History Repeats: Gas Stations Shutting Pumps in CA – Prices Surge – Running Out of Gas at Pumps – Coming to a State Near You? Analysis

Pumps closed in CA - image from the Northridgepatch.com

During the period from 1979 to1980 one saw the price of gas surge, gas stations run out of regular then premium, shutting pumps, gas rationing and after a stabilization, (government controls) the price of gas surged in 1980 and lines still cropped up in urban areas (The End of Happy Motoring, Sarasota Herald Tribune. This added to the nation’s woes as high unemployment, coupled with high inflation and high interest rates on loans, resulted in what became known as the “misery index. There were fingers pointed in every direction, from supply and demand (as prices at the pumps rose, motorists could no longer afford to fill their tanks, refineries slowed or ceased production, shortages began to occur, first on the West Coast, spreading east to encompass the entire nation.) to government regulation and oversight of gas rationing.

Fast forward: California is running out of gasoline and pumps are shutting down. From the Contra Costra Times 10/4/2012 Headline: “Gas shortage shutters Costco stations, prices skyrocket” - “California had its largest single-day gasoline price spike in almost five years Thursday, leading to long lines at the pump, gas shortages and even station closures. According to the Times, the price of regular unleaded is at $5.79 for those paying with a credit card, and a dime less for those paying cash. In addition the paper cites a multi-faceted problem causing high fuel prices and lack of available fuel as part regulations requiring gasoline to be refined differently during summer months than winter months (emissions), which slowed production, coupled with a rise in wholesale prices, and a power failure at an area refinery.

From the Redding Record Searchlight: the question “What's next? Gas lines in California? The answer, most likely. The Record sites a Bloomberg News Article, which speaks to the problem in California headlining :”California Gas Stations Shut as Oil Refiners Ration Supplies” and the gist:

Low-P, a gasoline station in Calabasas, California, 30 miles west of Los Angeles, stopped selling unleaded gasoline Oct. 2 and ran out of high-octane and medium-octane fuel yesterday, John Ravi, the station’s owner, said by phone yesterday. Ravi said he posted an “Out of Gasoline” sign on each pump and took down the prices outside his shop. “I can get gas, but it’s going to cost me $4.90 a gallon, and I can’t sell it here for $5,” Ravi said. “If you come here right now, I’ve got some diesel left. That’s all. My market is open, but no gas.” “We’re going to start shutting pumps Friday,” Sam Krikorian, owner of Quality Auto Repair in North Hollywood, said by phone yesterday. “Gas is costing me almost $4.75 a gallon with taxes. There’s no sense in staying open. The profit margins are so low it’s not worth it.”

What is usually not considered by the average consumer is that gas stations are either franchised or owned by the corporation, meaning the nations gas supply is kept going by small business owners. In fact the majority of gas stations are owned by independents or franchise, according to U.S. Census data, gas and convenience stores are in the top 10 of industries that “make up the majority of the business nationwide” (Inc. Magazine online) Therefore, when the small businesses owner, already burdened by regulation and uncertainty over additional regulations, including national health care and the tax code (Which the Bush era tax cuts are set to expire in 2012 as the White House and the Congress will address taxes in January’s lame-duck session – leaving the entire nation, individuals as well as businesses subject to tax increases), a tightening of available loans (Dodd-Frank) and rising costs of a product which is highly taxed to begin with – the choice is often made for that owner, they shut down.

If one thinks this is going to stay in California without some intervention by both state and the federal government (or perhaps, less intervention by the states and Federal government would better serve the problem) those rising prices will be exported east, and the lines and lack of fuel will be at your door. With winter coming to the nation, especially the upper west, Midwest and Northeast, home heating may also be affected.

Is there a way out? Yes of course, depending upon how the crisis in the Middle East is handled, taxes on individuals and small businesses as well as fuel are stabilized or lowered, and more consumers (lower unemployment) will all combine to up demand, and supplies will follow – of course, regulations may put a damper on that 1980-1981 model. In the meantime, grab a bus schedule, buy a bike, or start a carpool and wait it out. Of course, depending upon the election and the outcome, if the status quo remains, one can anticipate stocking up on sneakers and bicycle tubes, bus passes, and in the northeast, blankets and fleece.

It Must be Winter – U.S. Consumers begin to feel pinch from Increase in Fuel Prices – OPEC seeks price-setting at $100 Barrel.

OPEC, $100 per Barrel on the table - image Latest News

When the need for fuel increases during the winter (heating) and summer (anticipated vacation bound drivers), the price of fuel appears to increase with demand. As January approaches, the price at the gas pumps has risen to over $3.00 per gallon, or up 7 cents in a week. (Reuters). Meanwhile, OPEC is, once again, asking for an increase in price per barrel, up to $100 Saudi Arabia wants pricing set at approximately $75/per barrel, while Libya, Iran and Venezuela prefer the higher price per barrel. This is causing some anxiety amongst oil importers such as Japan, and, yes, the U.S. (Bloomberg).

OPEC has historically toyed with the vast wealth of oil at its disposal, during the 1970’s, under the Ford, then Carter administrators, Carter, when pressed by rising OPEC prices, fixed prices in the United states, which resulted in an embargo and subsequent gas lines at the pumps. (Milwaukee Journal Sentinel, March 1st, 1974). Carter’s response was to offer a tax on U.S. consumers in order to manage consumption which ultimately failed to pass the Congress. (Washington Afro-American). Additionally, always attempting to tax his way out of a problem, Carter, instituted a “Windfall Profit Tax on “Big Oil”, which resulted in a backlash of fewer barrels of oil being refined in the U.S.

With President Obama reading Reagan’s blueprint for a productive nation, perhaps he’ll pick up on the Reagan Plan of drilling both offshore and in Alaska to boost production crippled under Carter. (Merced Sun-Star).

He might want to get a few pointers from the former Governor of Alaska, who trimmed $231 Million from the Alaskan budget, and then went to battle with Oil Companies to boost production

Palin, during her tenure as Governor of Alaska,

1) Created Alaska's Petroleum Systems Integrity Office to oversee maintenance of oil and gas equipment, facilities and infrastructure, and a Climate Change Subcabinet to prepare a climate change strategy for Alaska.
2)Passed major legislation that began a competitive process to construct a gas pipeline and overhauled state ethics laws.
3)Served as chair of the Alaska Oil and Gas Conservation Commission. (National Governors Association)

Palin also served as Chair of the NGA’s Natural Resource Committee

With a new move to the middle by the Leader of the Free World, all things may be possible, but it remains to be seen whether he will follow the lead of Carter or take advantage of a Tea Party Congress and it's hero's and heroines: Reagan and Palin