Supply and Demand

Some more thoughts on gas prices and supply and demand.

People say "The Government shoud do something." Sure the government should do something but not price controls. That has been tried and does not work. It gives consumers a false sense of supply and demand. When the prices are kept artificially low, we think there is a never ending supply. When the price controls are lifted, the prices usually go up for a while. People use less and the price then settles into an amount that matches the demand. Hawaii recently made a law putting a cap on wholesale prices of gasoline. The only thing I see that doing is causing the price to go up. Hawaii imports all their gas. Now when the wholesale price of gas reaches the cap, do you really think the wholesalers are going to ship to Hawaii? With the decreased supply, the price at the pump will actually go up. There is no cap on the retail price.

So what should the government do? Open up the reserves in Alaska and drill there and encourage off shore drilling. Environmentalist don't like it because they think it will disrupt the environment. I think there would be minimal impact on the environment and animal life. There is great space there and the animals won't be affected by this much. Unfortunately, I need to think on this a bit more to give good discussion as to why this is. I do know that in the vast open areas of the rural part of the country, that the animals coexist very well. In fact, in my state, there are so many deer that the numbers are actaully damaging to the deer. Getting to the oil that we know is our there that would help us be less dependant on others is the answer, not price controls.

As I said earlier, we can do things to decrease the demand and if each driver would do one or two things, the demand would lessen. Another thing people can do is driver much closer to the speed limit. Allow yourself a few more minutes, drive slower and save gas. Check the miles per gallon for your car and see where you get a better mpg and drive that speed. It is not going fast.

A little more than 2 years ago, we were in Germany. The price per liter was about 1.25 to 1.30 Euro which at the time was pretty close in US dollars. The exchange was not quite 1:1 and in US dollars the price would have been more. There are 3.78 liters per gallon. Do the math, over $4 per gallon two years ago! I was in Guatemala just before that and the price of gas was approaching $2 per gal. here and was about 2.75 there. We were in Hawaii in January of this year and the price per was again nearing $2 here and was $2.34 there. I think of what we could be paying and am thankful we are not paying those prices.

You could say I am a proponent of supple and demand (let the market take care of it) and personal responsibility (what can I do now) instead of letting the government take care of me (ah, isn't that socialism?).

I guess I could change the title of my blog to Politically Incorrect (not the Bill Maher type either). Off of my soapbox now.