Friday, April 28, 2006

Say It With Me: Supply and Demand

Charles Krauthammer:
"Supply is down. Start with supply disruptions in Nigeria, decreased production in Iraq, and the continuing loss of 5 percent of our national refining capacity because of damage from hurricanes Katrina and Rita. Add to that the mischief of idiotic new regulations. Last year's energy bill mandates arbitrary increases in blended ethanol use that so exceed current ethanol production that it is causing gasoline shortages and therefore huge price spikes.

Why don't we import the missing ethanol? Brazil makes a ton of it, and very cheaply. Answer: the Iowa caucuses. Iowa grows corn and chooses presidents. So we have a ridiculously high 54-cent ethanol tariff and ethanol shortages."
I think his commentary is very helpful in putting the oil prices in perspective. The ethanol tariff is something I have not discovered before. Very interesting observation. But, who would ever think that Congress would take a consistent approach to law and policy?

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