Sunday, April 23, 2006

Where's The Shortage?

As I mentioned yesterday, the reason the oil companies claim that they were forced to raise prices is because there is a temporary shortage, and they need to raise the price to reduce demand. But does that really work? Has anyone really cut back on driving as a result of those suddenly higher gas prices?

I know my driving patterns haven’t changed. I haven’t heard any of my co-workers or friends talk about changes in their habits. The roads still seem just as crowded where I live, and the daily traffic jams are unchanged. The airlines are still flying. Trucks are still delivering goods all over the country. My observations are certainly not scientific, but it really appears to me that there’s been no real change in demand. In the long term, that might change, as people could switch to smaller cars, hybrids, and and so on…but the price changes aren’t long term, they’re an immediate response to a temporary shortage, and only make sense if they produce an immediate effect.

So if demand hasn’t changed, but there’s a shortage, we should be seeing signs of that shortage. Where are those signs? I haven’t seen a single station shut down. I’ve heard about a few, but they seem to be scattered individual stations – I haven’t heard about any cities shut down because no one can get gas. As best as I can determine, the solution to the shortage in those few places that are experiencing it is to drive an extra block or two to the next gas station – or at worst, buy mid-grade because the station is out of regular…which of course increases your costs and the oil company’s profits.

So, once again, tell me where I’m going wrong. The prices have been raised as a solution that doesn’t work to a problem we don’t have, caused by the people who profit most from the price increase. And they wonder why people are upset and asking Congress to intervene. Unfortunately, Congress is much more likely to make a lot of noise about the issue than to actually put a crimp in the profits of their biggest financial contributors.

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