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39 comments on Another picture that tells a story

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Sealth on September 27, 2005 - 2:37am Permalink | Subthread | Comments top
Trying to balance gas production against heating oil may be a hard call that someone is going to have to make.
Given the tendency by the current administration to prefer (or at least give lots of lip service to) free markets over government intervention, I don't see anybody making a hard call about balancing gasoline vs. heating oil production except for Adam Smith's invisible hand. Unfortunately, I think that this may lead to a situation where refineries respond to the economic incentives and don't produce enough heating oil, and thus poor people freeze to death because rich people won't stop driving their SUVs. The poor don't have much standing in the free market.
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louGrinzo on September 27, 2005 - 9:42am Permalink | Subthread | Parent | Comments top
But the poor do, in effect, have a standing in the House and the Senate, where lots of Republicans are eager to get re-elected in 2006.  If things got bad and Bush sat on his hands, the Legislative branch would take action and, if needed, pass something over a Bush veto.  It would be political suicide not to.  (Although in the interest of fairness, I have to point out that the $50B appropriation for New Orleans passed with 11 Republican House members voting against it.)

There are already Republicans who are distancing themselves from the Iraq war, including the guy who started the "Freedom Fries" idiocy.  A domestic heating emergency would have Republicans jumping ship in droves.

Now, whether the Congresscritters would actually do the right thing is another, and legitimate, question entirely.

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Descolada on September 27, 2005 - 10:02am Permalink | Subthread | Parent | Comments top
More than likely, it would indeed by the Congressman paying lip service to their constituents.  Bundled inside of any $10 billion dollar social program bill would be $20 billion in business welfare to "help encourage new growth."  

I think people need to stop and remember that neo-liberal laissez-faire is only one directional, and that our representatives only work for us enough to pretend like they respect our intelligence.

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Ben on September 27, 2005 - 5:04pm Permalink | Subthread | Parent | Comments top
Historically, poor people don't vote.  Or should I say not many of them vote.
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Jack on September 27, 2005 - 1:21pm Permalink | Subthread | Parent | Comments top
Sealth: Refineries respond to the economic incentives every year and shift production to distillates for heating oil during the fall. This year, they will do the same thing. The only difference is that the prices will be higher for both heating oil and gasoline. Demand for each determines the level of production and price for each. There is no reason to think that heating oil is less profitable than gasoline.
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fatbear on September 27, 2005 - 1:30pm Permalink | Subthread | Parent | Comments top
There is no reason to think that heating oil is less profitable than gasoline.  Yep, he's right - for instance at 12:19 today, NYMEX

Jan Heating Oil - 2.1160

Jan Gasoline - 1.9500

seems to be some money in Heating Oil....

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Sealth on September 27, 2005 - 1:35pm Permalink | Subthread | Parent | Comments top
Yes, but if prices are high enough that demand destruction (a euphemism for "the poor can do without") is occuring in both gasoline and heating oil (a distinct possibility this year), then not enough heating oil will be produced to allow everybody to adequately heat their homes; thus, the rich will continue to drive SUVs while the poor freeze to death.

In another part of this thread, somebody pointed out that Congress could dictate to refineries that they have to produce enough heating oil to supply all residential heating requirements for the winter, even if it cuts into their bottom line (because the rich are willing to pay more for gasoline than the poor are able to pay for heating oil). My question is whether or not Congress will be able to muster the political will to do so (after fending off accusations of being communists) in time to really make a difference this winter.

This all may be moot because we are not currently short, and with any luck (and perhaps a mild winter) we can avoid a heating crisis this year.

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Jack on September 27, 2005 - 3:15pm Permalink | Subthread | Parent | Comments top
If heating oil prices stay anywhere near the level cited by Fatbear, refineries will shift as much of their production as possible to take advantage of the it. Heatng oil prices higher than gasoline mean great margins for refiners. However, their equipment will be the main constraint on how far they can go.  With a given set of refining equipment, there is a fixed range of gasoline/distillate production levels.  The government can't order refineries to produce more than they can. However, you are right that the poor may not be able to bear the increased costs created by a product shortfall.
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