[saymaListserv] "Economics 101: How (not) to Lower Gas Prices

Janet Minshall jhminshall at comcast.net
Tue May 23 10:07:24 JEST 2006


Hi Roy,  Thanks for your response and "yes" to all of your 
suggestions about "what to do".  You understand supply and demand, 
the issue that Spitze's column addresses.

But if you think the price of gasoline and oil won't go up you are 
probably mistaken.  The futures markets have, in the past, been more 
often right than wrong  -- certainly more often right than economists 
who make predictions out of their accumulated knowledge rather than 
out of the immediate experience of "what the market will bear".  The 
futures markets function on the theory of "the wisdom of crowds" -- 
using input from many, many more people than participate in our 
elections.   No, there has been no shortfall in supply yet.  But it 
will come as China and India and the rest of the developing world 
begin to buy more and more to satisfy their perceived needs.

At the moment the prices are falling because the supply channels are 
full to overflowing -- that is, we have more oil and gasoline (and 
natural gas) on tap than we need right now.  But that is a temporary 
phenomenon.  Gulf oil production is still down 13% from last year's 
hurricanes.  The prediction is for more and stronger hurricanes this 
year.  When supply will actually fall short of demand is 
unpredictable.  Futures markets trade successively in a good news/bad 
news context.  As long as the news is good, as long as the supply is 
adequate to meet the demand, gasoline and oil prices will remain 
steady to down, but when the news gets bad  we will all know it  by 
the prices paid for gasoline and, next winter, for heating oil (and 
natural gas).                                                Best 
Regards, Janet Minshall


At 05:16 PM 5/22/2006, you wrote:

What to do?
>Agree to tax oursevles for the use of gas to pay for the means to 
>reduce using gas.  Fund renewable energy development, fund public 
>transportation. fund conservation measures such as green buildings 
>that use only half the energy of what conventional buildings 
>use.  Fund transportation concepts such as carbon fiber concept cars 
>that are stronger than steel, weigh less than half and go twice as 
>far as our current cars. (with a hybrid engine they would be getting 
>over 100 mpg,  all with off the shelf technology that we have today) 
>And fund research into solutions that haven't even been thought of yet.
>We just have to collectively want to.
>Roy




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