As we’ve all noticed, gas prices are up again. Follow this logic with me and help me see where I’m going wrong.
The reason prices are up is, again, the Law of Supply and Demand. There’s a crimp in the production line, dropping supply. In order to keep demand down and prevent widespread shortages, the industry raises prices. As a result of this selfless action to prevent panic, the oil companies also bring in massive profits, but that’s just an unavoidable side effect, not at all the intent.
But the press has also reported the reason for the shortage – a delay at the refineries in switching over to a “summer formulation.” The refineries change the formula for the summer months in order to reduce pollution – largely in response to government regulation, which explains why some states are not experiencing shortages.
Here’s where I start to have a problem, though. This changeover happens every year. The companies know ahead of time that summer is coming, and certainly have ample time to prepare for it. In fact, they’ve been doing it for years. By now, they really ought to have a handle on it.
So, if I’m understanding this correctly, the oil companies are forced to raise prices because of a shortage that they created by their own incompetence. A cynical and suspicious person might wonder if this annual delay in making the switch is intentional. Certainly, there doesn’t seem to be any real incentive for them to hurry.
It appears that in this case, contrary to the old adage, a failure to plan is planning to…profit.