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Blame High Prices For The Gasoline Shortage

 November 12, 2012 10:47 AM


Uh, what? Higher prices created less product not more? My Econ 101 professor is rolling over in his grave (I don't know if he is actually dead but go with it).

Remember in the fun days of 2008 when gasoline was heading toward $5 per gallon? Remember back even further when there were four gas stations on many corners in populous areas? You toddler traders with only 10 years experience are too young for that, I suppose.

But in 2008, I blogged Where Have All the Gas Stations Gone. It was hard to understand why they were disappearing especially when their products were soaring. Reader comments were awesome - basically saying that gas station profits were steady while inventory costs went up. Credit Card companies took a percentage leaving the station owner with a few cents revenue out of which they had to pay expenses and taxes. A big chunk for the oil company, a big chunk for Uncle Sam and a little chunk for Amex. Chaff for the station owner.

[Related -Chart Says This Retailer's Comeback Isn't Finished]

Lower profit margins and unfavorable cash flow (pay for inventory now, get paid by customers in 30 days or more). Result - Your local Esso station (toddlers?) is now a Walgreens. Your local Sinclair station is now a Wells Fargo.

The station density became inadequate to serve the population.

And then there's Maude, er, Sandy. Li'l Miss hurricane blew out a good chunk of the gas stations in the Northeast. Remember, the number was already low so this was -and still is - a big problem.

[Related -ETF Performance Review: Major Asset Classes | 19 Dec 2014]

So, higher prices for gasoline in a fixed profit, not fixed profit percentage business and viola! Gas shortages.

Now, where is that hamster powered generator. Ain't no gas to fill up a real one to get the pumps working at gas stations sitting on thousands of gallons that they cannot pump. You cannot make this stuff up.

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