Declaring a state of stupidity

Pilot: VA Dems call for State of Emergency

Sometimes the little devil that sits on my left shoulder has a clever idea.

VA Dems want Gov Youngkin to declare a State of Emergency over gasoline prices so the State’s Anti-Price Gouging law would be in effect. During a State of Emergency, merchants can be fined and even jailed for charging the poorly defined “unconscionable price” for necessary goods like gasoline.

The little devil wants him to give them what they want to teach a lesson.

Gasoline stations use “last in, first out” accounting in setting prices. That way they can afford to replace the gas they sell. But gasoline bought earlier by the merchant was less expensive so during the rising price phase of a spike, the profit margin based on ‘first in, first out’ would be enough to make the “unconscionable price” definition.

So, merchants will predictably sell what they have and then shut down, at least long enough to establish a new base, rather than find themselves on front of a jury trying to explain accounting conventions. Instead of expensive gas, we will have no gas.

The angel on the other shoulder hopes Youngkin will refuse and save the Democrats from their own stupidity, but…

28 thoughts on “Declaring a state of stupidity

  1. Uh, nobody would call it an “unconscionable price” if service stations charge a reasonable and customary mark-up over their cost of replacing the product they sell. Presumably, the administration of the proposed emergency order would be in the hands of the governor. I am sure that he and his appointees understand LIFO vis FIFO accounting and would sensitive to the point you make.

    By the way, your not approving of a proposal is not the definition of “stupidity.” In this case there are rational arguments to be made pro and con.

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  2. RE: “The little devil wants him to give them what they want to teach a lesson.”

    You’re saying that a predictable consequence of state-of-emergency prince controls would be gas going from unaffordable to unavailable. I’m with you on the logic, but either way Napoleon nods.

    To many, unaffordable gas might as well be unavailable and even to those who can pay higher gas prices that will mean other things they may want will become unobtainable.

    There is no way to save Democrats from their own stupidty. Opportunity cost is a cruel teacher.

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  3. Well two things come to mind. First, at least we don’t live on the west coast where the Democrat induced excessive taxation and emissions standards makes gas upwards of over $2 a gallon more than we pay and second I just made a REALLY nice return on selling my Chevron stock.

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  4. “his appointees understand LIFO vis FIFO accounting”

    Gasoline, being a liquid, LIFO and FIFO accounting generally does not apply with respect to business management but may possibly apply in income tax considerations. Average cost inventory accounting is more prevalent for the end supplier from a business perspective, especially because oil pricing is extremely volatile.

    Having worked with major oil suppliers in the world, they want to track oil pricing by the minute, or even more often, in order to avoid the pitfalls of this volatility. It is much like volatility that can occur in currency translation. The big oil companies often bill end suppliers based on the price at time of billing and not when the purchase is initiated nor when delivery is made. Although I found some big companies have billing programs that bill the higher of the price upon delivery or the price at billing.

    While there is no doubt some end suppliers conduct price gouging, probably because they are poor businessmen or they are greedy. But the average filling station is just trying not to incur a surprise loss. Their margin on gasoline sales is not very high; their profit comes from volume sales. So who is the real initiator of price gouging; the big oil companies or the small businessman?

    Bobrsmith probably made a good decision to sell his Chevron stock and take the profit. From an investing perspective a rule of thumb is prepare to sell oil company stocks when the price of a barrel exceeds $100 and to buy oil stocks when the price is below $70 or lower. I am watching the oil market and preparing to sell myself.

    As for whether any government appointees really understand the nature of the oil market; I doubt it. At best they likely only know the aforementioned rule of thumb.

    Most of the participants in this forum are familiar with gas price wars of the past. I think it may be wisest to look at the price gas at the Texaco, 7-11, or Chevron at your local street corners and buy gas from the store with the lowest price.

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    1. RE: “So who is the real initiator of price gouging; the big oil companies or the small businessman?”

      I’d say that’s the issue in a nutshell. Using “emergency powers” to address it would be like using a shotgun to feed a kitten.

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  5. No matter what we do, the price of oil is still based on its value as a global commodity.

    We are on track to produce more than pre-pandemic amounts, estimates of 12.4 million bbl/day by 2023. More leases have been issued than in the first year of the last administration. But if global prices go up, as they have, so do ours no matter how much we drill.

    Effectively, the oil isn’t “ours”. It is the oil companies’ product and they are multinationals.

    The companies are making record profits, but they also took heavy losses in 2020. But until Putin decides to join the rest of the world economy again, prices will probably keep rising.

    Still, the party in power will take the blame. That’s politics.

    Liked by 2 people

    1. RE: “But until Putin decides to join the rest of the world economy again, prices will probably keep rising.”

      I doubt that Putin has anything to do with our inflation. I’m more inclined to blame U.S. monetary policy for the inflation we are seeing: Too much money chasing too few goods.

      On the other hand, our inflation problem, because it is systemic, may be one of the reasons Putin invaded Ukraine at this time.

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  6. If profits stay at the same astronomical levels, it is the oil companies that are doing the gouging. Why is it the American consumer has to pay more when the oil companies are raking in the dough and not suffering or sacrificing?

    Just a thought.

    Liked by 1 person

        1. Well, considering the costs to get the oil, what would you think the profits should be?

          The profit margins for oil companies are not aout of line with the risks involved.

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          1. Profits are profits, That includes the cost of exploration, drilling, people, and transportation and anything else that needs paid for to get the product to market. Anything AFTER those costs is profits.

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          2. If gas companies would lower her profits a bit to allow the consumer a break, would that be a good thing or bad thing? They can afford to do so without affecting their shareholders any more than they are being affected by economies turning away from fossil fuels.

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          3. The average profit margin for oil companies id 6.8%. If they gave up half of it, you’d hardly notice the difference, but their stock would be worthless as there are far less risky investments paying 5%/

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          4. RE: “Profits are profits…”

            Yes, and profits are a good thing. If you are a worker, it is better for you to work for a profitable company than an unprofitable one.

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          5. If the profits were shared with the workers, then I would agree. THe profits go straight to the C-suites and the stockholders. THere may be some minimal benefit to the workers, but it’s the elites that get the pot of gold.

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  7. By the way, Maryland just suspended its gasoline tax for 30 days. And it was a bi-partisan agreement. Nice to see that Larry Hogan has stayed true to his conservative roots while working with those on the other side of the aisle.

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    1. You think the VA Dems would agree?

      Not just the gasoline tax at the pump, but the upstream taxes there to meet RGGI goals?

      After all, they passed those taxes for the purpose of making gasoline too expensive to make electric cars and mass transit more attractive.

      But if they’ll go along, sure it would be a good idea.

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      1. …”they passed those taxes for the purpose of making gasoline too expensive to make electric cars and mass transit more attractive.” Uh, NO!

        Before the federal infrastructure plan was passed, how was VA supposed to pay for all of the work, both repair and new roads needed?

        This is about gas taxes and potential price gouging and you are trying to bring in your disdain for RGGI funding which goes towards the resiliency efforts you know are needed.

        And if Youngkin is all about protecting the citizens of VA, then why not declare an SOE to prevent actual gouging, or allowing those who DO practice it to be punished? He has declared that there might be things our children have to be protected from. Ya know, just in case. 😇

        Liked by 1 person

        1. The price gouging laws are there for use in the case of a disaster.

          If you are willing to concede that Democrats being in control is a disaster than I guess a State of Emergency would be appropriate. However, low Democrats poll numbers do not make an emergency.

          Part of the RGGI is taxing fossil fuels to raise the price and decrease use.

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          1. …”taxing fossil fuels”

            Coal and natural gas. There has been no increase in gas taxes at the pump related to that.

            So you are blaming Biden and the Democrats for the pandemic now? Trump was in office for the beginning of that.

            If you don’t see the relationship between gas production driven down by lack of demand, you are not as smart about economics as you think you are. You just want to blame Democrats for everything.

            The Democrats are still trying to clean up the several messes left by TFG. And remember that elephant’s crap is a lot bigger than donkey..

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