Thursday, May 24, 2007

Muslim Metrics and Market Musings

There are roughly 2.35-million Muslim-Americans living in the US—which is the latest hyphenated demographic to be identified by social researchers. The Pew Research Center has been counting noses and taking the pulse of this segment of the population, discovering some alarming things:

· 26% of Muslims under the age of 30 believe homicide bombings are acceptable forms of religious expression in defense of Islaam
· 60% are concerned about increased Muslim extremism in the US
· Interestingly, only 40% of Muslim-Americans in the survey believe the 9-Eleven attacks were carried out by groups of Arabs

Meanwhile, Presidential wannabe John Edwards now says the War on Terror is little more than a bumper sticker slogan with which the current administration can pummel political opponents. Pass him a Fez—sounds like he’s assimilating with them.

The House has passed a measure making it a federal offense for price gouging gasoline. The legislation would give federal authorities the power during presidentially declared energy emergencies to investigate and prosecute anyone selling fuel at a price that is "unconscionably excessive" or "indicates the seller is taking unfair advantage unusual market conditions."

There are about as many holes in this ill-conceived legislation as a chunk of Swiss Cheese…or the noggins of the knuckle-headed lawmakers who proposed it--who are obviously trying to do something before returning home to their constituents for the Memorial Day holiday.

There are two simple truths at play here:
1.) There is less gasoline on the market.
2.) When supply goes down, price goes up.

The laws of economics will prevail here, just like the law of gravity: What goes up, must come down. The price of a commodity will control the price; when the price gets steep enough to curtail consumption, the price will fall as demand tapers.

Instead of tinkering with things over which Congress has no control, more time and effort should be expended making it easier for the location, extraction, and refining of oil—the choke point has historically been refinery capacity. That’s where Congress should focus its attention if they want to do anything meaningful and substantive to address the problem.
Ironically, the official policy trend towards biofuels could be a contributor to the refinery capacity issue, as oil companies read the handwriting on the wall, and see the landscape changing.

John D. Hofmeister, the president of the Shell Oil Company, told the New York Times yesterday, “If the national policy of the country is to push for dramatic increases in the biofuels industry, this is a disincentive for those making investment decisions on expanding capacity in oil products and refining.”

The ugly truth is that oil companies are in business to make a profit, just like you or me. That they’re doing so in a sector that is vitally important to national security and the economic health of the country is exactly the point: everyone needs what they make. They’re where the action is. That’s their sweet spot, and it’s not an accident.

It would be no different if shirt buttons were a vital commodity (with the trend of increasing wasteband girth, they might be vital!), and the nation’s economic health relied upon a steady supply of shirt buttons in order to function. If there were to be a shortage of buttons, we’d be screaming and hollering for price controls on buttons and passing laws against price gouging for Velcro.

1 comment:

Biby Cletus said...

Cool blog, i just randomly surfed in, but it sure was worth my time, will be back

Deep Regards from the other side of the Moon

Biby Cletus