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Originally Posted by CourtneyB
yeah itll effect me terribly lol cuz i haveta pay for gas and insurance and all that...i think im just gunna stop driving period lol its way too much....why is it so much???
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It is simple supply and demand. When supply is down, demand goes up. Merchants all along the supply line realize this and raise their prices. Once the prices go up and people start thinking "im just gunna stop driving period", then these same merchants think twice about raising their prices.
Also, when the cost to supply raises, the prices raise.
In this case, before Katrina, we already have the price for crude oil over $60 per barrell. Combine this with the fact that 10 oil refineries had their supply cut off due to the hurricane AND many drilling rigs in the Gulf are non-functioning, gas prices are going to remain high for quite a while.
Once the supply recovers and catches up with the level of demand, then prices will recede.
At this time, if governments capped gas prices (like they did in '73), then people would continue to buy gas at the same rate they have in the past and not change any of their habits. This would lead to a continued demand and an ever-decreasing supply. That situation would be scary since the supply side of the situation would not have a chance to catch up with demand. It is good that people like Courtney are thinking about "not driving period"... that helps the process much more than government control. This change of habit decreases demand and allows supply to recover.
A big fan of Adam Smith,
Andy B.