News flash: The world will not end because of rising gas prices. Contrary to the beliefs of those who focus on impending doom and politicians who love this sort of thing to score a few points with the voters, gas prices, adjusted for inflation, are about where they have been for a long time. The price of everything has steadily gone up over time and when prices stay the same for very long, they are, in effect, actually going down. Gas prices which are connected to the price of oil, tend to stay the same for a while and then jump. The jumps get everyone upset and there are cries of “price gouging†and demands for investigation.
How many times will people be caught off guard by the obvious? Gas prices move around a lot, sometimes down, often up, but the long term trend is moving upwards. If anyone buys a vehicle or decides where to live based on fixed gas prices, they’re going to be sorely disappointed over time and probably in many other areas, too, if they missed on this one.
Wouldn’t it be refreshing to hear a politician say, “If gas prices are bothering you, buy a smaller car or maybe a motorcycle. Carpool to work or ride a bicycle. Don’t demand higher mileage standards, buy one of the higher mileage vehicles already available. Deal with the problem in your own life instead of demanding someone else do it for you.†Just a hunch, but, we’ll be a long time waiting for that guy to get elected!
Links: Gas Price Chart and Consumers not Changing Behavior via Instapundit
The Kneeslider: High Gas Prices – Smile!
todd says
if people delt with problems on their own then we wouldn’t need politicians.
The market really does reflect reality. people in the US don’t want high mileage vehicles. They are still buying gas guzzlers and expecting “the big oil companies” or “the government” to pay for their gas.
-todd
hoyt says
There are many articles about increased scooter sales. This is good news for motorcycle companies and motorcyclists as scooter sales are cash cows and help fund projects and new models.
will HD manufacture a scooter? I had to ask…
http://www.cbc.ca/manitoba/story/print/mb_scooter-sales-20060404
http://www.cbsnews.com/stories/2005/09/22/earlyshow/series/main879425.shtml
Michael Shannon says
Most of us with IQs over 100 can readily understand the basics of supply and demand, and the relationship to price.
However, what sense does it make that while demand goes up/supply goes down, prices increase and yet oil companies INCREASE their profits??
Normally in that given situation you would expect profits to stay the same, not radically increase. The American consumer is being taken for a ride by big oil.
Michael Shannon
kneeslider says
Michael,
Do we have unlimited supplies of oil and gasoline? If not, how do we regulate demand for gasoline (or any product in short supply) so we don’t run out and consumers have it when they really need it?
In the case of gasoline, we could tell everyone to stop buying gas when they don’t need it or we could have someone interview each person to determine their need before allowing them to buy gas or we could shut down gas stations every other day or limit what you buy to some set amount … or we could simply allow rising prices to let each person determine how much gas they really wanted or needed. Each person, in effect, bids for their gasoline and says yes I need it or no I don’t. The more important gasoline is to you, the more you’ll pay. Gasoline is available, no shortages appear.
If you understand the basics, as you say you do, you already know that’s called equilibrium, the intersection of the supply and demand curves.
Rising prices in those situations can certainly raise the profits of those supplying the gasoline, so, contrary to what you believe, in that situation you would expect profits to rise. It’s the incentive companies get for supplying a commodity in high demand and an incentive for others to get into the market with competing products.
Extremely high profits cannot exist in any industry for a sustained period unless competing products are kept off the market.
hoyt says
a couple of lessons learned:
– the next energy sources cannot gain the disproportionate energy monopoly that oil currently reaps (in terms of: the number of competing oil companies and the number of competing energy sources). There is way too much money in the hands of too few for the rest of the world to accept this situation. The market AND more intelligent govts. need to drive this balance.
– top coporate management salaries are absurd. A $400 million retirement bonus and a salary of $141,000.00 per DAY is insanely disproportionate to the men and women showing up to work everyday on the rigs.
todd says
hay Hoyt, maybe HD will come out with a new Topper. You wonder what is so different between the ’50s Harley consumer Vs. the Harley guy/gal today. I think a new HD Topper would do ok competing against the Vespa and other premium brand scoots as long as it was nimble and had a similar cool factor. One problem I see is that if they make it light and as quick as a 200cc vespa it would be faster than most of their full size bikes!
-todd
Earl says
There are massive untapped oil reserves. Albertan oil sands, Central Asian ‘Stans (hence the need to secure pipeline territory). We’re highly unlikely to see a genuine oil shortage in our lifetime. And isn’t it funny how commuter vehicles cop the opprobrium? No mention of airlines or the massive amount of oil that cruise ships consume. Tho a million cars do use more oil than one Sea Princess.
Oil cartels manage prices to suit themselves. The best argument for bikes and scoots is relieving traffic congestion. It’s insane here in Sydney! Lucky I work tradesman hours.