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.

Federal Commission Proposes Higher Fuel Tax – New Punishment for Consumers – The cause and effect on Congressional power

In 2007, gasoline prices soared, hitting consumers hard – forcing most to cut back on spending in order to afford, not only the drive to work, but the rising costs of food and other goods affected by transportation costs. During the 2008 presidential campaign, John McCain and Hillary Clinton proposed a “Gas Tax Holiday” to ease consumer woes – this was shut down by the Democrat controlled congress based on fears that the loss of Federal Gas tax income which is earmarked for federal highway projects, would result in road construction layoffs.

The Federal Tax Rebate issued in early 2008, was intended to stimulate the economy, however, many used the funds to pay down debt associated with the rising cost of fuel. On the campaign trail, Obama urged consumers to invest in Hybrid’s, in order to cut dependence on foreign oil , and allow the US to become energy independent by 2015. The logic of hybrids – conserve energy and lower fuel costs being the main theme.

In May, 2008, oil prices were at climbed to $124 per barrel - the rise blamed on speculators and the Bush Administration. Consumer habits changed, and in part, resulted in a lowering of oil prices to the current level of $42.54, or the lowest level since 2004
The subsequent result of a drop in consumer spending as well as lower oil prices has resulted in a drop in tax revenues which are used to fund infrastructure projects. As a result, consumers can anticipate an increase at the pumps – and it is consumer habits that are, somehow, to blame.

In order to the infrastructure to be maintained (and include the increased “Big New Deal” infrastructure project by Mr. Obama to “stimulate the economy”), The National Surface Transportation Infrastructure Financing Commission, has suggested an increase in the Federal Fuel Tax or “fee”. Those who live in the Bay State, understand that taxes being unpopular are often referred to as “fees”, (or another word for “tax”).

Logic follows that should the federal gas tax rise to meet the demands of current and projected projects, consumers would be forced to make further cuts in their spending habits at a time when the nation’s retailers are are facing bankruptcy and looking to the Federal government’s Bailout program as an option.

One obvious suggestion to increase government income would be to further reduce government waste,something likely not to occur given the increase in the size of government programs (new “state owned” industry), and the Democrat controlled House and Senate. It may serve those currently in power to recall 1994, when the GOP swept into Congress and enacted popular tax cuts - this occurred due to a President Bill Clinton and the Democrat controlled Congress suggesting a rise in the gas tax. Should the incoming administration and in-concert legislature consider further rises in consumer taxes or “fees”, one can bet the house that there will be a change in leadership in 2012.