Tuesday, June 12, 2007

Freedomnomics: Chapter One

Are you getting ripped off?

Jumping right into the oil company’s billions-with-a-B record profits over the last several years since peak oil and various natural disasters (such as hurricane Katrina) and unnatural disasters (terrorism against oil pipelines in north Africa and threats of such in the middle east itself), Lott says of the Congressional panel investigating gasoline:

But no one on the panel seems to have made the really vital argument – what if, by dramatically raising prices during Hurricane Katrina, the oil companies were doing a good thing? (p15)

A good thing for whom, you will surely think to ask right off the top of your head. It’s not like there was any danger at all of the oil companies losing money by keeping prices what they had been, and Lott doesn’t even try and make that argument. Instead, he says the oil companies were altruistically doing us a public service.

By raising gas prices before a hurricane, they reduce demand for gas and are left with a bigger supply, which they can sell after the hurricane for a higher price. (p16)


First off, if they’re selling it at an EVEN higher price after the hurricane, while STILL BEING IN NO DANGER WHATSOEVER of actually losing money, that would be the very definition of price gouging. So they are most certainly guilty, in Lott’s own words.

But let’s examine the other claim, that really, the CEO’s out of the goodness of their hearts were attempting to serve the public, (and not baked or fried, as Asimov would say). Is there any actual evidence that the high prices of Katrina, or over the last few years in general when gasoline jumped from seventy five cents a gallon during one friendly summer price war in a small town near where we now live, to a hefty average of over three dollars a gallon here and four gallons in some big cities, actually reduced demand significantly?

On the Oil Drum, one of the premier websites for analysis of the commodities markets in oil, gasoline, coal, etc. in their May 25, 2007 news roundup, this comment appears under the headline Oil Prices Forecast to hit $80 [a barrel]:

Global oil prices could easily rally to record levels above $80 a barrel this summer, analysts forecast on Thursday, due to Middle East tensions, red hot Chinese growth and a reluctant OPEC. But record high prices will not have the same impact on oil demand as in the past few years since consumers have grown accustomed to it…

Now, I’m pretty sure the energy analysist at the Oil Drum know what they’re talking about, and they say that for most people, gasoline usage is a non-elastic monthly budget expense. What that means is you only go on vacation once, maybe twice a year. For most of your time, though, you have to get to work, the kids have to get to school, and you have to get groceries and run other necessary errands. They’re not optional. And, the analysts say, since most people live nowhere near a mass transit system that doesn’t itself run on gasoline or diesel, even if those few people take more mass transit trips this will impact only a very small fraction of gasoline usage. Since way, way more people live in suburbia than in metro urban centers, and these people don’t live ANYWHERE NEAR their job or a supermarket, walking or biking is not an option, either. According to renowned urbanist architect James Howard Kunstler in his book, The Long Emergency, Americans have made some dreadful mistakes in thinking sprawl was a sustainable way of life. And first off, let me quote something with which I wholeheartedly agree, before anyone else decides I’m an evil communist:

…in the decades to come the national government will prove to be so impotent and ineffective in managing the enormous vicissitudes we face that the United States may not survive as a nation in any meaningful sense but rather will devolve into a set of autonomous regions. (p1)

You’ll just have to read the book to see why he wrote that. What do you want this article to be, a novel? So let’s get on with the relevant passages:

America finds itself nearing the end of the cheap-oil age having invested its national wealth in a living arrangement – suburban sprawl – that has no future…and very soon we’ll be without both the oil needed to run it and the wealth needed to replace it. (p17) Without cheap gasoline, how would any of the denizens of these houses range across the vast geographical distances they were accustomed to, driving thirty, fifty, a hundred miles a day to get to a job or to fetch groceries? …Would they have to abandon their roadside entropy bunkers and move into town? If so, how would they sell their devalued homes and what would they move in to? (p236-7)

Yes, even here in more modest size cities (the place where we now live has an estimated population of only about 300,000 people) most of the suburban developments place homes literally miles away from the nearest pharmacy, grocery, or hardware store. Since my husband is a GIS specialist for the city, he sees every new neighborhood built in the entire county, and this county is typical of the whole United States.

So, class, since most people can’t significantly reduce their gasoline consumption, are the oil companies doing you any favors by raising the price? As the Oil Drum article noted, at current levels people have simply adjusted. They buy less junk food or paper plates. For most of middle class and even upper low class America, people just did what they had to do, and gasoline demand has not gone down even close to enough to actually put a real dent in usage.

Now, class – think about that. If the oil companies REALLY wanted to significantly lower demand, since our demand for gasoline and petroleum now exceeds our ability to refine them, and the oil fields have been in decline for a few years now and aren’t going to magically get filled with new oil – what would they do? They’d raise the price of gasoline to TEN dollars a gallon. That would lower demand, wouldn’t it?

It’s clear from the evidence that oil companies, however, don’t want demand really reduced – no, they just want to skim as much profit off of their captive public as they can without getting into trouble with Congress. That’s why gasoline is $3-$4 a gallon instead of $10 a gallon.

Lott says: Prices will begin falling once the supply improves.


Ummm, Peak Oil, anyone? There hasn’t been a major discovery of oil in over 30 years, class. And you know from reading other articles that I have blogged about that production in the Saudi fields, the South American fields, and even the Russian fields are all past peak. The Saudis are pumping so much salt water into their fields to try and keep production up that there are actually concerns they will collapse the ground above the fields for thousands of square miles over the geographic area of the former oil deposits. Production of oil in the US peaked thirty years ago – and even if the government would get over it’s fear of the Sierra Club and drill in Alaska and the known offshore areas, it wouldn’t be enough oil to stop the price of oil from going sky high, since China and India are expanding their use exponentially each year and don’t plan to stop until THEY have a modern, largely middle class economy like we do. Can all those billions of people live in suburbs and drive cars miles every day, too? Can all those people use petroleum based plastics and other modern products like we do? Yes, they can, and they will, and frankly, we have no right to tell them they can’t.

And I’ll tell you another little secret, class. Since they haven’t gutted their manufacturing base and have a real value-driven economy instead of an imaginary fake paper one, they can way, way outbid us for the world’s remaining oil. And do you think that the Oil Company CEO’s are going to have a sudden attack of altruism and sell gas to us anyway, though they make way less money from us?

HAHAHAHAHAHAHAHAHA!!!!! OH, WOW, THAT’S A GOOD ONE. What’s the US government going to do, punish them for relocating overseas like every other multinational corporation has? Good luck with that.

So not only is your government not doing it’s job to protect you now from the oil companies’ price gouging and profiteering at your expense, basically, they can’t over the long term. That’s why the price of gasoline will continue to go up and up – because, they say, that’s what “free market capitalism” is all about. They’ll still be making their Billions-with-a-B dollars in profit every year from the wealthy and from foreign buyers, but you’ll be screwed. And the government let them screw you. Isn’t that nice?

Lott says: Suppose that tomorrow the government capped gasoline prices at their current price…and goes on to say it would result in a spending spree by people wasting gasoline right and left. Apparently, in Lott’s world, there aren’t any economists and analysist out there at the Oil Drum or anywere else where people who are industry experts can calculate reasonable (read: not billions) amounts of profit and cover the basic production costs. Gee, class, the oil companies could do that if they wanted to. The problem is they aren’t happy with a modest profit. They like their Billions of dollars of other people’s money they’re gleefully spending on yachts and Mazaratis.

Where are the ETHICAL considerations here? How is it right to price the poor out of the market for gasoline while personally enjoying a multi-million dollar compensation package, plus stock options? And while we’re on the subject, how is it right for the CEO to make 100x or 200x or even 300x what the average employee in his oil firm makes? Under free market capitalism, they have A RIGHT to be greedy, but is it RIGHT? Lott and his ilk never answer that question, and if you raise it, they yell “communist” as if thinking greed is bad automatically makes you evil or something. Last time I checked my Torah, it was greed that is evil.

Lott then shifts to the topic of pharmaceutical companies and says: Americans cover the research and development costs through our high prices (p20)…while other nations get the benefits of protection from being bankrupted by their insurance premiums or direct pharmaceutical purchase costs.

I am entirely baffled about why Lott thinks American pharmaceutical companies are somehow doing us a service by letting us get stuck with production and research costs when the entire world benefits from the products. Lott believes that failing to give everyone else a steep discount and sticking us with the high bill will result in other countries failing to honor intellectual property rights and just making their own copies of the drugs more cheaply.

Now, there are a couple of issues here. One is that this is actually an argument FOR having government or educational institutions do all of the research and development. They get the prestige and the coveted New England Journal of Medicine articles, we get drugs whose prices are based on their manufacturing costs and not the million dollar compensation packages for the “top executives” who basically handle nothing but marketing and don’t do any of the actual work of inventing new drugs.

Even better, such CEO’s put the kabosh on hundreds of promising new drugs every year! Why? Because they’re for rare diseases or turn out not to make “sufficient” profit for the company. Notice what’s missing here? I’ll tell you, class: ANY ACTUAL CONCERN ABOUT RELIEVING THE SUFFERING OF SICK PEOPLE.

And even better, class – the drugs they make are often, in fact, INFERIOR to natural products whose ingredients can’t be patented and have MORE unpleasant side effects. For example, if you go to the ER with pre-ecclampsia, they are going to give you an IV to lower your blood pressure in a hurry, because it’s a life-threatening situation for you and your baby and they don’t have a week to sit around waiting for the latest marketed blood-pressure drug to work. Do you know what they give you? Magnesium. Plain, old, unpatentable Magnesium. But will you ever hear your doctor say, “Take a magnesium tablet every morning” for high blood pressure, whether you’re male or female? OF COURSE NOT! DON’T BE SILLY!

Pharmaceutical companies are just like any other for-profit corporation. They have one interest and one interest only: making money. The fact that their high-priced junk is bankrupting insurance companies, medicare, medicaid, and uninsured people is not relevant to them in any way. By allowing these pharmaceutical companies to direct medical education in this country, own the FDA, and put profit ahead of the well-being of the people in this country, they have sucked us dry – and enjoyed every minute of it. In fact, just in case you hadn’t noticed, they are now embarked on a multi-million dollar campaign to buy enough Congressmen and government officials to even deny you the right to go out and buy a magnesium tablet. Isn’t that nice? Do you really want these people deciding what medical care is in this country? I don’t. You shouldn’t either, class. A sick person is another captive audience, and they want to make sure you have NO CHOICE but to buy their over priced brand-name products. Is that “free market capitalism?” According to Lott, it is.

It’s nice to see on page 27 that Lott actually admits that …any business will charge the highest price the market allows in order to maximize profits. But what he doesn’t acknowledge is that the cumulative effect of all these businesses doing this in every category of captive audiences has not done us any favors. It’s only lined the pockets of robber-baron CEOs and their favorite upper level cronies. Even the workers who work in these (mostly overseas) factories and offices don’t benefit from the obscene profits these multi-national conglomerates are making. It’s nothing but a few exploiting the many.

Where is the MORALITY here?

None of the examples he gives proves there is any real reason but greed to charge the highest possible price for any item. He says that …short notice travelers can consult Orbitz, Expedia, or other websites that compare ticket prices (p29) without observing that these companies obvious also know that you are trying to get a last-minute ticket. That their last-minute prices are similarly higher than non-last minute tickets still shows they are just fleecing a captive audience. And the whole argument that airlines somehow “lose money” on the deal because you purchased a ticket at the last minute is extremely disingenius. Airlines typically OVERBOOK their flights to a considerable percentage – so they not only fleece you for a ticket at the last minute, but they also know that you’re likely to be bumped. So you get screwed twice over – they charge you more for a seat they don’t actually have available and then waste your valuable time making you take a later flight anyway. Where’s their “loss” here? I can’t find it. (And really, class – when someone in any other industry sells you something they know you don’t have available, it’s called fraud. When airlines do it, it’s business as usual. Why is that?)

Full service gas customers (example p31-2) have cell phones – there isn’t any “time cost” of visiting a gas station. They can be checking the stock market, calling their analyst, or giving orders to fill overseas shipments. They don’t even stop working WHEN THEY’RE DRIVING, much less when they’re getting gas. So much for that analysis.

It seems perhaps that our entire economy is not really based on free competition, but rather on the overwhelming power of a few monopolies that can prevent other companies entry into the market. However, to the contrary, the strategy of predatory pricing is so riddled with contradictions that it actually ends up creating new incentives for competitors to join the market. (p33)


Yeah, right. Go ahead and go to your now conglomerate-owned bank and tell them you’d like a few million dollars to start up a business that will compete with Wal-Mart. Good luck with that. And it’s simply not true to say that Wal-Mart and other huge corporations don’t engage in predatory pricing.

First, a personal example. My late father in law used to own a grocery store. Then Kroger came to town. They underpriced all of the specialty items (kosher, organic, etc.) and even the regular items my father in law had sold, and he eventually went out of business. Now, class, what happened then? Gee, Kroger raised the prices of their items to where my father-in-law’s prices had been – or higher! And then, even better, they STOPPED SELLING many of the specialty items, because they wanted to draw from a much larger area and didn’t need our neighborhood’s specialty business. So don’t tell me they didn’t purposefully use predatory pricing to run him out of business, because I know better.

But that was a small town, you say. OK, how about Wal-Mart, which Lott specifically says can’t or wouldn’t employ predatory pricing in the small towns where they are well-known for eradicating all of the competition and then raising their prices. Lott says: …the losses incurred from predatory pricing easily exceeded any subsequent profits from the monopoly prices. (p33) I’m wondering what planet he lives on, because here in the real world, Wal-Mart can lose money at dozens of new stores at a time and more than make up for it at their already existing venues, for months on end. That’s a fact. Their net is still a gain – but the small local businesses can’t do that, and they collapse. Also a fact that anybody with eyes can see in small town after small town after small town all over this nation. Pretending it hasn’t been happening takes some real imagination. Remember, by Lott’s own earlier words, as soon as the big box retailers are the last men standing, they must raise their prices to what the market will bear! That’s how “free market capitalism” works.

But you don’t have to take my word for it. In their article Wal-Mart: Global Retailer, Kai Mander and Alex Boston analyzed Wal-Mart’s history and business practices and found that:

In reality, Mr. Sam was in the business of driving small shops out of business across the continent and paying most of his workers minimum wage, while he amassed a fortune of [then] $23.5 Billion…Study after study confirms what hundreds of American towns learned the hard way – Walmart leads to a net loss of jobs, decreased income for the community, and a decline of central shopping areas. Even Walmart’s vaunted “low prices” are exaggerated. …Big enough to sustain losses for a long time, Walmart keeps prices low as long as they must. …The jobs Walmart does provide are at the bottom end of the economic scale. Notorious for wringing the most work out of its employees for the least pay…the average annual income for a full time worker…hovers well below the poverty line. …[and] as the local competition decreases, all of Walmart’s prices begin to climb…

Local businesses don’t go out of business primarily because Walmart can offer more cheaply manufactured and transported goods. No, Walmart undercuts their competition primarily because local businesses aren’t willing to impoverish their employees by refusing to pay living wages and reasonable benefits. And that is the real reason Walmart wins – UNETHICAL TREATMENT OF THEIR EMPLOYEES. And then they raise prices, because they can. Is this the “free market” that you want, class?

Also on pg 33 we find this little gem: This ferris wheel of lowering and raising prices makes little economic sense. Gee, that must be why gas stations spend all day doing it, because it makes no sense. Apparently, they’re just bored or something. Wait, what?

And I just love his piece on Real Estate Agents. Let me tell what happened when we looked for our first home when we moved to the locality where we now live. We engaged a realtor, who told us their mortgage broker had determined that we qualified for such and such a loan amount for a house. Now, that number sounded odd to me, and when I investigated it turned out that the payments on that loan amount would have been about half of my husband’s take-home pay. So I did the proper calculations myself, and came up with a top price for a house that was within a reasonably intelligent person’s budget abilities. We told the realtor we only wanted to see homes in the price range that I calculated. And she completely ignored us. For the entire several months of her contract, she continually showed us homes in the price range that her broker had come up with instead. She and the broker intended to make the commission that they wanted off of us, and they obviously couldn’t care less whether or not we could really afford that much mortgage or not. We didn’t buy a house from her, and she was mad when we didn’t renew her contract.

This sort of moral hazard has been a direct cause of the sub-prime mortgage meltdown that is just getting started. As I have blogged to you before, there is plenty of evidence out there that real estate agents and mortgage brokers purposefully steered people to buy houses they absolutely could not afford – and made millions of dollars doing it. In fact, there is now evidence that people who actually had good enough credit for conventional mortgages were told by their agents and brokers that they needed a sub-prime loan, which made more money for the banks and brokerages and more kickbacks for the agents. None of this is fiction – it’s been in the news for months and is only going to be in the news more as the flaky ARMs adjust and force more and more people out of their homes. Can you say Moral Hazard, class?

On the flip side, Lott says …It’s hard to see why real estate agents woud deliberately depress bids. (p40) No, it’s not that hard. If one Real Estate agency has decided to “compete” ala Walmart with another agency, they would naturally low-ball all bids for houses marketed by that firm. They would more than make up for it when dealing with all the other real estate firms in the area for deals with other houses. One real estate agent may even have a personal vendetta against another for having higher sales or winning some award – this is competition, remember? Why give your competition a good deal?

(And I’d love to know where agents only charge 3% commission. The industry standard has been 6% for some years now.)

And the analogy to physicians is laughable. Lott says …Don’t we expect Doctors to obtain the top medical treament for themselves simply because they know who the best doctors are [for such and such an illness, I presume] and are better able to evaluate the medical advice they receive? Does this mean that patients who are not doctors are being treated unfairly?

It does if the doctor doesn’t TELL his patients that Dr. so-and-so is really the best in the field and they should go see him instead of buying his own services – after all, shouldn’t “efficient” medical markets use “comparative advantage” like all other businesses?

Then, near the end, Lott complains about courts. He specifically complains about a ruling a woman received in her favor against a predatory lender. But as with ARMs, the judge was right – the moral hazard is real. (Aside from the fact that it is, frankly, against Torah, that is, morally wrong, to charge poor people higher interest rates than rich people.) This isn’t “insuring” against a greater risk – this is CREATING the risk in the first place. The company took advantage of this woman – they knew or should have known that she was overextended. After all, it’s their JOB to evaluate credit risks, right? So why did they give her the final loan in the first place?

Well… to make money off of her, class! Duh! They didn’t care if her kids went hugry as long as they were milking her for every cent they could get. They had a responsibility to say “no” to a loan they knew was over the top, but they didn’t. The judge rightly decided they had done their best to fleece this woman, ignored sound calculations showing she already had too much debt, and acted in a predatory manner. Go judge!

And lastly, on worker compensation insurance, Lott says: American workers who faced the average occupational exposure to carcinogenic hazards…included a “risk premium;” these higher wages over their lives totaled over $185.000 in today’s dollars. (p47) Ok, let’s see. The vast majority of factory workers in this country (you remember, back when we had factories) started out of high school and worked until retirement. So let’s just say they bummed around for a couple of years and then started work when they were 20 years old. The retirement age is now 67.5, but just for good measure let’s round up to 70, because we all know medicare eligibility is going to be raised to that age sooner or later. So over a person’s “lifetime” of earnings, that great “premium” only works out to about $3000 per year –about $250 per month. Ummmm, cancer costs way more than that to you and your family, class.

I want to revisit quickly something from the Introduction, namely footnote #6. (Yes, I read endnotes. They are often good sources of articles and books to read.) This note says in a gallup pole, only 14% of respondents rated the honesty and ethical standards of congressmen as “high” or “very high.” …while business executives registered at 18%. Now, “the market” is everybody’s perception of what’s going on in the world. The poll shows clearly that big business leaders and congressment are considered highly unethical and dishonest by “the market.” Class, in free market economics, everybody IS “the market.” And since “the market” decides the value of things based on data, how can everybody be wrong, as Lott implies? The market is always right, isn’t it? You can’t have it both ways. Either the market has determined that big businessmen are greedy slimeballs, or everybody’s wrong. Pick one.

In the footnotes for chapter one, I’d like to draw your attention to #11. It says that the gasoline and oil controls discussed here, first imposed on August 15, 1971 were not removed until almost ten years later, on January 28, 1981. And yet there was no real shortage of gasoline or petroleum products after the embargo was lifted, was there? And gas and oil companies weren’t dropping left and right, were they? No? So what was the problem? Oh, yeah, profit. They made less profit than they would have otherwise. How terrible!

In footnote #19, Lott talks about the price of seltzer water verses that of soda (cola, pop, or whatever your area calls it). When I read this, I thought to myself that I really don’t have any idea what the comparative prices are in my current locality, because I’m probably the only Jewish person on the planet who hates seltzer – flavored or unflavored. (Ok, wait – I actually like the taste of Alka-seltzer, but there must be something else in those tablets.) Then it hit me… oh, yeah. The price of seltzer water is consistently higher than soda because WASPs don’t drink seltzer, at least not daily - they don’t drink it like pop. The price is higher because the perceived income level of the clientelle is higher. (Most orthodox families are actually quite cash-strapped.) It has nothing whatsoever to do with production costs. It’s more like economic racism.

Concerning footnote #28, my thought was that most people just buy regular or just by premium, and they don’t really notice or care about the spread between the two. I do my own form of dollar cost averaging when it comes to buying gasoline – I just buy twelve or fifteen dollars at a time and no more. I recommend this strategy, because the price of gas is liable to be very volatile for the next couple of years, as the trendline creeps permanently up. (This is the “undulating plateau” the oil analysts talk about.)

And finally, footnote #32 regarding Standard Oil. My dispute with Standard Oil is not that they bought up all the smaller oil firms. This is just “free market capitalism” at work, and there is some justification for economies of scale (to a point). My problem with Standard Oil is that they bought up all of the electric city streetcar and electric trolley systems and dismantled them. This has been extremely harmful to the American people, and it was done for pure spite and profit. No thought of the future welfare of the people crossed their minds. It is unethical to force people into a monopoly situation, for transportation fuels or anything else, which is what they did. And in fact, they still do it. Who owns most of the patents for “alternative energy” technology? And who will sit on them until the very last possible minute, until they have bled the gas market dry and made every single cent they can off of their oil processing infrastructure? That’s just free market capitalism, you say. Cartels have every "right" to eliminate their competition, even if it hurts America’s long term viability, according to Lott and his cronies. And I reply: I hope you remember that later, when you’re the one who can’t get to work and lives five miles from the nearest grocery store.

Happy motoring, class!

4 comments:

John Lott said...

First, let me say thanks for taking the time to read the book. That said, however, I took great pains to argue that oil companies did not do what they did out of altruism. The point was that they aleveated the extent of future scarcity by taking gasoline from when it was relatively plentiful prior to the storm, storing it, and making it available when little gas was available after the storm. The made it so prices did not rise as much as they otherwise would have gone up after the storm, but they did this because they were making money doing it. Sorry, but I didn't have time to go past that point.

John Lott

Ahavah bat Sarah said...

Dear Dr. Lott,

Allow me to say I am extremely flattered that you have taken the time to personally read some of my blog. I know you must be very busy. So thank you so very much for your time and energy.

I'm guessing, though, that whomever found my blog and recommended it to you didn't really read about me or read too much of the rest of the blog, because economics is, admittedly, only my armchair hobby. My degree is in philosophy, which is why there is so much emphasis in my comments concerning the morality, ethics, and worldview of "free market economics". And I am neither a communist nor a liberal - my "socialist tendencies" extend no farther than utilities (basic necessities of life in the 21st century). Makes of widgets, whatnots, and do-dads can duke it out all they want. I am registered Republican voter. Let their companies live or die by the market - but don't let PEOPLE live or die by it.

Now, to get to your point: The oil companies act to make profit, and it is hardly in their best interest to "make sure" gas isn't "more expensive than it would be" after any disaster. Surely you can see that? Their incentive is strictly profit, not price to the consumer nor availability. If I recall correctly there were news stories during and after Katrina showing that most gas stations did in fact run out of gas. And of course they would - regardless of how much they raised prices to "help defray demand" people were still ordered to evacuate and most were inclined to obey. How could they "reduce" their demand for gas in that situation? It seems plain they couldn't. They were just another captive audience at the mercy of the oil cartel, who raised prices because they COULD, not because they SHOULD.

Shalom.

John Lott said...

Thanks, Shalom.

1) I think that altruism is important. But if you want to be altruistic, please be altruistic either through donantions or if you really don't think that people can buy enough gas to get 20 to 30 miles inland to avoid the storm, have the government help them out, just don't force the companies to pay for your altruism. Eliminating their profits means that they won't have a sufficient incentive to store gasoline for when disasters like Katrina hit.

2) Suppose that the damage from Hurricane Katrina was so much worse than people expected so that the gasoline stations did run out of gas. The point is still the same. At least the desire to make profits caused the gas companies to take some gas from before the storm when it was relative plentiful and store it for after the storm. The higher prices after the storm if they didn't store enough would create profits to rush new supplies to the area even more quickly than if the prices were not allowed to rise.

Ahavah bat Sarah said...

Eliminating profits?

The oil companies could have donated an entire tank of gas to everyone in the state of Louisiana and not put a dent in their profits, which were billions-with-a-B for EACH INDIVIDUAL COMPANY. BP alone, where we usually buy our gas, made 6.6 Billion in profit in 2006. I think they could have spared some gas; ditto all the other companies.

And in case you didn't know it, I believe some 40% of the population of New Orleans didn't have enough gas or money to evacuate - that's why they were stuck in their homes or at neighborhood shelters of at the super dome. These people were at or below the poverty line.

Also those "stores" of gas didn't do the people of New Orleans or the other areas hit by the hurricane the foggiest bit of good - since the power was out for months, there was no way to run the gas pumps, now was there? No one to even man the gas stations, even. How did this help them, exactly?

The people NOT in the hurricane area, of course, were never in any danger of running out of gas in the first place - so, basically, this great tactic benefited exactly no one (except the oil companies) and didn't reduce demand for gasoline in the area one bit. Only powerlessness and depopulation did that.