If gas price is determined by supply and demand, is it fair we all have to pay the same rate?

Question

It seems as if people who use less (1 car family for instance), should not have to pay the same price per gallon as a, say, a trucking company who uses 10 times as much gas.

People who use less gas should be rewarded and not have to pay as much per gallon as say,a 5 SUV family, who is more responsible for running up demand.

Answer 1

To be fair would make gas cheaper to the trucking company because they a doing a service for the public, not just for themselves as the drivers of private cars. To be fair  you should charge rich people more because  oil is a natural resource that belongs to everybody, and with high prices they can afford more than their share. What is fair is in the eye of the beholder, but we live in a market economy and markets are   not fair.

Since the US has the highest oil usage per capita  (12 times that of China) your reasoning would mean we should pay the highest prices,

Answer 2

Gas price is not determined by supply and demand. That is a factor, but not the deciding factor.

Answer 3

That is an interesting point - but remember that gasoline markets trade in a homogenous good (ie, 85 octane at Shell in Buffalo, NY is the same as 85 octane at Ayerco in Kirksville, MO), and so the price per gallon is determined by the aggregate at a given wholesale level. Another way of putting it is that gasoline sellers are not able to discriminate between someone who uses 10,000 gallons annually and someone who uses 100 gallons annually, and so they price it at the local supply and demand (the difference in price between Oakdale, CA and Highland, OK isn't solely due to taxes).

Also, consider that those who use less gas are rewarded - they don't pay as much for total gas consumption. Thus they alone are responsible for increasing their efficiency and decreasing their costs.

Answer 4

You're confusing the economic principle of supply and demand with consumption. The answer to your question is yes...it is fair we all pay the same.

Gas is a commodity and hence its price is set primarily by supply and demand, however goverment taxes has skewed the price significantly. Lower taxes to lower gas prices.

Answer 5

trying to set up a controlled structure to ration gasoline will create huge inefficiencies that can be taken care of more simply in other ways.   You need the free market to properly price gasoline, the people who make the most efficient use of gasoline, probably trains who burn diesel fuel to haul freight, will be able to stay in business while the less efficient users, single families with 5 SUVs, all driving around the same town at the same time, will eventually be priced out of the market and have to cut back to ride sharing or buying a prius.

We need to let the price rise according to the free market, so that people will change wasteful behavior.

If there are short term crises that need to be addressed, you can provide targeted tax credits or other payment supports for people behaving in a desirable method

Answer 6

Imagine how difficult it would be to show and keep track of who has a large number of gas guzzling vehicles and those who have smaller sedans. It is near impossible.

Answer 7

How would you enforce your solution?  How do you know when somebody drives into your gas station, whether they deserve the "green" incentive or not?  You'd have to add a lot of overhead in infrastructure, not to mention the cost of regulation from both gasoline vendors and the government.  I just don't see how a "green" gas price scale could ever get implemented.

Also, keep in mind that in the US, we use more gas per capita than any other country in the world, and yet we already pay the lowest prices at the pump.  In economics, higher volume is proportional to lower prices, and yet your solution completely reverses that trend.  Would you suggest that because the US uses the most gasoline at the macro-level (i.e. country), that the US should pay more?  Or do you think your principle should only apply at the micro-level (i.e. family.)  

That said, thank you for your efforts at using less gasoline!  I would point out that you are still being rewarded.  By using less gas, you pay an overall lower gas bill.  I'm seeing a lot more people commuting to work on bicycles these days, and why not?  You save by making fewer trips to the pump, and get exercise.  Of course, if you live too far away, you can still choose to car-pool or use public transportation to reduce your bill even farther.  There are other ways at cutting your bill and living more green at the same time.

Best wishes!

Answer 8

Good idea, however that would be impossible to regulate.

Answer 9

Your theory makes no economic sense.  We are a market economy, who function by supply and demand.  Supply and demand determine the price that all people pay.  People don't pay more because their quantity demanded at the particular price determined by supply and demand is higher.  All demand (aggregate demand) determine prices along with (aggregate supply).

Answer 10

I TOTALLY AGREE WITH YOU!!!!