Published: October 12, 2005 08:03 am      

Simple solutions to higher gas prices

Somehow it has escaped many people that we live in a Capitalist society where a merchant can charge whatever consumers are willing to pay for their product or service.

In Iowa, where we are among the best educated in the country, our own governor has jumped on the “gas gouging” bandwagon. He has joined several other governors in asking the federal government to “investigate possible gasoline price gouging in the aftermath of Hurricane Katrina...” and to “refund any excessive profits to consumers.”

The university of Wisconsin economist’s study that they refer to says that the hurricane is not entirely to blame for high gas prices because it did not cause a surge in crude oil prices. Of course not! The hurricane mostly affected the supply of refined oil (i.e. gasoline), not the crude oil supply.

Hurricane Katrina shut down nine Gulf Coast refineries, disrupted gas pipelines to the Midwest and East and stopped 90 percent of oil production in the Gulf of Mexico. We are still recovering and waiting on the damage reports from Hurricane Rita. Simple economics, the law of supply and demand, explain the high gas prices.

As a result of any crisis, Americans run to the gas pumps in panic and the customers drive up the price by further depleting the supply. In capitalist economics, price is directly related to supply and demand. The price a station charges is whatever the consumer is willing to pay for its product. When there is less of a product and the demand stays the same, then the product will cost more.

The opposite is also true, when demand decreases and supply stays the same, the price will drop. When there is a run on gas like there was on Sept. 11, 2001, station owners must increase prices or they will run out of product too quickly and not have any supply until their next shipment and their business will suffer.

If we really want to bring gas prices down in this country, the solution is very simple, we need to use less. It’s time for Americans to use this opportunity to utilize mass transit, carpooling, hybrid vehicle technology and human powered transportation, etc. We can nail two birds with one stone and be the better for it.

Start walking and cycling more, use less gas, save money, bring the prices down and lose weight all in one fell stroke. Instead of complaining about gas prices, stop driving your 5 miles per gallon gas guzzler and start pushing for higher gas mileage standards. It is people like me that stopped driving when gas prices went up to more than $2.50 per gallon that kept you from paying $4 per gallon.

Gas gouging is hard to prove and prosecution is usually a state matter unless it involves some form of collusion or other activity in violation of federal antitrust laws. Even the Federal Trade Commission has no jurisdiction over an individual gas station operator raising his price, no matter how high, unless there is some collusion among other station owners.

If a merchant is charging an outrageous price for something, just don’t buy it, they will eventually bring their price down. Contrary to what most people think, gasoline for the most of us is not a necessity. The average person drives less than 40 miles per day, and usually that is within the limits of local mass transit. It’s time we lay down our dependence on automobiles and start depending on each other.

Governor Vilsack, please send your economist friend back to school, hopefully in Iowa this time, and let him take a basic course in economics again. We don’t need to waste more federal tax dollars on a useless ‘investigation’ to prove that we need to blame ourselves for this situation.

Quit asking the federal government to do things for us that we can do for ourselves, our communities and our country more effectively; leave this issue to the state and local authorities who have the jurisdiction to handle this matter.