Monday, May 08, 2006

Price Gouging and Consumer Gasoline schemes

Every time the price of gasoline goes up, emails start circulating
about how we should have a day with out buying gasoline. Another email
suggests that we avoid the big two oil companies Exxon and Mobil and
buy from their competitors. The going with out gas scheme does not
address the many other factors for the rise in gasoline prices. On the
other hand, the using the competitor scheme does not address the demand
issue. If the competing companies' demand increases due to business
taken away from Exxon and Mobil, but the supply does not increase, this
results in higher gasoline price at the competitor that you have chosen
to buy gas from. Exxon and Mobil at this point can keep their price the
same and it would be as savings compared to the higher gas price of
their competitors or they can charge the same high price that the
competitor's gas has risen to.  When it comes to gasoline, we tend to
react with our emotions instead of our intellect.  If we study Austrian
economics, we find that their can be many reasons for the rise in price
and that one of the main solutions is to increase the supply of oil. 
George Reisman has put up an excellent article about Price gouging and
the true reasons for the rise in gasoline price. See his article below:

George Reisman's Blog on Economics, Politics, Society, and Culture: “Price Gouging”: Setting the Record Straight

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