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Old 05-09-2007, 07:49 PM   #61
ddmoit
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Hi Gary,

It is still basic economics. The demand for gasoline is said to be inelastic. That is, the demand doesn't change as much as it might with other goods when the price increases.

http://en.wikipedia.org/wiki/Price_elasticity_of_demand

It's not perfectly inelastic though. People have changed their demand for it somewhat. Some people have opted for more fuel efficient cars. In my case for instance, I don't have to buy a new vehicle. I have two already - a comfortable one that gets worse mileage than my '92 Dodge Spirit. These days, the old Spirit gets used more than the van for running around town - even though its radio sucks.

I'm sure that some people have altered their traveling plans as well.

So, you are correct that there is no ready substitute for gasoline. But overall demand has responded albeit inelastically to the rise in price.

The reason we don't see stations with no gas is that the price increase has scaled back demand enough so that it hasn't happened. That's how the market works.

Those of us who are old enough to remember the early '70s saw a different phenomenon. Government mandated price ceilings were put in place. With no price corrections possible, demand outstripped supply, which led to lines at the gas stations and rationing. It was a shameful way for a supposedly free and prosperous society to live.

As for the amount of gasoline that can be extracted from a barrel of oil, I don't know the answer other than to say that it varies on the quality of the barrel. All barrels are not the same. There is sweet crude and sour crude - and points in between. Perhaps some of our Texas brethren will enlighten us.
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Old 05-09-2007, 08:37 PM   #62
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Okay, I'll concede my argument about basic economics is a bit flawed. Heck, I hated the economics courses I took way back when ( I'm an engineer, not an economist).

And I believe that gas demand is inelastic, at least until the price crosses the threshold of pain to consumers. What is that price? And I'd dearly love to see a correlation between price increases and consumption to see if demand has really dropped in response. With no real data other than what I feel in my gut, I have to say that my hunch is that demand hasn't changed doodely-squat yet. Especially since the summer season isn't here yet (schools not out, hence people not going on vacation yet) so demand shouldn't have really risen yet - but prices have in anticipation of the demand.

So perhaps prices are rising to deter higher usage? We all know that usage will increase at least somewhat over the summer, it always has, regardless of prices. It is just not at the pain threshold yet. Close, maybe, but I'd lay odds that the current price won't decrease current usage one iota, though on the other hand, I can see some analysts saying that well, usage hasn't risen as much as anticipated, hence, we'll drop some risk and prices will recede a bit.

IMHO, the system is still just flat out broken. I don't believe there is any hard data to justify any of the fluctuations.
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Old 05-09-2007, 09:17 PM   #63
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I came home after work today , aching knees and all, grabbed a coldy and went to my butt in front of the computer. As ridiculous asit sounds, I've really had fun reading all of your takes on why fuel is so expensive. I've actually been thinking of riding my bike to work. Got five showers to build, the materials all there, no real reason to drive. It's only 10 miles on the back road.
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Old 05-09-2007, 09:23 PM   #64
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Dave, if i rode my bike(if i owned one) ten miles to work, i certainly wouldn't get any showers done.
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Old 05-09-2007, 09:25 PM   #65
Dave Taylor
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Quote:
Dave H said: It's only 10 miles on the back road.
D@mn Dave! Onliest' way that would work for me was iffn' it were 10 miles down hill. Dunno' how I would ever get back.

It's hell to git's old!


Seeee..... even Dave S is faster than I am.... ouch ouch ouch.
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Old 05-09-2007, 09:33 PM   #66
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Can you imagine what a back road in Oregon looks like?Didn't Reagan introduce electricity to oregon.
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Old 05-09-2007, 09:36 PM   #67
MHI
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I know that this attitude won't solve the problem, but...everybody pays the same for gas.

I pay more for gas, I pay more for materials to be delivered, I charge more for the jobs I do, my client pays more because of the gas prices. Don't forget the fuel surcharge that most manufacturers charge for shipping products to the supply houses.

Other things are going up as well, like copper, brass, aluminum, steel, cast iron...do I need to go on?
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Old 05-10-2007, 01:42 PM   #68
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Dan said

Quote:
Those of us who are old enough to remember the early '70s saw a different phenomenon. Government mandated price ceilings were put in place. With no price corrections possible, demand outstripped supply, which led to lines at the gas stations and rationing.
Those long lines were a result of OPEC cutting off oil shipments. The price controls had nothing to do with it. The price controls were a result of not the cause of the shortages. The Arabs were teaching us a lesson.
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Old 05-10-2007, 03:16 PM   #69
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Old 05-10-2007, 03:24 PM   #70
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I second what Jim said. The Arab Oil Emgargo gave Nixon an excuse to order the 55 mph speed limit. Congress later made it law. Then they determined that the reduced speed was responsible for a decrease in highway deaths, so they made it permanent. What a crappy piece of legislation it was, but it endured for two decades.

The price controls on gasoline and fuel oil were absolutely necessary. Gas went from .35 a gallon to over .70 in a couple days. If the feds hadn't stepped in it would have gone out of sight. Gouging, plain and simple.

Later on, Jimmy Carter introduced "windfall profits" legislation on the oil companies. It was a failed policy.

I'm with Gary. I think what's happening is highway robbery, and it ought to be stopped. All this excessive demand stuff is bullshit.
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Old 05-10-2007, 09:18 PM   #71
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Well their big plan is working. Get everybody pissed about 3.50, so when it goes down to 2.75 you think you're getting a deal.
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Old 05-11-2007, 07:58 AM   #72
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Dave, I only wish.
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Old 05-11-2007, 01:54 PM   #73
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Flat (and JB),

The notion that shortages are created by price ceilings is not my own. It is a generally accepted concept among economists.

There are many good books out there for anyone who would like to improve their understanding of economics. I recommend two in particular:

Economics in One Lesson - a true classic by Henry Hazlitt.
http://en.wikipedia.org/wiki/Economics_in_One_Lesson
http://jim.com/econ/contents.html


Economics for Real People - Gene Callahan
http://www.amazon.com/Economics-Real.../dp/0945466358

Since these two books and many others explain it a lot better than I can, I will limit my comments to a few remarks.

First, it is true that OPEC did reduce the supply of gasoline for a while. But all economic goods are scarce to some degree. The unfettered market strikes a balance between a given supply and demand in the form of market prices.

If a price is artificially set below what the true market price is, the first people who get to a supply of a scarce product will demand (consume) more of it than they would have at the true market price. This leaves less for others. That is a shortage, gentlemen.

If one were to pursue the logic of price ceilings to their ultimate conclusion, one would end up arguing that everything should be free. Hopefully even the most economically ignorant among us can appreciate the folly in that.
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Old 05-11-2007, 02:07 PM   #74
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Nobody is saying price fixing is a good thing we are just trying to explain to the economically ignorant why it was imposed in this one instance.

Believe it or not there was price gouging going on.

Put 10 economists in a room and you'll get 10 different answers to a question.
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Old 05-11-2007, 02:27 PM   #75
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put ten economists into a room and no-one will notice they've gone.
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