No gouging, just supply and demand

Denver Post ^ | 09.08.05 | David Harsanyi

[Hendrix]

You don't have a clue what you are talking about. Our oil industry is highly competitive and operating perfectly within the bounds of our free market system.

[kellynla]

I agree that we do need more refineries and I am against price controls which we found out in the 70's clearly don't work anyway but the price a station sells gas for against what they paid for it has nothing to do with supply & demand and definitely doesn't profit stockholders.

Most stations(and most are independently owned) make a dime a gallon and those who were and are selling gas for over four dollars were and are clearly gouging!

[EagleUSA]

If we had it your way, last week the gas stations in Atlanta all would have run out of gas, and then the gas stations would not have been able to afford filling up their tanks.
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Oh really? And how would have charging a fair price for gas made the situation any different? Nice try.

[Rodney King]

For example, it doesn't matter how high the price for food goes because of short supplies, the demand for food will not drop below a certain minimum level, because it is an essential commodity. At this point, supply and demand laws break down. Gasoline and other energy commodities are in this category. No matter how high the price goes, past a certain point there will be no corresponding reduction in demand. This is why price gouging is a real event in these cases.

In economic terms, what you are describing is called the price elasticity of demand. Different products have a different price elasticity of demand. You are correct, food has a low price elasticity of demand. That is, demand doesn't change much as price changes. Gasoline has a low short-term price elasticity of demand, although a reasonably high long-term price elasticity of demand.

Still, in absolute terms, it is there. Demand went down this week, people drove less.

As for price gouging, why did the evil gas companies wait until now to raise prices? Why did they ever let prices get as low as $1 in 1995 or so? Were they just stupid giving up all those profits in 1995 when they could have been charging more?

[jasonk1]

In listening to Mr. O'Reilly, he does advocate using less fuel not just asking Big Oil to take a small cut in otherwise huge profits (35 Billion last quarter alone). Points about soda and popcorn do not apply to this case because they are not part of interstate commerce. If 18 wheelers ran on soda you bet the price would be down to $2 a gallon.

[Hendrix]

"For example, it doesn't matter how high the price for food goes because of short supplies, the demand for food will not drop below a certain minimum level, because it is an essential commodity. At this point, supply and demand laws break down."

False.

[fooman]

need to lift the government regs to build refineries and drill!

I also say, institute a Nimby tax on gas for states like cali and fla. This money would provide tax credit build refineries in other states.

Yes, tax INCREASE that foo likes!

[Rodney King]

Oh really? And how would have charging a fair price for gas made the situation any different? Nice try.

What is a fair price? People were lined up at gas stations trying to buy every gallon they could. That is called an increase in demand. If the price didn't go up, the stations would have run out. I don't know anything about biology, and therefore don't comment on it. It always amazes me that people who know nothing about basic economics never hesitate to comment on it.

[Protagoras]

The supply of these "monopoly/profiteer/gouger/conspiracy" guys seems inexhaustable around here. Could you imagine what it is on the liberal sites?

The supply is huge, the demand is minimal, I guess the price is low? :^}

[Hendrix]

Excellent post. Right on the money. You actually understand economics, unlike most people on this board.

[aspiring.hillbilly]

Ridiculous post. The stations jacked up the price in some cases overnight to $5 $6 a gallon. If thats not price gouging I will pee in my gas tank. There has been a spate of mergers in restraint of trade. in big oil Exom-Mobil being the most egregious. The Bush administration has turned a blind eye to the obvious anti trust violations. They just posted record gross profits of 134.49B on revenues of 295.70B... What loon can conclude there is no price gouging with profits ringing up that high?

[fooman]

lines

[Rodney King]

The supply is huge, the demand is minimal, I guess the price is low? :^}

No, the demand is high. The gimme gimme gimme crowd wants to blame somebody else for the high price of gasoline, hence the demand for the evil profiteering posters.

[Realism]

Gouging and price fixing aside, if this is he only way to break the American gasoline addiction and push for alternative sources, keep the prices high. Sure it will hurt, I've parked the Silverado, I carpool with the wife to work, and make few as possible trips in to town. Our fuel consumption went from $100/week to around $30/week. I now realize we should have been doing this long ago.

[EagleUSA]

What a wonderful example.
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I know, it makes too much sense. Try that line of response on DU -- fits better there.

[fooman]

they were planning for replacement costs. competition should lower prices now.

[Hendrix]

You need to take economics 101 because you don't have a clue what you are talking about and you have zero understanding of how price is determined in the market.

[ModelBreaker]

Rare common sense from the Denver Post, the Front Range mouthpiece of the loony left.

[tfecw]

"If thats not price gouging I will pee in my gas tank."

Don't forget to shake when you're done.

[fooman]

you are so right. I expect this talk on lib sites but not here.