Tag: economics

spread it.

In Margaret Visser’s excellent Much Depends on Dinner, the history of margarine is related.

A cheap butter substitute terrified the dairy industry. As margarine became widely available commercially, the butter people did everything they could to stop it. They bought laws that taxed the stuff and enforced prominent labeling. In at least once place they required that margarine be placed apart from other groceries in a special closed off “Margarine Zone” of the market so that people would be humiliated to go in, revealing that they were cutting costs. And most of all, the color of margarine was regulated. It couldn’t look like butter, so the yellow coloring was either totally absent or in a tiny dot in one corner of the bag of goo so that consumers had to knead the package for some time to get it all yellow before putting it in the fridge. To this day, margarine cannot be butter-colored in some places.

What was the result? Today margarine is everywhere that butter is sold. There is still very good money to be made from butter. There is also good money to be made selling margarine and similar substitutes. Everyone knows the difference. The butter industry was not destroyed; they just lost some market share. Had they invested in the margarine business at the beginning most of their loss would have been stopped.

The Internet is margarine to a long list of industries. The music industry stands to lose retail distribution, which is not only a great place to add marginal costs but the place where their unpleasant friends in organized crime collect their money. The movie industry likewise loses its chain to theatres and all the incidental revenue there. Anyone with a job that ends in “Agent” who doesn’t work for the government is threatened.

The car dealers might be threatened too, but they’ve already got laws in every state in the U.S. restricting auto manufacturers to selling only through dealers; they’re in a stronger position than the dairy farmers.

Wine distributors are trying to “margarine” wineries with specious laws as well, because they find themselves disintermediated.

It might be good for business people who feel threatened by these changes to spend an hour with Visser’s book and take a lesson from margarine.

The effect of Katrina on energy and the world economy

From that hysterical voice of apocalyptic leftist scaremongering, the Wall Street Journal:

Some highlights:

“The storm cut off about two million barrels a day of crude-oil refining capacity, resulting in the loss of one million barrels a day of gasoline production — or 10% of U.S. demand. Four refineries that together represent about 5% of U.S. oil-refining capacity will be out of commission for at least a month, while another 5% of refinery capacity knocked out by Katrina appears likely to restart in coming days and weeks.”

“The federal government’s decision to release crude oil from the Strategic Petroleum Reserve is helping some crude-choked refineries resume normal operations. But ultimately restoring sufficient gasoline production appears to rely most heavily on repairing the refineries, not adding more crude oil to the market.”

“The huge blow to the Gulf of Mexico has led to long lines at filling stations in much of the U.S., and outright shortages in some places. Panic buying of gasoline was reported as far away as the Czech Republic. ”

“…the world has now started running on its reserve fuel tanks — oil and refined products stockpiled over the past two decades for use only in true emergencies. Western oil companies are already pumping at full capacity. Russia, the world’s No. 2 producer, is producing all it can. Even Saudi Arabia, the top exporter, and its fellow members of the Organization of Petroleum Exporting Countries can do little to alleviate the emerging crisis. OPEC has spare capacity of some 1.5 million barrels a day — which is just about equivalent to the production lost last week in the Gulf of Mexico because of Hurricane Katrina.”

full story here