Friday, January 8, 2010

R.I.P.: "Supply and Demand."


If Wisconsin energy companies are any indicator of where the market is heading nationwide, then energy prices will go up no matter how energy efficient we become. And that's because the decreased use of oil and gas will be cutting into profits, forcing companies to charge more. Crazy isn't it?

We've also seen the excuse, "supply and demand," become completely irrelevant. The rules have now changed. But you won't see Republican politicians change their rhetoric, as demonstrated by Sarah Palin's proud chant, "drill baby drill." In the reality based world, just the opposite is taking place:

AP-Just seven days into the new year, pump prices have surged past 2009 highs as winter storms and a flood of speculative money send oil prices higher.

The run-up in gasoline prices has had nothing to do with demand for gasoline that is so weak that refiners have been shutting down operations and scaling back others. The government said Wednesday that refineries operated at just 79.9 percent capacity for the week ended Friday, well below historical averages. In fact, winter storms have driven gasoline demand down sharply because people have been unable to drive.

Refiners are paying high prices for the crude that they turn into fuel, but say demand for fuel is so low that they cannot recoup those costs when they bring their products to the market.

The warning here is simple; If Republicans remain clueless about how irrelevant their argument is now, any energy proposal from them will have huge economic consequences, and do nothing to curb the prices consumers will end up paying. Any changes they enact will only have the appearance of having done something, leaving families poorer in the end.

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