Low gas prices bad for the economy???

The market is controlled by an invisible hand. [/adamsmith]

http://plus.maths.org/issue14/features/smith/

 

The hand is Exxon's. And the only reason it's briefly invisible is that it's in your pocket.

 

I prefer to go with the rational explanation. Gas is an almost perfectly inelastic product right now, meaning that demand doesn't change regardless of what the price is. Products can only have high prices and remain inelastic for the short-term, economically speaking, before the demand curve flattens a bit. This is also the best time for competition (different energy sources) to enter the market.

If that doesn't make sense to you, think about this: Why would you believe that this conspiracy is the ONE THING that the Bush administration managed to pull off competently? It seems too complicated.

 

It's not a Bush administration scheme. They're not scheming to drive up the prices. They're allowing the oil companies to do it. They're accepting these bullshit excuses about Katrina and supply and demand and yada, yada, yada and they're allowing their base supporters to make a shitpot of money.

And there have been several schemes the Bushies have pulled off, to an extent. The war in Iraq, Abramoff, wire-tapping -- they pulled all those off well enough to get what they wanted, they just got caught afterward.

 

The oil companies didn't make up the laws of supply and demand. If their prices truly were too high, consumers would not buy gas. Publicly traded companies are money-making machines. They will sell their product at the highest possible price that people will still buy it for. This is basic firm theory, and the oil companies are caught up in a perfect storm of controversy while doing the same thing that any other profit-seeking entity would do. Do they catch tax breaks and pollution breaks through their relationships with the White House? Sure. But selling gas at high prices is not some devious conspiracy they are getting away with. It is the free market at work in a country where people can't get their minds around the idea of not driving and are therefore dependent on oil.

 

It's not as simple as "supply and demand." If it were just that, gas prices wouldn't have maintained their high levels over the past year. There would've been a price bump during normal times and a big bump after Katrina, but there's absolutely no legit excuse for the prolonged high prices.

They're tinkering with the prices on two fronts -- refining and markets, mostly in the markets. I really don't want to go into details on this, partly because I don't think I have the knowledge to even adequately explain it. But there was a case involving BP from earlier this year, in which the company was accused of manipulating the market, that would offer some decent insight.

The bottom line: Gas prices didn't suddenly multiply by three for no damn reason. Supply didn't decrease for anywhere near the same period of time gas prices were up and demand didn't increase significantly at any point.

Also, I'm tired of hearing the argument that we should drive less. OK, I'll drive less. But the guy driving the UPS truck, the guy driving that semi and the guy driving that airplane, I don't see them following along. I understand the premise -- that we should attempt to decrease our dependence on oil. That's a fine notion, but it's like saying we should decrease our dependence on electricity. There's only so much dependence you can eliminate.

 

You're right about one thing. You don't have the knowledge.

 

That's rather sad. Here I thought we were having a civil, friendly discussion and the first time you can't come up with an intelligent response you turn to a personal attack.

Nice work.

 

He did win.... twice.

 

I would watch the news to see whether oil companies are waiting till after the November elections to shut down refineries for winter blend. They usually start doing that in early October.

If they keep flooding the market with gas and driving prices down farther, that'll be great for those of us who drive ... but it'll send up a big red flag.

Never mind Bush — The oil companies have as much at stake in November as Bush does, if not more. If the Democrats regain Congress, the joyride's over for both Bush and Big Oil. Once they start digging into their escapades, Enron's gonna look like a carnival game.