Monday, October 24, 2005

Hurricane O'Reilly

Big Bill was back on his "bash big oil" binge on the radio today. Since prices have dropped in the past week or so, O'Reilly concludes this "proves" it was price manipulation all along. Perhaps higher prices reduced consumption and stimulated production, worked off the shortage, and caused prices to ease, i.e. the market worked? No, not according to Bill. The drop occurred because Bill went a crusade against oil company "price gouging."

A caller from Saint Louis reported that diesel prices are going up as gasoline prices fall, and wondered why that would be. He and Bill agreed they couldn't see any reason for it, but Bill assured us all, "It's not supply and demand." Of course, it's supply and demand. We don't know if it's a local effect, confined to Saint Louis, or nationwide, but it's obvious that supplies of diesel were/are tighter than gasoline relative to demand. Our bet would be that refineries shifted some capacity to make gas instead of diesel, but perhaps demand for diesel is less elastic than for gas.

Two minutes later, O'Reilly was denouncing the New York Times for its "quasi-socialistic" views. Well, he's right about that, aside from the "quasi" part, but how about a little philosophical coherence?! Don't pose as a defender of capitalism within minutes of denouncing business "greed." Pick a philosophy and stick with it.

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