An Erroneous Supply Chain Argument
“Silly” Arizona House Representative Republican Justin Wilmeth is making an argument for lower gasoline, etc. prices to Arizona. Justin traveled to California to ask for no cap on fuel prices at a California refinery (Arizona has no refinery). As if he does not have enough to do in AZ?
Not sure what makes him think, they will not raise prices anyway and without a cap. Justin’s main beef . . .
“If they were to lower production or supply, the prices would go up, and there’s not much we could do about that. That’s basic supply and demand economy . . . right there.”
No Justin, that is called Supply (Chain) manipulation versus Demand and an on-purpose decrease in Capacity to increase profits. Oh, you will not allow us to increase prices? We will cut back production to force a price increase. That is called Supply Chain manipulation. Something we have today in food and other supplies from industries during and after the pandemic. That is a major cause for inflation Justin.
And there is Western States Petroleum Association’s Catherine Reheis-Boyd with some head nods of their cutting production to increase prices. Catherine . . .
“If the CEC chooses to penalize refiners making revenue over a certain number that will actually incentivize less in-state gasoline supply, not more.”
What they are looking for is “increased” profits on a unit of gasoline. That is not a supply chain issue, it is called rent-taking because we can do so and where else will you go? The news story . . .
Channel 12 News, “High Arizona gas prices may have out-of-state policies to blame”
PHOENIX — If you’re driving anywhere in Arizona, you might be feeling more pain at the pump than usual. On average, Arizonans are paying 40 cents more than the national average right now. But one Arizona state representative is worried that the price could increase even more.
Arizona relies on fuel coming from out-of-state, namely Texas and California. State Rep. Justin Wilmeth, a Republican representing constituents in north Phoenix, traveled to California because he is concerned that changes there could impact Arizonans at the pump.
“We don’t have any refineries of our own, so we are reliant on your fuel, and these decisions that you make,” Wilmeth said in a public comment at a state senate oversight hearing.
The oversight hearing was about Senate Bill X1-2, the California Gas Price Gouging and Transparency Law, which was signed by California Governor Gavin Newsom in March of 2023 and took effect in June of 2023.
Wilmeth is specifically concerned with this proposal because it could cap California refineries’ profits — a concern the president of the Western States Petroleum Association has as well. Catherine Reheis-Boyd said
“If the CEC chooses to penalize refiners making revenue over a certain number that will actually incentivize less in-state gasoline supply, not more.”
Wilmeth is asking California to consider a proposal that works for the entire Southwest, not just one state. Wilmeth again . . .
“If they were to lower production or supply, the prices would go up, and there’s not much we could do about that. That’s basic supply and demand economy . . . right there.”
Steven Bradford, a Democratic state senator for California, said it is good to hear the concerns from neighboring states like Arizona. Bradford . . .
“We are not in a vacuum, that what we do in California impacts other states and sometimes the nation, and they depend on a great deal of their petroleum, their gas products from California. We need to understand that what we do will drive costs up, also in Arizona.”
No decisions have been made yet, Wilmeth said. The proposal will head to California’s other legislative body next week where it will be reviewed.
Arizona Driving and Gasoline Usage
When talking to new housing builders. Maricopa City Planning Commission VP said 60% of the new vehicles sold in Arizona are pickup trucks. Unless they overpriced EVs, these are not the most efficient vehicles to be driving. The Planning Commissioner VP was discussing driveway and garage size for parking.
If you come to AZ, prepare for the fast speeds being driven and tailgating. There is no following a posted speed limit or a reasonable 5mph over the speed limit. On state highway 347, they have been clocked at 80-90 mph in their over-tired pickup trucks. Over a 5-year period, there were vehicle collisions on a 14 mile stretch equivalent to one every other day.
Do Arizona drivers really need a larger and cheaper supply of gasoline ordo they just need to slow down and conserve?
California used to be a major oil producer. The green nuts shut that down by regulating and taxing them out of business. In the same class of stupidity as Europe shutting down gas on the supply side and reverting to coal and harvesting old growth forests for power generation.
The economics are pretty simple: refineries in Ca. now import oil from Canada and the expense has to get passed on down the chain. Likewise for the expense of punishing regulation.
Now do you know what is going to happen if a price cap is a little too close to costs? Is anybody in Ca. capable of coming up with a workable price cap? (both NO)
Mr. Price:
I think the argument I made was balanced. On the citizen side, we have a bunch of people doing unreasonable things including blowing themselves up when they crash. They know no limits. On the other side we have Western States Petroleum Association’s Catherine Reheis-Boyd actually threatening users with a decrease in production. That will really go over big with people. Want to see how Congress works when constituents get angry?
Justin Wilmeth going to California is a pretty stupid move on his part and no his argument and Catherine Reheis-Boyd argument is not how the economies work. In either case, it is an attempt to manipulate supply and pricing. They are not good at it. I am supply chain and I know how to work it on the items I was responsible for over forty years.
Did the refinery have a good and profitable year? You should be able to tell us that tidbit. Did AZ citizens driving to big-to fast-to often have a good year? They must have also as they are still selling those behemoths, driving them in a most inefficient manner, and they want cheaper prices without giving anything back to achieve such.
I am happy with my 2015 VW Passat which is capable of getting 40 miles to the gallon at 70 mph. If you want to do 80 mph fine, I will be 10 minutes behind you and burned less gasoline.
If I remember (please correct me) Canadian oil is the heavy oil which requires greater processing. There appears to be increases in OPEX and not CAPEX The importance of Canadian crude oil to refineries in the U.S. Oil from Canada supplies more than 23% of U.S. refinery feedstock, helping bolster North American energy security.
This is a pretty good article: “U.S. Oil and Gas Production Continues to Shatter Records.”
I am with you. We would entertain an article if you are up to it.
I am sure you could have made your point without the hysterical name-calling
In business school we called that ((( The Invisible Hand of the Market )))
Just as horse-less carriages replaced horse-drawn eventually we will stop guzzling gas, stop burning carbon, stop venting noxious gasses into our breathing space. We may be extinct, most likely sooner than you think, but eventually we will stop