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I have said it before, and I will say it again: markets always seek equilibrium. Just as nature abhors a vacuum, markets abhor an imbalance.
And no matter what the Demcrats do to try and bring back the 70's with their Energy Bill, nothing will change the rules of economics.
Most people don't want to remember what happened the last time the Democrats decided to overrule the markets and play games with the nation's energy supply.
But I have this stupid thing where I remember way too much, and I remember the gas lines of the late 70s. I remember sitting in the back of a dark brown 1976 Dodge Dart with an AM radio listening to WFBR while my legs stuck to the vinyl seats in scorching heat. Slowly crawling down Pleasant Plains Blvd toward the old Towson Dodge and down to the Hess Station. Remember the odd/even days? Signs at gas stations with "Yes we have gas" or "No Gas".
Thank you James Earl Carter. Progenitor of gas rationing.
And proof positive that markets seek equilibrium.
You know what happened? People started keeping their tanks full all the time. They would go every day they could to top off their tank, instead of running it down. Why? Who knows if they will be able to buy gas on their assigned day? They might run out. As a result, economists estimate that almost a third of the nation's gasonline supply wasn't being consumed. Instead it was being stockpiled in people's gas tanks.
Do you know what that caused? More shortages. It extended the supply problem. The market found an equilibrium in rational actors (customers) who decided to guarantee their supply by working around artificial attempts to restrict demand.
The same thing will happen with the socialist Energy Bill that just passed the Senate.
It's great that they want to encourage alternative forms of energy. But you know why they are still alternative? Because they don't necessarily work everywhere. Windfarms are great in Texas. Parts of Texas have consistent wind that can generate consistent and sustainable energy.
Hydro is a great potential, too. But you know what? Just about every river that can be dammed for hydro plants has been. Just ask the state of Pennsylvania, which is the number two producer of energy in the country-- most of it hydroelectric.
Solar is expensive, still, and has the same problem as wind power. Not consistent, and not sustainable from a constant power perspective. It's great for warming pool water in Florida, but lousy for warming water for the washing machine.
And let's look at the last energy bill-- the one that set the requirements for ethanol. Remember that markets seek equilibrium right? Well, with the mandate for ethanol, a number of things have happened:
- Food prices have skyrocketed. Looked at the price of a twelve pack of soda lately? Soda uses high fructose corn syrup. Corn is the basis of most US-based ethanol.
- Milk prices are skyrocketing. Dairy cattle need feed. Most of the feed is corn.
- The price of meat-- chicken, pork, and beef - is skyrocketing. Again, feed is corn.
The government has created a shortage in the corn crop this year. The market responds by raising prices to adjust the supply against the demand. But the artificial interference in the market -- the mandate -- increases the supply problem and does not address the demand.
Plus, ethanol makes gasoline more susceptible to the fluctuations in heat. Gas can lose 2% of its energy from a degree difference in temperature. That means that consumers who buy gas in July get less energy per gallon than they get in November. That means they use more gas. That means they need more ethanol. That's more corn.
Again, the market seeks an equilibrium, and prices go up to adjust the demand against the supply.
And now, because of the mandates for ever-increasing ethanol use, there is declining incentive for oil refiners to build more capacity into an already-stretched system. So any short-term attempts to adjust to current gasoline demand now are being swatted down by government mandates. Again, the market seeks equilibrium, because producers are most concerned with a consistent set of rules and parameters to work within.
Government mandates go the other way too. Because of parochial nimby-ism and paranoia surrounding nuclear power plants, we can't take advantage of an energy source that is clean, safe, and cheap. My God, if the French can use nuclear for 80% of their electricity generation, why can't we?
Because of short-sighted stupidity of many local officials, Maryland cannot benefit from an LNG plant on Bear Creek down on the Point. LNG is cleaner and safer than regular natural gas. But using the paranoia grab of "we are afraid of a terrorist attack", that project is dead in the water.
And the market will still seek equilibrium, as we are selling our first born to pay our energy bills this year.