery is brought back on line and prices drop but not as far as to be back where they were. It is a ratcheting system. Prices are not set on externalities but basically are based on “all the market will bear.” The basic rule on prices is they get raised until sales fall. If they get raised and sales do not fall, they rarely come back down. Prices for gas in the U.S. are quite low now because of the squeeze on the middle class. Our cars are now more fuel efficient and we drive less, so we consume less gas, so prices are less now than they were ten years ago. hence the need for a little boost.

      I am not saying that that particular explosion was deliberate but if it proved to be so, I would not be shocked.

      On Tue, May 1, 2018 at 7:35 AM, Class Warfare Blog wrote:

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      Like

      Comment by Steve Ruis — May 1, 2018 @ 8:29 am | Reply

      • I seriously doubt the oil prices are lower because of the squeeze of the middle class, since the squeeze was as bad now as in 2008 when the prices were above $4/gallon. As I understand, they are lower now because of fracking, which made fracked oil economically feasible, fracked gas, which competes with oil when it’s used for heating. Remember the stories from a couple of years ago about oil fracking wells closing because the oil price fell so much because they became unprofitable? And, sure the oil prices fall because of the renewables, which may not have a lot of market share now, but it is rapidly increasing, amd that prospect also drags down the oil prices. And, probably, more fuel efficient cars played a role, too. But the prices don’t fall because we drive less – if anything, we try to drive less when the prices go up.
        As for the refining business, I suppose if an area has a shortage of refineries, a market would have to bear a higher price if some refineries close – but prices would go up only so much before refineries from another areas and countries start sending trains and tankers of gas to take advantage of the overinflated gas prices.

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        Comment by List of X — May 1, 2018 @ 9:27 am | Reply

        • If that new supply did not meet a falling demand, prices would still be going up. Prices are set by demand. By dropping supply so that it doesn’t meet demand, prices go up. It is preferable for the industry to have ever increasing demad as that raises prices naturally, but when deman drops other considerations are made.

          Of course, in places like Saudi Arabia and Kuwait, prices are set by government and not by supply and demand, but we “supposedly” allow our prices to be set this way. Because of this there is an ever increasing tendency of businesses to pursue monopoly status because then prices can be set at will. In robust areas of the economy, this strategy doesn’t last all that long, but in the case of Microsoft it lasted long enough to make Bill Gates filthy rich.

          On Tue, May 1, 2018 at 9:27 AM, Class Warfare Blog wrote:

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          Like

          Comment by Steve Ruis — May 1, 2018 @ 9:33 am | Reply

  2. Just for you, my dear man

    Like

    Comment by john zande — May 1, 2018 @ 11:43 am | Reply

    • Beautiful, mate … brought a tear to my eye.

      On Tue, May 1, 2018 at 11:43 AM, Class Warfare Blog wrote:

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      Liked by 1 person

      Comment by Steve Ruis — May 1, 2018 @ 8:33 pm | Reply


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