$20/gallon gas

[KanadaHye]

How about them apples?

http://www.cnn.com/video/#/video/us/...dollar.gas.cnn

[Anonymouse]

Re: $20/gallon gas

This seems like a doomsday scenario but it's a potential scenario because in the end, all prices in anything, reflect scarcity.

Is it possible that this may occur? Yes.

Is it probable that this will occur? No.

Here are a few good articles about gas prices and markets and although a bit of a read they will breakdown the common misconceptions.

http://mises.org/story/1936

http://mises.org/story/2008

http://mises.org/article.aspx?record=389&month=17

[KanadaHye]

Re: $20/gallon gas

If there are political motivations behind pushing the public to move towards alternative energy such as electric cars, I have no doubt this is a possibilty. Perhaps not 10 times the current prices but maybe double or triple.

[Sip]

Re: $20/gallon gas

A friend of mine recently told me an amazing story about his son who is a truck driver ... just recently he had a job to take a load of bottled water from Los Angeles to New York. Upon arrival, he had another contract lined up from just a couple of buildings away to take a full load of bottled water from New York to Los Angeles. It sounds horribly made up but it isn't. The kid actually drove the bottles there and drove the other bottles back.

Somehow at high gas prices, I doubt this would occur.

[Haykakan]

Re: $20/gallon gas

A friend of mine recently told me an amazing story about his son who is a truck driver ... just recently he had a job to take a load of bottled water from Los Angeles to New York. Upon arrival, he had another contract lined up from just a couple of buildings away to take a full load of bottled water from New York to Los Angeles. It sounds horribly made up but it isn't. The kid actually drove the bottles there and drove the other bottles back.

Somehow at high gas prices, I doubt this would occur.

That does sound pretty waistfull but businesses will do whatever makes them money. Supply and demand would control oil prices in a free market but we do not really live in a free market nor do we really live in a democracy. There is a reason why Russia is trying to hoard all the oil supply routes, this control will give it power over supply and thus it can manipulate many things including the price which is based on supply and demand and russia will control the supply factor. We have already experienced what wars can do to oil prices to. It is pretty obvious oil prices can be manipulated despite what those articles say and many countries are banking on it. It is rather frustrating that Armenia is in a region rich in oil and gas yet there is non that can be pumped in the country in a economoically feasable way. There is oil in Armenia but it is very deep and would not be cost-effective to get it now but i wonder if that will change in the future.

[KanadaHye]

Re: $20/gallon gas

I just paid $5 for 12 (500 ml) bottles of water. I can get a 24 (355 ml) can case of pop for much less. How much sense does that make?

Once all the world's water is privatized, there won't be water running out of our taps as cheap as we get now because people in developing nations will work and pay for the water they need. It will be a commodity just like oil. Good times, good times.

[Anonymouse]

Re: $20/gallon gas

If there are political motivations behind pushing the public to move towards alternative energy such as electric cars, I have no doubt this is a possibilty. Perhaps not 10 times the current prices but maybe double or triple.

We must not forget that a factor into the current price of anything, including fuel, is price inflation. The present dollar is worth barely 10 cents, maybe even less, of the 1970 dollar and is bound to lose ever more in the future. If you remember 1970s was the fuel shortage. The point is, if such a thing were ever to happen, the worst idea would be to enact price controls and price caps or any other silly legislation in an effort to combat rising prices.

The market must allow the proper allocation of resources to move about in an efficient way. This will involve a hard hit on many of our lifestyles but it must be necessary, otherwise intervention will only create unintended consequences.

In other words, the "market" - which really is just a reference to the anarchic or chaotic conditions of so many different and complex variables and permutations of voluntary interactions and transactions - must be allowed to efficiently allocate and disperse the resources to where they will properly belong.

For example:

To take Sip's trucking example. Assuming all other conditions being equal, fuel is $3 / gallon. It's possible that now such an endeavor is profitable or at least sustainable. Let's say the water costs $5 a bottle to deliver cross-country. There may be local companies that would sell State A Company water for $3 a bottle. However, maybe the company in State A prefers water from a company in State B because it is cheaper water and State A Company knows its customers like water from State B Company.

However, let's change the variable and say fuel is $20/ gallon. Now it would be unsustainable for State B Company to deliver water cross-country to State A Company because of the prohibitive gas price. State B Company would tell State A Company that it could still deliver the water, but the delivery of the water and the price for that product would be alot more. Instead it would now be at $30 a bottle to account for the increase in fuel prices.

At this point, State A Company would likely stop doing business with State B Company because buying water from them would simply be too much and they would lose money. State A Company would now choose to purchase water locally for $3 a bottle because that's what would be the most efficient under these conditions. Now, because State B Company has lost a valuable customer it probably will no longer be able to sustain itself and go out of business. Thus, the resources would properly be allocated into different fields. Perhaps those people in State B Company will now go into the lumber business because it's more local and serves local needs better. Those people that were employed by State B Company will now look to secure employment in another endeavor and a temporary unemployment would result while the market was correcting itself. It's possible that living expenses in State B would be untenable and alot of former State B Company employees would find living in State B not economically viable and move to State C where jobs are still plenty and cost of living is alot cheaper.

However, enter the state: In the grand wisdom of socialistic policies and government fiat, the government decides "there 'oughta be a law," to stop all this "price gouging" by companies. So they enact some legislation which is in effect a price control or a price cap or alternatively a subsidy to State B Company in billions and billions, or tax breaks to State B Company, and somehow State B Company manages to survive, and for years. The company continues to operate inefficiently because now it is effectively free from competition and innovation and will merely seek to sustain itself and present conditions because it has the aid of "the law" and "government" and the costs have shifted to the government, which in reality is, the taxpayers, from where the government gets its money. So people who would have moved out of State B to another state, sought alternative employment, continue to remain in State B. In fact, the jobs at State B Company seem so lucrative and ever-increasing, with increased profits, the company expands and expands and hires more workers. This goes on for years and years, population increases, housing prices increase because of more people, etc. What's really happening is the government as artificially created the illusion of prosperity, but in reality it's a bubble waiting to pop.

Somewhere down the line the constant government pumping of life becomes unsustainable and the inefficiencies and cracks in the system begin to come out. Like a house of cards, State B Company comes tumbling down. All of a sudden, State A Company, which has for years and years relied on its business from State B Company is out of a supply, and consequently out of its own business. Whereas before State A Company could have purchased water locally from a local company at $3, because of the government's subsidization of the inefficient State B Company, the government basically created a monopoly and it became harder for the local company in State A to do business in water so it closed its shop long ago and went into something else. Over in State B, State B Company which seemed like "good business" for years, and hired many people and indirectly affected housing prices, is all of a sudden out of business and there is a lot of unemployment. Essentially, the bubble has burst.

Had the market been allowed to correct itself initially, the gravity of this would have been far far far less severe and the impact would have been localized and only temporary. But because the government decided to interfere, it created an unintended consequence, with a bigger spread of the impact, which will take even longer to recover and readjust and properly reallocate resources. This is roughly a simplistic model of what has happened in America with the housing market and auto-industy.

This is why government interference into the marketplace is always for the worse.

[KanadaHye]

Re: $20/gallon gas

Yeah, the system screwed people with subsidies. The market was flooded and overstocked.