For several days in the aftermath of Ike, several states were still experiencing gas shortages.  Motorists would drive by gas stations that were simply closed for business, with plastic bags over the pump handles.  And when motorists did manage to find a station selling gas, they often had to wait in lines of 20 or more cars, spilling out into the road and causing traffic jams.  According to USA Today:

The crunch is especially severe in the Southeast and Mid-Atlantic, which get their gas through pipelines from the Gulf region. It’s largely hitting stations and convenience stores not affiliated with big brands such as ExxonMobil.
…
In South Carolina, many stations are running dry, though the situation improved Wednesday as oil companies started drawing from gasoline reserves, says Michael Fields, head of the state Petroleum Marketers Association. Premium gasoline is especially scarce. Previously, he says, most stations could not even get regular.

“We aren’t seeing quite as many bags on the nozzles,” he says.

About half of Mapco’s 500 stations in the Southeast had no gasoline after Ike hit, says company spokeswoman Paula Lovell. Many were still dry Wednesday, but supplies have increased, she says.

In Virginia, about 15% of stations have no gas, though distributors are scrounging in other states for fuel. “People are going to Maryland, Pennsylvania and all the border states to pick up product,” says Mike O’Connor, head of the state Petroleum, Convenience and Grocery Association.

And yet, what the USAToday story failed to mention is that the shortages were the fault of price controls – either explicit or implicit.  Specifically, gas retailers had been warned in several states not to “gouge” their customers.  Gas retailers in Tennessee knew they had to tread carefully, as an AM radio news report and public service announcement made clear:

Complaints of high gas prices and gouging have gotten the attention of Tennessee officials. Now, they are going after retailers who illegally raise pump prices.

The State Department of Commerce and Insurance said it has received more than 750 price gouging complaints statewide.
…
If you suspect gas gouging and want to report it to the state you can call the division of consumer affairs at 1-800-342-xxxx.

Drivers in Missouri were also “protected” from expensive—but available!—gas by their governor, according to this news article:

Missouri Gov. Matt Blunt directed the Attorney General’s office to investigate gasoline suppliers and stations for potential evidence of price gouging in response to Hurricane Ike, the state announced on Saturday.

“I have directed Attorney General Jay Nixon to investigate concerns about potential price gouging in the wake of Hurricane Ike,” Gov. Blunt said in a statement. “We have seen price gouging in our state before, and I will not permit businesses to reap unjustified profits by using a natural disaster as an excuse to gouge Missouri families who are already dealing with high prices at the pump.”

Not to be outdone, Georgia’s governor moved to hold down market prices as well, according to this official press release from September 12:

Governor Sonny Perdue signed an Executive Order today enacting Georgia’s price gouging statute to protect Georgia consumers from unlawful increases in gas prices and other products.

“The threat of Hurricane Ike has disrupted the production of distribution of gasoline, which will have an effect on prices,” said Governor Sonny Perdue. “However, we expect the prices that Georgians pay at the pump to be in line with the prices retailers are paying. We will not tolerate retailers taking advantage of Georgians during a time of emergency.”

Citizens are asked to report any suspected incidences of price gouging to the Governor’s Office of Consumer Affairs at (404) 651-xxxx or (800) 869-xxxx.

North Carolina joined the party too, according to this report:

Governor Mike Easley declared a state of “abnormal market disruption” under North Carolina law, which charges the Attorney General with enforcing the price gouging statute.

Easley issued the following statement concerning the situation:
“As a result of Hurricanes Gustav and Ike, oil refineries in Texas and Louisiana have temporarily interrupted some gasoline supplies to the pipelines that serve North Carolina…Today I have declared a state of abnormal market disruption under North Carolina law and charged the Attorney General with enforcing the price gouging statute. This statute prohibits the charging of prices that are unreasonably excessive under the circumstances.

And the harshest words came from Florida’s governor, as this story details:

Florida’s Gov. Charlie Crist has strong words for gas station owners after receiving more than 2,000 complaints of price gouging on gasoline across the state.

When news broke that Hurricane Ike could affect the oil refineries in Texas, some gas stations responded by raising prices.

“Some people are so damn greedy,” Crist said. “They want to take financial advantage of that.”

In the Tallahassee area, some stations were charging $5 a gallon.

“It’s outrageous. Enough is enough. We’re not going to take it anymore,” Crist said.

Four gas companies are now under investigation for raising their prices, Flying J, Dodge’s Gas Stores, Valero and Pilot Travel Centers.
…
The Florida Attorney General’s Office said it has [referred] more than 1,800 complaints for review by its Economic Crimes Division. …

Meanwhile, state agriculture officials said they will serve 16 gas companies with subpoenas. Four more would be served by the Attorney General’s Office.

Businesses that engage in price gouging could face fines of up to $1,000 per violation.

If you suspect price gouging at a gas station, the state wants to hear from you. Call 800-HELPFLA…

Interfering With Market Prices Creates Shortages

The market price balances available supply with consumer demand.  Hurricane Ike disrupted the supply of refined gasoline; there were fewer gallons to go around.  The drop in supply should have led to an increase in price, because only at a higher price would consumers want to restrict their total purchases to the number of gallons Ike had spared.  But when state attorneys general and other officials threaten retailers with “gouging” – or even if there is an implicit threat or fear of massive stigma – then the retailers keep their prices at a low price, which is now unrealistic.

At artificially low prices, consumers want to buy more gallons of gasoline than producers want to sell.  Specifically, what happened in this case is that wholesale prices spiked, eating away the profit margin of independent retailers.  Because anti-price gouging laws forbade them from raising their own prices just as sharply, some retailers decided it was better to shut down, rather than lose money with every gallon they sell.

Market prices serve an important function.  Correct market prices transmit real information about supply and demand.  When the government interferes with these prices, unintended consequences always emerge.  In this case, politicians forced their citizens to wait in long lines at the pump.  What motorists may have gained in the form of lower prices is more than offset by the uncertainty (“Where can I get gas?”) and time wasted in line.

There are other effects too.  The government’s handling of the credit crunch seems to have scared investors headlong into commodities such as gold, silver, and even oil.  So oil prices are rising because of a real demand by investors, as well as the declining exchange value of the dollar against other currencies.  This is a one-two punch from the feds to consumers.

After weeks and weeks on the decline, oil prices shot up more than $15 per barrel today after the markets pondered the weekend news of the government’s bailout plans.  At the same time, the euro rose more than 2.5 percent against the dollar, and the S&P 500 fell more than 3 percent.  It seems clear that investors are running from sophisticated assets and are returning to the basics: commodities.  In times of uncertainty, investors can always rely on an ounce of gold, or a barrel of oil.

According to one respected analyst:

“There is no logical reason as to what we are seeing now,” Stephen Schord, editor of The Schork Report told CNBC. “My biggest fear now is that we’re right back to where we were last September.”

“The Fed is signaling that they’re going to make money cheap again, cheap money is going to start piling into commodities—this is my biggest fear and it looks like this fear is coming into reality right now. We could be back on the road to what could be $150 crude oil, regardless of the supply-demand fundamentals.”

In light of the increasing cost of imported oil, and the growing burden on the U.S. Treasury, the case for opening up federal lands to oil and natural gas drilling becomes all the more compelling.  Additional supplies of domestic energy through new leasing and development would lift the U.S. dollar and yield billions in additional state and federal revenues.

This bill, like the recent “Gang of Ten” proposal, does almost nothing to increase domestic energy production. Instead, it offers more of the same government imposed mandates that promote inefficient or untested types of energy.

The following is an analysis of the most recently available proposal:

Title 1—Federal Oil and Gas Leasing

While the authors may seek to open up additional areas on the outer continental shelf (OCS) to new exploration and development, the bill permanently locks up the most oil and gas-rich areas of the OCS. For example, this would permanently ban about 97 percent of the undersea oil lying off the coast of California.

Subtitle A—Outer Continental Shelf Oil and Gas Leasing

• Permanently institutes a ban on new offshore development out to 50 miles. [Sec. 102]
  • The vast majority of undiscovered oil and gas reserves are projected to be between the coast and 50 miles offshore. Instead of allowing the production of great quantities of oil and gas, this section locks up billions of barrels of oil and trillions of cubic feet of natural gas.

• Permits leasing only between 50 and 100 miles offshore only if the adjacent state legislature ‘opts-in’ to allow leasing off its coastline. [Sec. 102]
  • Section 102 fails to provide royalty revenue sharing for the states near new offshore development. States will not have any incentive to allow oil development if there is not revenue sharing from the actual production.

• Fails to open new, energy rich areas for exploration and development in the eastern Gulf of Mexico. These areas in the Gulf could start producing oil and gas very quickly because they are close to existing infrastructure.

• Creates a new duty for the Secretary of the Interior, notwithstanding all current environmental laws, to make sure any activity “provides for the protection of the coastal environment.” [Sec. 104]
  • Offshore exploration and development is already subject to a large number of environmental laws such as the Marine Mammal Protection Act, the Coastal Zone Management Act, the Endangered Species Act, and the Magnuson-Stevens Fishery Conservation and Management Act.
  • Because this new language is not defined in the bill nor the U.S. Code, it is an invitation for environmental groups to sue so courts will determine what it means for the Secretary to “provide for the protection of the environment.” [Sec. 104] This will only slow new offshore development.

Subtitle B—Diligent Development of Federal Oil and Gas Leases

• Requires oil and natural gas leaseholders to “diligently develop” the leases they hold. [Sec. 121]
  • The bill does not explain how this would change existing law and existing requirements because existing law already requires leaseholders to develop leases or give them back to the United States.
  • This subtitle is a reference to the myth that there is 68 million acres with economical deposits that are leased by oil and gas production that oil companies are not using. More information on that myth is available here.

Subtitle F—National Petroleum Reserve in Alaska

• Accelerates leases sales on National Petroleum Reserve—Alaska (NPR-A). [Sec. 162].
  • NPR-A is estimated to contain 10.6 billion barrels of oil but those reserves are spread out over NPR-A’s 23 million acres. This bill does not open up nearby ANWR. ANWR also holds more than 10 billion barrels of oil, but ANWR’s resources can be accessed from a very small area. More information about the NPR-A and ANWR is available here.
  • The bill states that the Secretary must offer leasing in an “environmentally responsible” manner. This section does not define “environmentally responsible” potentially allowing environmental groups to sue to define what this means.

• Requires the President to facilitate construction of a natural gas pipeline from Alaska with unionized labor [Sec. 165-166]
• Bans the export of Alaskan oil. [Sec. 166]

Subtitle G—Oil Shale

There are more hydrocarbon resources in oil shale in the western United States than there are oil reserves in Saudi Arabia. The United States Geological Survey (USGS) has estimated the U.S. has 2 trillion barrels of resource of which 556 billion barrels is recoverable. A better approach would be to remove all impediments to oil shale research and development.

• Allows oil shale leasing for research, development, or production of oil shale only if states specifically pass a law permitting oil shale leasing within their borders. [Sec. 171]
  • This is only a half-measure to developing oil shale. Developing oil shale is expensive and requires experimentation to improve oil shale extraction technology. It is currently not necessary to get state approval for experimental projects, but this bill creates additional hurdles for experimental projects—the type of projects necessary to one day utilize this vast resource.

Title II—Consumer Energy Supply

• Sells 70 million barrels of light grade crude oil from the Strategic Petroleum Reserve and buys heavy grade crude. [Sec. 201]
• It is unlikely this scheme will have any effect on gasoline prices, as evidenced by this information here.

Title III—Public Transportation

From 1993 to 2003 capital expenditures for public transit grew by 100 percent, but transit ridership only grew by 13 percent. By that measure, federal subsidies for public transportation has been a bad investment, but it seems measure throws good money after bad.

• Spends $100 million in new federal spending for public transportation. [Sec. 303]
• Establishes a new pilot program for contracting vanpools. [Sec. 306]
• Authorizes $1 million in spending for public transportation advertising. [Sec. 307]

Title IV—Greater Energy Efficiency in Building Codes

This title usurps the authority to set building codes from state and local governments and institutes new national building codes standards in the name of energy efficiency. The likely outcome of this title will be an increase in the cost of new construction and renovation of buildings in the United States.

• Requires states to revise their building codes to comply with certain energy efficiency standards. [Sec. 401]
• Increases energy efficiency standards for building renovations.

Title V—Federal Renewable Portfolio Standard

This title requires electricity providers (except for state or local governments) to provide 15 percent of their electricity from renewable sources, excluding hydropower, by 2020. Currently, less than 5 percent of our electricity is generated by renewable sources according to the definition in this title. Renewable electricity mandates increase the price of electricity to consumers by forcing them to use more expensive and less efficient sources of electricity.

Title VI—Green Resources for Energy Efficient Neighborhoods

This title contains and myriad of subsidies and directives that interferes with housing markets in the name of “energy efficiency.”

• Creates new subsidies for people who participate in HUD programs to implement energy efficiency programs. [Sec. 603]
• Authorizes $50 million in pilot programs for more energy efficient multi-family dwellings. [Sec. 605]
• Encourages Fannie Mae and Freddie Mac to favor energy efficient mortgages. [Sec. 606]
• Establishes a “duty to serve underserved markets” regarding energy- and location-efficient mortgages for “very low-, low-, and moderate-income families.” [Sec. 607].
• Authorizes $5 million for advertisements about energy efficient mortgages. [Sec. 609]
• Authorizes $10 million for “increasing sustainable low-income community development capacity.” [Sec. 617]
• Creates new requirements for state certified appraisers to consider the value of energy-efficiency features. [Sec. 620]
• Authorizes a $5 million fund for loans to states and tribes to carry out renewable energy sources activities. [Sec. 623]

Title VII—Miscellaneous Provisions

• Mandates each automotive fueling station owned by a major integrated oil company to have at least 1 alternative fuel pump. This section assesses a $100,000 fine for each gas station not in compliance. [Sec. 701]
• While section 701 appears to greatly increase the amount of alternative fuel pumps, this is not true. Only 3 percent of gas stations are owned by major oil companies.
• Authorizes $25 million in funding per year for a “National Energy Center for Excellence” at two universities. [Sec. 702]

Title VIII—Energy Tax Incentives

This final title is a hodge-podge of additional subsidies for politically-preferred and economically expensive energy projects, partially paid for by a major tax increase on oil companies. A recent IER analysis found that this could cost America over half a million jobs and tens of billions in lost household income and almost $200 billion in total economic output.

• Extends renewable energy tax credits. [Sec. 801]
• Creates new tax credits for “marine renewables.” [Sec. 802]
• Adds credits for pet energy projects. [Sec. 803]
• Extends credits for residential renewable energy projects. [Sec. 804]
• Authorizes $2.25 billion in tax credits integrated gas and combined cycle projects and advanced coal-based generation. [Sec. 811]
• Increases tax credits for coal gasification projects by $150 million. [Sec. 812]
• Increases the coal excise tax. [Sec. 813]
• Commissions the National Academy of Science to devise a taxation scheme to tax greenhouse gases [Sec. 815]
• Increasing subsidies for biodiesel and renewable diesel [Sec. 822]
• Creates new subsidies for plug-in automobiles [Sec. 824]
• Implements tax breaks for heavy duty trucks with idling reduction devices and thick insulation [Sec. 825]
• Implements special payroll tax breaks for governments around New York City [Sec. 826]
• Institutes special benefits for bicycle commuters [Sec. 827]
• Increases tax credits for alternative fuel vehicles [Sec. 828]
• Subsidizes loans for natural gas refueling at gasoline stations [Sec. 829]
• Subsidizes bonds for local governments to implement pet “green” projects [Sec. 841]
• Extends credits for biomass heating [Sec. 842]
• Extends credits for energy efficient commercial buildings [Sec. 843]
• Subsidizes for energy efficient appliances [Sec. 844]
• Institutes tax breaks for smart meters and smart grid systems [Sec. 845]
• Extends tax breaks for green buildings [Sec. 846]
• Retains the Gang of Ten’s tax increases on oil companies by ending section 199 credits for oil companies [Sec. 851]

National Association of Convenience and Petroleum Retailing, Who Sells Gasoline in the United States?, http://64.233.169.104/search?q=cache:3SO5I9pKI18J:cstorecentral.com/NR/rdonlyres/e4byydgy5rac32l3xw2ajs53o2jolqw73vsi6roq5dag2vh2hzrx4flprwtlvzgwcjukq434wwsesxqwzspln4ynzxh/Who%2BSells%2BGasoline%2Bin%2Bthe%2BUnited%2BStates.pdf+what+percentage+of+gas+stations+are+owned+by+major+integreated+oil+companies%3F&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a

If oil prices keep going down, what will happen to all the progress the United States has just made toward energy independence? Higher gas prices caused U.S. motorists to drive 12.2 billion fewer miles in June compared with a year earlier, according to the Transportation Department. This wiped out the previous five years’ worth of growth in gasoline demand, the American Petroleum Institute reports. As a result, we all enjoyed less traffic (and fewer traffic deaths), cleaner air and greater national security.

For people like the Washington Post’s editorial board, who apparently make enough money so that filling up their tanks with $4 a gallon gasoline doesn’t faze them, expensive gasoline isn’t a problem. High gasoline price keep the rest of us off the road so that the Post’s editorial board doesn’t have as much traffic to contend with.

Unlike the Post’s editorial board, we know that inexpensive transportation is a good thing. It allows us greater work opportunities, it makes it easier to take care of our families, and it gives us more entertainment options. These are the positive benefits of inexpensive transportation. Too bad the Washington Post believes that we have it too easily.

The Post concludes:

Recent experience with higher gasoline prices and lower oil consumption confirms something we have long maintained: A serious national energy policy would include a higher federal per-gallon tax on gasoline. Just a 19-cent increase in the tax, which is currently 18.4 cents a gallon, would lock in the incentives to conserve that have been lost during the past month’s price decline.

In summary, the Washington Post believes that everyone has it too easy. Taxes aren’t high enough, but if they were, the people would make the “better” decisions. Who cares that it makes our lives more difficult? Obviously not the Washington Post. In fact, that is their explicit goal.