...what really needs to happen is finding a long-term solution to our oil sources and prices...
And there are many options that need to be considered...but I caution anyone that thinks that putting permanent price caps in place is the only solution...
If you are in doubt, one only needs to look at the energy crisis that was created in California when price caps were instituted...
Yes, the consumers fared better...FOR A WHILE...
When you have price caps in place eventually you will find government subsidizing necessary if the companies are going to remain operational...which is exactly what happened in California:
As a result of the 1996 restructuring, the privately owned (non-municipal) utilities were subject to provisions that made it uneconomical for them to enter into long-term contracts. Public Utilities Commission rules created strong incentives for them to buy electricity only from the state-run Power Exchange on the short term, making the utilities subject to spikes in wholesale markets. On the Power Exchange, the longest term market for purchase was one day in advance; the short term was 10 minutes in advance....
“So there was no long-term protection for the investor-owned utilities..(snip)...If you are selling to retail customers who don’t want price fluctuations, the way to operate is through long-term contracts to have that security.”
The situation resulted in the draining of all financial assets of the investor-owned utilities, the bankruptcy of Pacific Gas & Electric, and the near-bankruptcy of Southern California Edison.
And there is another wrinkle when considering what is happening to our gas prices....the competition is getting smaller and smaller...
What do I mean?
Well, think about it...companies are merging...companies are being bought out...which leaves fewer companies competing against each other...which eventually leads - or COULD LEAD - to higher prices...
Is that what is happening right now? Who knows for sure?
Are the gas companies raising prices in line with what they are paying for the crude oil?
A lot to consider...hopefully our legislators won't move to put price caps in place...at least not permanent ones...with the speed that they raced to the cameras after Exxon announced a profit...
Obviously companies are in business to make money for not only themselves but their investors as well...
Let's slow down and take a good look at what really is going on before making a knee-jerk decision that will give good face time on the news channels...
It might buy you votes today...but it also might create a worse crisis in the future...
Long-term solutions...that's what we need...
DR
