About the previous post, one of the issues is a shortage of refining capacity. The CEO of Chevron has said the last significant new oil refinery built in the U.S. was in the 1970s, 1976 to be precise. He added that there may never be another built, obviously reflecting the environmentalists’ desire to wean us off of fossil fuels.
During the pandemic when gasoline demand was lower, some refineries were repurposed to produce bio-diesel from vegetable oils and no longer refine petroleum. Now as demand for gasoline and diesel has risen to pre-pandemic levels we lack refining capacity to produce all we need.
An economist will tell you that today’s higher prices are the logical way to trim petroleum demand, even though the process is painful. They call this “price rationing” and it forces people to make decisions about where they live, shop, and recreate which, in the medium run result in less fuel being purchased.
Higher fuel prices will also reduce demand for other products and services as discretionary funds are diverted to essential fuel purchases. This will contribute to the predicted recession’s higher unemployment and reduced economic activity.
I personally know of one small business - a retiree hauling decorative bark for landscaping - who quit as a result of higher diesel prices making the business no longer profitable. Multiply that by thousands and you get a recession.
