Plain Sense Economics

In Principles of Micro class last week we talked about how sellers will reduce production when market prices fall. Lower prices mean less opportunity for profits, and usually lead to lower output.

Here’s an article in today’s Wall Street Journal, that illustrates this point.
Refiners Look to Reduce Production as Falling Gas Prices Cut Into Profits

Here’s the lead

As falling gasoline prices squeeze refining profits, there are signs that refiners are ratcheting back production to pare losses.

Gasoline output, which had been expanding as U.S. refineries came back online after hurricane-related shutdowns, dropped for the first time in weeks, according to data reported last week from the Department of Energy. Philadelphia refiner Sunoco Inc. said last week that it is shutting down a unit used in gasoline production at one of its refineries, though it declined to say why.