Thursday, September 22, 2005


As expected, the media is running with 'Gas prices could hit $5.00!!'

Well prices will certainly increase if everyone panics, and lines up to buy gasoline, won't they? (Econ 101 again, folks)

Notice, however, that while government hacks continue to point the finger at mean old big oil companies, they have yet to repeal a single gas tax.

There will be adjustments in price as supply may be affected by weather. Happens all the time. But ultimately, the price is set at the point at which the gas station owner sells his last gallon as the truck pulls up with more gas (except in Maryland, where he is required to charge at least what the gas cost him). If you don't want to pay that much for gas, don't. Drive less. Telecommute. Combine trips. If the gas station has gas left over when the new shipment shows up, the price comes down. The market always moves towards the market clearing price.

(I'm ignoring all of the government intervention that keeps this from working exactly this way, but for the purposes of this post, it's close enough. I'm also ignoring speculative buying, where a gas station owner would not sell gas at a competitive price in order to have more when the competitive price goes up, but that is going to be factored in to the market - someone will sell gas now.)

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