Tuesday, October 12, 2004

gas prices

Highway Robbery

I can recount the chronology of my drive to work with the posted prices of gas at various stations between Sacramento and Roseville. There's a Shell on the corner of H and 29th, an Arco at the Marconi exit off Business 80, and a Chevron, Shell and Circle K at the corner of the street on which my company resides. I'm gas price hawk, so I can tell you that the Arco is the cheapest, at $2.23 a gallon. The Circle K is where I will be getting gas from now on, since it's but a penny more and doesn't charge a fee for me to use my ATM card. The Shell and Chevron stations are charging $2.33 a gallon today, and their prices tend to vary wildly of late. There's something powerful about crossing the $2.20 threshold so stridently and so quickly. It makes me certain that this will only get worse.

Gas prices can't keep going up, and staying up, like this without having a significant effect on the economy. Since last October, gasoline has risen by 73%. If I consider merely the perspective of the individual consumer, I could possibly make the argument that a near-doubling of fuel costs would have a minimal effect on my consumption and driving patterns. I can't make this argument for myself, because I'm loathe to spend and use any more than I have to of this highly scarce and highly damaging natural resource and I'd just as soon work from home, or use mass transit to get there, if either were possible.

We can argue that the demand for gasoline is inelastic. We will buy the same amount regardless of the price, up to a point, of course. In the short term, this means that airlines will use the same amount of fuel, UPS will use the same number of trucks, shipping companies will continue to cross oceans to bring us our crap from China, you get the picture. If transportation and logistics industries are sacked with ever-increasing fuel costs, the only way to maintain their current profit level (which should be enough to keep them running, but not excessive, according the rules of competition) is to raise prices. We are dependent on those industries to facilitate trade, both nationally and abroad. This can only mean that soon, the price of goods other than gas will rise. The extra money has to come from somewhere.

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