This article that I found on Yahoo Finance was very interesting. One reason I found it to be interesting was because as the price per gallon of gas has gone up, demand has not gone down. Doesn’t this go against the rules of supply and demand that we have learned? Over the past month gas prices have gone up more than 10% and motorists are still buying it. The Energy Department released some figures that the demand for gasoline has raised about 2% from over a year ago. Why do you think demand keeps going up?
Another interesting point was that diesel fuel has gone up roughly 36% from a year ago, but the trucking industry is still thriving. Why? Some say it is because of fuel surcharges and a strong demand from the retail and manufacturing sectors. This is very good for the trucking industry as long as they can keep covering their fuel costs.
One last bit of information that I thought was interesting was the fact that gas prices would have to climb another $1 per gallon to reach all time highs. For our sake, let’s hope this doesn’t happen!
4 comments:
This is a good question with an easy answer. Prices can rise either from supply shifting to the left or demand shifting to the right (or a combination of those).
There is no problem in demand shifting to the right, prices rising in response, and buyers not doing anything about it. All that this reflects is that the shift in demand caused the price rise.
The alternative argument - that somehow high prices should cause buyers to economize - is implicitly saying that it is supply that has shifted to the left. In this case the economization is represented by the movement up the demand curve.
The second is the argument that Diane is making. The point of all this though, is if there are two arguments with different implications, and one of them is not supported by the facts, then the other one is the correct one. In this case, we are not seeing economization on gas (which would happen if high prices were caused by a supply shift), so we can conclude that the high prices are caused by a demand shift. People are not economizing on gas because it is gas they want. If there is any economization, it is on other things (like Diane economizing on her use of public transportation).
People will keep paying the outrageous prices to get where they need to go. More consumers should try alternative modes of transportation, or simply cut down on foolish driving, "pounding laps" around town. Maybe try to get all your erands done in one trip, to avoid haveing to go out again.
Oil companies have too much money and too much power, which is why they buy pantents for new technologies, making us(consumer), pay more and more money.
When will the government step in? Never, our goverment officials are making six figures and could care less if if costs them $40-$80 a week on gas. This is pocket change to them. However, to the hard working american, this is not pocket change. Something needs too be done.
Sorry for omitting to sign - I posted the above.
Thanks for reading.
I wonder how Concerned Jake feels about this now that gas prices are back down again.
Are oil companies being less greedy than before? Because - unless the answer is yes - it is hard to claim they are more greedy when prices rose.
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