Oct 12 2008
Gas Prices Questions
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Rhino from http://therelevantrhino.today.com/ responded to my gas prices blog a few days ago with: “You’ve missed the connection…imploding economy= less travel=lower prices. They can’t afford those multi-million dollar bonuses if no one’s driving. The simple fact of the matter is that in order to operate, companies have been forced to drop the barrel price, and we see the results at the pump.”
I’m not here to attack this person, whom is intelligent and writes a mean blog, but their comments confused me. Gas prices go up and that is bad, right? Gas prices go down and… That is also bad? How does that work? I’ve stated many times that I’m not an economist, but I’m trying to learn. If up is bad and down is bad… Then what is good? Is there anyone out there who can help me out with this one?
And to throw fuel on the fire, wouldn’t off-shore drilling solve these problems? Providing Americans with their own oil while freeing up money to invest in research for alternative fuel sources? Also, what about a high speed rail system for travel throughout the country?
One Response to “Gas Prices Questions”
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First, of course I don’t mind being quoted.
Second, here’s the thing. In order to operate, the oil companies have been forced to lower their prices so that people don’t simply stay at home. Economics is built around supply and demand. When the demand drops (people drive less, spend less on gasoline), the price must drop to make the product more attractive.
I wasn’t saying that low gas prices were a bad thing, far from it, just that there is a connection between a crumbling economy and lower cost at the pump.
Unfortunately, we won’t see a drop of oil from offshore drilling for 10-12 years. In the same amount of time, we could spend that money concentrating on becoming more reliant on non fossil fuel based energy. Even the White House’s own energy commission acknowledges that offshore drilling won’t solve the problem until 2030. We only have 3% of the world’s oil reserves, yet consume 25% of the available oil. That doesn’t eliminate the problem, it exacerbates the problem.