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The Kneeslider

Doers Builders and Positive People

More on High Gas Prices

By Paul Crowe

High gas pricesYou’re going to see a lot more of this in the coming days, you might as well get used to it. Right now, everyone is warning against “price gouging” as though that means something. But think about it. A gas station has a finite amount of fuel until it runs out. Say your costs allow you to charge $3.00 but you decide to charge $6.00 per gallon instead. A driver pulls up with $30.00 to spend and before could get 10 gallons but now can only buy 5, is that bad? I’m sure the driver thinks so, but think, too, that twice as many drivers will be able to get some gas before the station goes dry. What about the hundreds of drivers that would have been completely stranded without any gas at all. Prices regulate demand and can instantly adjust to match supply, that’s how markets work. If there was a huge supply of gas, other stations would charge far less and drivers would avoid the high price, but there isn’t a huge supply and until gas purchases are reduced, we’ll get shortages.

For those of you old enough to remember the arab oil embargo in the early 1970’s, stations weren’t allowed to charge what they needed to and long lines appeared and stations quickly ran out. Let prices rise and lines disappear and everyone can buy what they need. Yep, prices are high but no shortage at that price, not because companies are holding back until then but because consumers buy less and supply can keep up. We’ll be learning that all over again if too much talk of “gouging” gets going.

Update: Looks like someone agrees
Update 2: Someone else agrees.

Posted on September 1, 2005 Filed Under: Economics and Politics


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Comments

  1. Dave says

    September 2, 2005 at 5:38 pm

    I agree, however it would be nice if the increased price went to taxes or some relief effort instead of directly to the pocket of the oil companies.

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