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Cost of Freedom Guest: Don't Worry! Be Happy! Your Heating Bill's Going Up 30 to 70 Percent!

Reported by Marie Therese - September 25, 2005

When I was a young girl about 13 years of age, my mother taught me a basic lesson in economics. In the early 60's, the news was filled with reports that a beef shortage was going to hike the price of a pound of ground round by 40% a pound. Ground round was a staple of our family's diet, so Mom told me we wouldn't be eating beef for a while until the price came down. Then she explained something I've never forgotten. "The prices are raised way up," she said, "so that, when they fall back again, even though they're higher than they were before, everyone is relieved. It's just a sneaky way to increase prices." We ate tuna fish casserole until, sure enough, a month or so later the "crisis" was over and prices came down, but not to their pre-crisis levels. My mother was a very smart woman

Yesterday during the second hour of the 9-24-05 edition of the Cost of Freedom, Neil Cavuto and his guest said things that that brought back memories of my mother's words.

CAVUTO: First it was Katrina. Now it's Rita having a big impact on how much you're gonna pay for things like gas and heating oil and maybe natural gas, maybe even that airline ticket, because of jet fuel prices rising. Joining us for answers on where we go and how high we go. Phil Flynn of Alaron Trading. Phil, what are we really looking at from all this?

FLYNN: I think it's too early to know, Neil. I mean - I mean the good news is that the storm missed - the heart of the storm - missed the highest part of our refining capacity, which was closer to Houston, which was roughly about 13%. But, ya' got ...

CAVUTO: What would, what would that have meant, had it hit that area?

FLYNN: If we took out those refineries in the same way that we did in New Orleans, we would have seen gasoline prices at $3.50, $4.00 a gallon real quickly. There would have been a potential for natural gas prices to spike up to fifteen maybe as high as $20.00 on a panic and then pull back down, so this, you know, in one way we've just dodged one significant bullet, I can tell you that right now.

CAVUTO: Yeah, but we're still looking, as you so often remind me, Phil, at prices that are double what they were a year ago, so for folks thinking that they're gonna get a reprieve on their winter heating bills, I guest the snapshot is that you're not, right.

FLYNN: Well, maybe not, but there's some hope here, depending on how the storm went. Now, you know in this Port Arthur area there's still a lot of refining capacity there - 7% - but it's not as vulnerable to flooding, but as we saw in Geraldo's report, one of those refineries is being surrounded by water ...

CAVUTO: Right.

FLYNN: ... so it's gonna take a little time to get in there. But the good news is that, if the flooding recedes quickly, we can get these refineries back online and you might have the opposite effect when it comes to price and what that is is that instead of prices going up after the storm, they could actually continue lower, so if we get goods news on the refinery front - there's not a lot of damage we might even get a little bit of a break. Who knows?

CAVUTO: Well, you know, Phil, that's an interesting one. One of my crackpot - of many crackpot theories - but one of my crackpot theories on this is that the high prices we saw were were going to lead to the lower prices I think we will see because of the commensurate slow-down that comes with it. What do you think of that?

FLYNN: I think you're sleepin' - you need more sleep is what I think. (Cavuto laughs) No, I actually think that you're right. I mean, you know, you're right. We have a saying in the trading business. "The best cure for high prices is high prices." And the opposite is also true. And I think in this case we've seen that. But the other good thing about this - if we went through and read 'em into the damage as anticipated. We were starting to see good news from the recovery from Katrina. Gasoline production soared because we waived some EPA regulations and the refineries that were operating were really doing a good job. They were - you know, the oil companies have done a great job to try to get this stuff back online and get back to normal.

CAVUTIO: Yeah.

FLYNN: But, you know, I think the bottom line when we talk about the storm they're still behind what they need to be but the storm if the damage isn't there, we're in a low demand period and that could mean the prices ease just a bit.

CAVUTO: But not a lot? You're saying a bit?

FLYNN: A bit. We still have to see what the offshore platforms are. Natural gas is still going to be a big problem That doesn't mean that you shouldn't worry about your heating bills. They're gonna be a lot higher. They're gonna be a lot higher but they might not be as astronomical as we heard. But they're still gonna be 30 to 70 percent higher depending on how bad it is.

COMMENT

Finance mavens like Mr. Cavuto and Mr. Flynn only have to stop drinking double mocha lattes or cancel one business trip to pay for their gas increases.

This winter, while people in my economic strata are faced with deciding between food and heat, Mr. Bush, Mr. Cheney, Karl "Turdblossom" Rove and their crooked buddies at the oil and gas companies will be laughing all the way to the bank.

I wonder how many elderly people and/or poor people will freeze to death in their homes because they can't afford a 30% to 70% increase in their heating bills? How many dead bodies will it take before America wakes up, throws these bums out of office and replaces them with peoiple who care about the people AND the environment the people inhabit?

Can't be too soon for me!


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