Everyone and their brother is bitching about the price of gas these days. I’ve heard a bunch of theories for why gas is as expensive as it is. It’s Obama’s fault for bombing Libya. It’s Obama’s fault for not allowing new US drilling. It’s Obama’s fault for wearing a yellow tie that one time. It’s Congress’s fault for allowing oil companies to have giant tax breaks. It’s Congress’s fault for threatening to take away the oil companies’ giant tax breaks. It’s Congress’s fault for being Congress.
I’ve got news for everyone: gas prices are our fault. For paying them.
The fuel market works off the most basic economic principle of supply and demand. They have gas – supply. We want gas – demand. They meet our demand for gas by selling us their supply of gas. They set their prices based on what they think we’ll pay. If we pay one price, they raise the price to see if we’ll keep paying it. If we do, they raise it again. And again. And again. They’ll raise prices until the day when their sales drop, or rather when their supply starts to exceed our demand.
Now, gas sellers may try and cry scarcity – low supply – to justify raising prices. They’ll say that they only have so much gas and they need to charge a lot for it because when it’s gone, they’re out of business so they need to make profits now. But I haven’t seen anything that indicates that we’re in a scarcity crisis. There is plenty of gas on the market and our import supplies aren’t being affected by the Libyan action as much as some would have you believe. The top foreign oil provider to the US is actually Canada and we’re not bombing them. US oil companies would like to drill more so they can garner bigger market share – can’t let those Canadians profit from our oil demnd, eh – but new drilling tomorrow won’t affect gasoline supplies tomorrow and therefore won’t affect prices. The only thing that will bring prices down tomorrow is a drop in demand for existing supply tomorrow.
I know, I know, I know. You can’t stop gassing up your car. You have to get to work. The kids have to get to soccer. You need to run to the liquor store. You can’t cut back. I know. I’m not going to suggest that you do. Instead, I’m going to suggest you cut back on produce.
Seriously. Go to your fridge. Look at your selection of fruit. Pick up an apple. Where did that apple come from? I’m betting it came from the West Coast. Maybe Washington state? That’s all well and good if you’re reading this from a living room in Walla Walla but if you’re on the East Coast like me, you should take some time to think about how that apple got into your fridge. It rode on a semi for 3,000 miles. 3,000 miles in the largest, heaviest, least fuel efficient kind of vehicle on the road. How many gallons of gas did it take to put that apple in your fridge? I have no idea, but I bet it was a lot. That’s why the apple was so expensive. You had to pay for the cost of shipping and that cost has gone up with gas prices, which the trucking company keeps paying because you keep demanding out-of-season apples from 3,000 miles away. And the oil companies rejoice and roll around in $10 billion worth of net income from the first quarter of 2011. Money they got from gas for the truck that you paid for when you bought that apple.
Don’t eat the apple.
Next week, when you go to the grocery store, don’t buy an apple grown on the other side of the continent. Just don’t. See if you can find fruit that was grown in-state instead. Don’t demand the fruit that requires a truckload of gas to get from the orchard to you. If you don’t demand that apple, the grocery store might order fewer apples next time. And the grower will ship fewer apples*. And the trucking company will make fewer runs of apples. And they’ll use less gas. And the oil companies will see a drop in demand for their product and say “Huh. They’ve stopped buying gas. That’s no good. Maybe if we drop the price by 2 cents a gallon they’ll buy it again.”
But you don’t have to. You can keep buying local fruit and veggies. You can keep buying products produced in your state. You can keep looking for items produced in the US that don’t require oil to ship them from factories overseas to get to you. Don’t give in to a 2 cent drop. Keep lowering demand on gas by lowering demand on shipping. Encourage your friends to do the same. Eventually, the oil companies will get the message that the price of gas is too high and you’re tired of paying for it at the pump and everywhere else you buy products that were shipped. And that’s when prices at the pump will start to drop.
*I am aware that decreasing demand for apples as a tool for decreasing demand for gas will have a negative impact on the apple industry. That’s what economists call a negative externality and it’s part of the law of supply and demand. I have no solution for this. Perhaps Robert Reich or Paul Krugman can help. They’re actual economists. I’m just someone who took an economics class once and can now identify patterns in the market and bloviate about them.