Whats up with these damm gas prices?

Question

Whats up with these damm gas prices?

Answer 1

Oil speculators, pure and simple. There oughta be a law...

Bush and Cheney's buddies are grabbing all the profit now while he's still in office. This is what the big secret meeting was about a few years back.

Answer 2

the oil company is now charging a c**p load of money for gas, and bush is in on it... which equals high gas prices!

Answer 3

A VERY SELFISH PRESIDENT

Answer 4

The price is expensive because the marginal buyer is willing to pay more.

You are the person who controls the price or really the "marginal you." Oil is a commodity, no producer has pricing power because no producer can differentiate their product. Imagine you had two barrels of oil, one produced by A and the other produced by B. They are identical in all respects, for purposes of our argument. Which is more valuable? Neither of course, so this is a case where producers must accept the given price and can do nothing to influence the price without losing profits to competitors.

So it is only the buyers who decide the price, every time you pump gas you are in an auction, a giant distributed global auction. If it isn't worth it to you, you will choose an alternative such as walking or something like that. If you cannot choose an alternative, then you have no say in the price. You must pay any price and so you have no voice in the price.

The person who has alternatives sets the price. This person can choose to buy or not to buy. They may walk, ride a horse, alter their travel patterns or ride a bike, but they can make changes. The person who is right on the edge, right on the margin is the only person with pricing power. If it is too expensive for them, the price will fall for everyone, if it is too cheap for them, the price will rise for everyone. It is only when the marginal people, the most flexible people with a choice alter their behavior that prices for a commodity change.

Right now, the people who are on the edge have shown a willingness to pay higher prices. As people fall off the edge, the price increase will begin to slow down. The saying, "the cure for high oil prices is high oil prices," means that when the flexible people stop participating, the price becomes inflexible and collapses.

One thing to remember, that is making this time a little different, is that the marginal people are probably not Americans anymore, they are probably Chinese and Indian. A nation addicted to oil will pay any price and isn't a marginal decision maker anymore. The nations that are just starting to become addicted are the ones deciding how worth it to them that oil be used instead of biking, public transportation or alternatives like coal.  A desperately addicted cocaine addict has no say in the price of cocaine.