Gas prices to high?

Question

I have a theory. When Supply goes up then demand goes down, and so does the price, but when supply goes down then deman goes up, and so do the prices . . . Then why is gas so high but yet I have not seen a single gas station that says "No Fuel" . . . something is wrong with that picture, someone explain?

Answer 1

Because it is an essential commodity and the government is subsidising its price. If you allow the market forces to determine the price, the prices would have sky rocked or would have closed down, as you suggested. The private fuel suppliers like Reliance have already closed their shops.

Answer 2

Demand for gasoline is high.  In Economics, they talk about the demand curve being "elastic" or "inelastic."  In the case of gasoline, the demand is inelastic.  The price goes up, but people still buy.

An example of elastic demand would be a certain chocolate candy bar.  If the price is doubled in a short time, demand will fall significantly.  Candy bars are not needed, so people can easily do without at a higher price.

Answer 3

Other factors come into play.

For example as the price goes up there formerly uneconomic oil wells are re-opened (there are many oil wells that are expensive to operate so they are closed if the price of oil is below a certain level.).

Another thing is that the demand for oil is lower with the higher prices.

Do not expect to see 'no gas' signs unless we do something stupid like placing price controls on fuel.

Answer 4

They have learned they can charge any price they want and we will pay it....there is no shortage in gasoline and the refineries, if put to capacity, would flood the market...but as long as we buy it they will sell it ... so far the price is no option!   Nobody has to have an excuse and our government is not asking for any.

Answer 5

Yes.