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Essay On Gasoline Prices
Many individuals, business owners, and politicians are complaining that the price of a gallon of gasoline is just "too high." What do people mean when they say "too high"? The notion of a price that is "too high" implies that consumers are being somehow unfairly treated or abused by overzealous corporations. In a market system, producers must compete for consumer dollars, with price determined by the interaction of supply and demand. Under competitive circumstances, we do not consider a price too high or somehow unfair; we accept the actions of buyers and sellers as the most efficient method for allocating resources (Bulow, Fischer, Creswell, Jay S., Taylor, 8).
In other words, if some people want to pay $75 for a ticket to Bruce Springsteen concert, that is their problem. If, however, the market is less than competitive and firms are not competing in a legal way for consumer dollars, we have a situation where prices may actually be "too high." In this Economics Minute we'll try to determine what forces are driving the high price of gasoline and if the market is competitive. If the market is competitive, then the high prices we are experiencing are appropriate given the current levels of supply and demand. If, on the other hand, the market for gasoline is not competitive and firms are artificially manipulating prices, then the current price of gasoline is too high and some government action may be necessary (United States, Department of Energy, 12).
One thing everyone agrees on is the complexity of the gas distribution system and its vulnerability to infrastructure glitches. Crude oil's journey from well to pump can take more than two months, spanning thousands of miles and hundreds of transactions before it reaches cars. Gasoline begins its journey as oil, usually pumped from foreign reserves in Canada, Venezuela or Saudi Arabia.....
