10 October, 2006

What to Do About Gasoline Prices

American Chronicle: What to Do About Gasoline Prices:
"Now that gasoline prices are below $3 a gallon, calls for the government to 'do something' to force prices lower have temporarily abated. But it is crucial for us to recognize that no matter what the price of gasoline is, such calls are wrong. All market fluctuations in the price of gasoline, up or down, are a good thing--and none of the government's business.

When customers' demand for gasoline increases relative to the supply, the sellers of gasoline raise their prices. As the producers and owners of gasoline, this is their right--and we should be glad that they exercise it. Not only do price increases encourage future production, but without such price increases, we would very quickly see shortages as customer demand for cheap gasoline far outstripped the available supply. Thanks to price increases, we can ensure our continued access to gasoline to the extent we are willing to pay for it--i.e., to the extent we value it. Most of us are willing to pay $3 a gallon for a 15-mile office commute--but might not be for a 15-mile drive to our pet's beauty salon, and so our personal consumption voluntarily decreases as prices increase."

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