15 September 2008

Government gas price fixing explained

Well, sort of.

There's no point in having a provincial government price fixing analyst try and explain why the system of government price fixing for oil works. 

He only knows how it works.

Sort of.

Something missed in the interview with CBC this morning:  if David Hillier and his colleagues use spot pricing to set fix the price of gas in Newfoundland and Labrador, then what about companies that bought futures last at considerably less than the current spot price price?

We really didn't get that in his talk about supply and demand (an Economics 101 example with lumber).

There may be good reason for the current spike in prices.  The major problem seems to be that consumers in Newfoundland and Labrador won't get the advantage of lower prices which will comeas Gulf coast refineries come back on stream.  Won't get it like we haven't seen drops lately when 25% of refining capacity wasn't shut down but, all the same, gas prices didn't meet whatever triggers there are in arcane formula the gas price fixers use that would actually send gas prices down.

You see, market forces -  supply and demand and simple competition in the marketplace  - will move prices up and down on their own. It's Economics 101.

We don't need a bureaucratic apparatus - way too cumbersome, undoubtedly unwieldy, and completely inscrutable - to fix gas prices in the marketplace.

That's more like State Planning 101 from 1920s Russia.  We all know how effective that model of economics worked.

Well, that is if the "we" is consumers.

We consumers can get along just fine without government gas price fixing.

This government gas price fixing  scheme makes you wonder who the "we" is the this thing is set up for.

Makes you wonder about that almost more than why it is that the cabinet minister responsible for the price fixing scheme isn't on the air defending it.

Maybe we can ask the guy who introduced this price fixing scam to the province in the first place.