I know that gas prices are high and people are complaining, but it seems that consumption still hasn't gone down.

So, how high before people REALLY start doing crazy shit about gas prices?

How high before you'd sell your current vehicle for a hybrid?

How high before you'd seriously consider biking to work instead of driving?


For myself, approaching $5/gal is when I'd start really thinking about getting a hybrid. And then once it reaches the $7/gal range I'd start looking at public transportation or bicycle options.

5/20/2007 2:41:42 PM

This couldn't go in the other thread?

5/20/2007 2:42:56 PM

No.

5/20/2007 2:43:37 PM

Oh, well in that case I'll answer here.

5/20/2007 2:44:55 PM

It's already happening. Gas consumption hasn't dropped, but the growth in travel is down and thus growth in fuel consumption is also down.

i.e. consumption hasn't dropped, but it's not growing like it used to.

5/20/2007 2:46:03 PM

I would seriously consider getting a new vehicle at about $5 for the simple reason that I drive very little.

I would consider getting a plug-in hybrid in about the $7 range.

5/20/2007 2:55:25 PM

bout tree fiddy

5/20/2007 3:23:04 PM

1.85

5/20/2007 4:04:12 PM

one dollar, bob

5/20/2007 4:40:30 PM

large numbers of people are still buying large SUVs,

so apparently we're nowhere near "too high" yet.

5/20/2007 5:09:00 PM

$10.00/gal

5/20/2007 5:56:15 PM

I think this fuel market is being propped up by all the equity loans people took out on their homes after the real estate boom.

5/20/2007 6:54:20 PM

4 dorra and I bike to work.

5/20/2007 7:52:46 PM

i already got a car with better gas mileage due to the increase (was driving an suv)...if i end up paying >$50 to fill up this car (which is almost to where I got when gas prices were at their highest last year and said "enough") then I'll start doing something else

5/20/2007 7:54:26 PM

^^i seriously doubt it.

i think people would still drive at $6 a gallon

5/20/2007 8:08:35 PM

When it gets to 6 or 7 bucks a gallon, I'll cut back on unnecessary trips, maybe buy a motorcycle.


To really, really change how I drive, 10-15 a gallon will have to be the norm. I don 't see that anytime soon.

5/20/2007 8:20:05 PM

^ if gas gets anywhere near that level, the decisions will be made for you as allowing such an oppressive market condition would destroy our economy.

[Edited on May 20, 2007 at 8:35 PM. Reason : .]

5/20/2007 8:34:31 PM

lots of things will destroy the economy, like my political science paper i wrote two years ago.

Says so right on the paper. Got a C- on it, not bad for something that would ruin the economy.

Fuel getting to 10 bucks a gallon is about as likely as a foreign military invasion of America

5/20/2007 8:48:52 PM

Quote :

"^^i seriously doubt it. i think people would still drive at $6 a gallon"

Some people might, but I won't. It's only 11 miles on back roads. I can get there in 50 minutes, and it's incentive to get on the bike.

5/20/2007 9:06:30 PM

I would drive at $6/gallon since the company I'm working for is covering my travel expenses. As for going to work I would probably try to bike since it is a short ride down to where I'm going, and I could take side roads with less traffic so I don't get killed.

If gas hits $5/gallon I am seriously going to consider getting another car. If there is a gas shortage this summer and I ever get stranded anywhere, I will probably get a different car. I don't have a lot of money when it comes to this kind of stuff, but I would make a change to keep gasoline as a lower percentage of my yearly budget (it's about 12% right now, and I don't want it higher than 15%).

5/20/2007 9:22:49 PM

In addition to reconsidering their vehicles, I'd hope many people would reconsider the distance of their commutes

5/20/2007 9:26:36 PM

because that is really easy to do

5/20/2007 9:27:58 PM

Well, I bought a electric bicycle that makes most short trips (to school and back, beer runs, bite to eat) about as easy as taking a car. Hell, its quicker than waiting on the bus or finding parking on campus. I hope people start to pick it up. No gas needed. I guess you would say its a beginning.

I wouldn't mind having an electric motorcycle like this guy built. Check it out, the thing moves. Guess the only annoying thing about it is without a motor to make all the noise, you can hear the chain clatter fairly well.



[Edited on May 20, 2007 at 9:45 PM. Reason : .]

5/20/2007 9:38:28 PM

Quote :

"because that is really easy to do"

What's so hard about it?

5/20/2007 9:42:45 PM

Quote :

"because that is really easy to do"

It is when you're making the initial decision. I don't expect people already firmly planted to up and move.

5/20/2007 10:18:14 PM

^^I think finding a place is the hard part.

Like, let's say that for some reason I find a job as a teacher at a really nice school. I wouldn't take it, but if for some reason I did, I probably wouldn't be able to afford to live near the school.

If the school allowed me to set up a cot in the classroom, swear to God, I'd do it in a heart beat and live right where I work. That's a dream of mine, but anyway...

5/20/2007 10:41:22 PM

my sister just got back from Qatar......where gas is 20 cents per gallon.

I guess its great when oil is your main export

5/20/2007 10:43:34 PM

This will tell you:

5/20/2007 10:43:41 PM

^^^ I'm calling it-- 15 days on the job until you're disillusioned.

[Edited on May 20, 2007 at 10:45 PM. Reason : .]

5/20/2007 10:44:55 PM

^^How about when supply and demand are both inelastic? Like in this case?

You can go ahead and throw out that graph.

5/20/2007 10:55:36 PM

^^I'm already disillusioned.

I have all these fantastic ideas about how the world would work if we just did everything my way, and when people fuck it up, I get so pissed off. Like, when a young, well-educated, smart girl who knows about birth control gets pregnant, I'm thinking to myself, "WTF is wrong with you?!?!" Cause she totally crushes my idea that if we educate people and give them cheap birth control, they won't go out and fuck up and get pregnant. BUT THEY DO!!!

I also yell at people. When I see kids just bumming around on bikes when they should be in school, I let them know how I feel with plenty of cursing out the car window.

Now that I think about it though, I'm sure there are people in the medical community and others who get pissed at people like me. Smoking cigarettes and drinking a case of beer after a day that included no exercise, two sausage biscuits, and a four-person serving of fettucine alfredo or some shit...

[Edited on May 20, 2007 at 11:23 PM. Reason : sss]

5/20/2007 11:15:47 PM

^^ Baloney. In practice, any currency or commodity used to measure price is also the subject of supply and demand.

Besides, demand is not perfectly inelastic. Your position only works as a short-term proposition. In the long-term, your position defies the basic law of demand--at lower prices, consumers will buy more of a good. THINK! And if the demand for gas is perfectly price inelastic, why do prices ever stop rising?

inelastic: "relatively unresponsive to changes, as demand when it fails to increase in proportion to a decrease in price."

Are you a Keynesian?



[Edited on May 21, 2007 at 12:30 AM. Reason : .]

5/21/2007 12:20:50 AM

I'm speaking in relatives, not absolutes. Both supply and demand are relatively inelastic to price changes. We are running out of new wells to drill, and current wells are producing less oil. OPEC and other oil producers have not been able to raise production despite record high profits per barrel of oil. That's called inelasticity of supply. Consumption has not gone down despite ever-rising oil prices. Thats called inelasticity of demand. What is so hard to understand?

Now re-draw the graph with two extremely shallow lines intersecting. Make the slope something like 1:10. Then move the demand curve up a little or the supply curve down a little and see what happens.

[Edited on May 21, 2007 at 12:33 AM. Reason : 2]

5/21/2007 12:31:56 AM

Quote :

"If there is a gas shortage this summer and I ever get stranded anywhere,"

Well, as long as we stay away from price controls of all forms (such as gouging laws) then shortages will not result.

Quote :

"How about when supply and demand are both inelastic? Like in this case? You can go ahead and throw out that graph."

Then the price moves a lot. What you are probably thinking off is perfectly inelastic supply and demand; in such a market it would be impossible for supply to equal demand, either infinite production floods warehouses or infinite demand outstrips supply. To the best of my knowledge there is no such thing as a perfectly inelastic market, so we can be pretty sure that the demand and supply curves do slope somewhat, so a meeting price can always be determined such that supply equals demand; it just might require substantial price swings.

That said, as oil price swings have been historically mundane, especially compared to far more volatile markets such as coffee or sugar, I suspect the supply and demand curves are moderately elastic.

[Edited on May 21, 2007 at 12:44 AM. Reason : .,.]

5/21/2007 12:39:25 AM

^^ I understand perfectly--I don't think you understand perfectly inelastic. Your last carefully worded post was nothing like your previous one in question:

Quote :

"^^How about when supply and demand are both inelastic? Like in this case? You can go ahead and throw out that graph."

You made no mention of "relatives"--you seemed quite absolute to me! In any event, though economics is often counterintuitive, we all know intuitively that at some lower price, demand for gas would increase; and at some higher price, demand for gas would decrease--and I'm just dealing with the demand-side economics of the scenario right now. No, I’m afraid that one cannot simply throw out the concepts of supply and demand--sorry.

PS: I think that LoneSnark and I have reached the same conclusion concerning your post, Prawn Star.


[Edited on May 21, 2007 at 12:51 AM. Reason : .]

5/21/2007 12:46:56 AM

Quote :

" Well, as long as we stay away from price controls of all forms (such as gouging laws) then shortages will not result. "

yeah, let's get rid of gouging laws. That's a great fucking idea.

and it is incomparable to compare a necessary commodity to luxury items (coffee and sugar)

5/21/2007 12:50:56 AM

Quote :

"Markets work fine under normal circumstances, but fail under crisis situations. Government must regulate prices and impose price controls during a crisis (such as after a hurricane) to stabilize markets. Fiction. This is an argument that we hear frequently (and not surprisingly) from state governors and their pit-bull attorneys general, ever poised to put a legal stranglehold on retail gasoline stations thought to be engaged in 'price gouging,' however that practice is to be defined. What the argument states is that the pricing system works well under 'normal' circumstances, when supply and demand are relatively stable. But, when crisis situations occur, and when supply and demand conditions are significantly altered because of a national disaster or other emergency situation, prices become too volatile and thus require 'stabilizing' through government price controls and other regulatory measures. That is, prices are said to 'behave' properly prior to a crisis, but improperly during and after a crisis. This is certainly wrong when one stops to think about it. Prices are coordinating information; signals to suppliers and demanders, a reflection of the market conditions of supply and demand. It is inconsistent and illogical to assert that prices perform their proper signaling and coordinating function in non-emergency situations, but then, somehow, for no apparent reason, simply stop performing their signaling and coordinating role during and after a crisis. In fact, if anything, it's just the opposite. The pricing signals that emerge from a free market during and after a natural disaster (such as a hurricane) are even more important for us to rely upon. It is precisely during emergency situations, when supply and demand experience their greatest volatility, that we are most in need of the coordinating information that prices convey. It is during a natural disaster, such as a hurricane, when pricing signals will be most valuable in conveying to suppliers and demanders the relevant information about the use of scarce resources. And, it is precisely during such crisis situations where the artificial manipulation of pricing signals by the government (through explicit or implicit price ceilings) will do the greatest damage and lead to the greatest shortages. We saw this clearly in the shortages of gasoline in and around the Houston and Gulf areas prior to Hurricane Rita. Government officials were looking for any opportunity to file law suits against 'price gouging' retailers in the aftermath of Hurricane Katrina. As a result, some gas stations in the Gulf region were understandably reluctant to raise their prices in the face of escalating demand during the Hurricane Rita evacuation. When prices remain too low relative to supply and demand conditions, a shortage must result. This is in fact what happened. Gasoline shortages in the Gulf Coast region stranded numerous people along the Texas and Louisiana freeways in the baking sun, directly in the path of an oncoming hurricane. So, why does this argument so frequently come up? It stems from the following fact: Those who make this argument tend to generally agree with and accept the outcomes of the pricing system and the market under 'normal' circumstances. That is, they will tolerate the prices they pay for goods and services under conditions they believe are routine. However, when an emergency situation arises, these same people strongly dislike and view as unacceptable the (higher) prices that emerge from the very same pricing system they rely on under normal circumstances. Thus, they claim that the market is not functioning properly and needs regulating because they dislike (for moral and emotional reasons) the outcomes they observe during a crisis. This is surely inconsistent. In fact, the price movements we tend to observe during and after a hurricane in the Gulf reveal that the market is working precisely the way any good economist would predict: a spike in demand for gasoline, accompanied by a reduction in the supply of gasoline refining capacity, will cause prices to rise. Just because some consumers dislike this outcome does not mean that markets have failed."

5/21/2007 12:58:32 AM

and where, did you get that?

5/21/2007 1:02:20 AM

^ What difference does it make? Let me guess: You want to attack the source instead of the argument--as is your standard mode--right?

I found it in Logic Land, which you should visit someday.

5/21/2007 1:05:25 AM

I don't like his explanation as to why people like gouging laws so much. I believe it has to do with how people view disasters. People can accept oil retailers making profits under normal circumstances where, arguably, everyone is prospering. But in the event of a disaster, people feel it is wrong for retailers to profit off the misery and desperation of others.

I too recognize the gut reaction such statements should illicit. But what our gut fails to recognize is that high prices (profits) are more than just the retailer's reward for existing, they are a system of rationing scarce resources.

That scarcity does not go away just because a disaster strikes; often a disaster increases scarcity. So why should high prices stop rationing scarcity just because doing so happens to benefit retailers financially?

People enjoy examples, and my favorite one is motel rooms. After a hurricane strikes an area, much of the housing and motel space is damaged or destroyed, leaving many homeless. As it is, there are only so many motel rooms to go around and people will be desperate to use them, making them scarce. Without gouging laws, the motel will quickly take advantage of the situation by jacking up prices. By doing so, it is sending the signal that motel rooms are scarce and should be conserved. As such, individuals whose homes are merely damaged will instead opt to stay home to save money. Individuals that have a full tank of gas will instead opt to keep driving, taking rooms further away from the devastation with lower prices. Families with children that would normally take two rooms will instead save money by squeezing into one room. As a result of high motel prices, therefore, individuals who don't have the option of avoiding high prices can get a room at the local motel.

Alternatively, with price gouging laws fixing prices, instead of scarce resources going to those most in need and therefore most willing to pay they will be consumed in a first come first serve basis. The first large family to the hotel takes two rooms, the group with a full tank of gas takes a room, the family that just wants to avoid a night without electricity takes a room. And late that night, after all the rooms are full up, arrives the multitudes of families with no where else to go; all they can do is start walking or sleep in the lobby.

Now, since you don't know which group you will fall into, which of these two scenarios do you prefer? The gut reaction is to complain that the rich will tend to take rooms away from the poor if prices are allowed to rise. Better to allocate the rooms first come first serve than to allocate the rooms according to class. But this complaint is an exaggeration: a poorer family with a credit card desperate for their lives can easily outbid a wealthy family that is merely fleeing the discomfort of driving to the next motel, squeezing into one room, or staying home.

5/21/2007 2:06:05 AM

^ Aren't you a libertarian? The quotation is from Tom Lehman for the Ludwig von Mises Institute--von Mises was, of course, an economist and a well-known influence on the libertarian movement. And Lehman's analysis is dead-on.

Is it your intention to disagree with everyone, LoneSnark? I understand that you probably view yourself as ruler of the economics' playground here. But--believe it or not--others, like me, actually have some coursework and interest in economics, too.

[Edited on May 21, 2007 at 2:17 AM. Reason : .]

5/21/2007 2:14:38 AM

Eh, I disagree with some of the price gouging analysis.

While government is certainly too quick to jump on the "gouging" bandwagon and use it in cases where its not appropriate, there are some good reasons for price gouging laws.

Raising hotel prices or gas prices to a level that will keep supply from running out is precisely how the market should function. However, some people are apt to raise prices beyond that because they may temporarily gain monopoly power or they may find it easier to collude during a crisis.

Quote :

"Bargaining on a sinking ship Your ten million dollar ship has been caught in a storm, disabled, and is gradually going down. Fortunately, a tug comes by and offers to rescue it. Unfortunately, the tug captain, knowing the value of the ship, proposes to charge nine million dollars for his services. If you turn that offer down, he will be happy to take you and your crew to safety, leaving the ship to sink. You agree to his price, he tows the ship safe into harbor, and you refuse to pay, claiming that your agreement was obtained under duress. The admiralty court concludes that a reasonable price for the tow is one million dollars and rewrites your agreement accordingly. Bargaining with the captain of the tug while the water is rising past your ankles certainly feels like duress to you. But this situation differs from real duress;your money or your life;in one important way. The mugger got you into trouble; the tugboat gets you out. It was not his fault that your ship was sinking. The argument offered earlier against enforcing contracts under duress here cuts in just the opposite direction. Increasing the amount tug boats can get for saving your ship increases the chance that, if you are sinking, a tug boat will be somewhere close, which is a good thing. If we are to justify the refusal to enforce such contracts, we need a different argument. The first step to getting one is to ask what the efficient price is for the tugboat to charge;the price that maximizes the net gain to all concerned. Since the payment itself is merely a transfer, that means asking how the incentives created by the price will affect the actions of people who own tugboats and people whose ships might need a tug. Consider the question first from the standpoint of the owner of the tugboat, deciding whether to spend an extra hundred thousand dollars to increase by one percentage point his chance of being at the right place in the right time to save a sinking ship. Perhaps he is deciding whether to cruise around in bad weather looking for ships in trouble, or whether to keep his radio receiver manned around the clock in the hope of picking up a distress call. When will he decide to spend the extra money and when, from the standpoint of efficiency, should he? He will spend it if the price he can collect is at least ten million dollars, since in that case (assuming away any complications due to risk aversion) his hundred thousand dollar expenditure will produce an average return of at least a hundred thousand dollars. He should spend it if the value of the ship is at least ten million dollars, since in that case the social gain from his acts;an extra one percentage point chance of saving the ship;will be at least equal to the cost. If we want it to be in his interest to take those precautions that are worth taking and only those, we should allow him to collect the full value of the ship as the price for saving it. Any lower price means that, when he takes precautions, some of the benefit goes to the owner of the ship. That is a positive externality, and the result is a lower than optimal level of precautions. Next consider the situation from the standpoint of the incentives of the ship owner. Suppose that, given whatever tug owners are doing, a sinking ship has a fifty percent chance of being rescued. The ship owner must decide what risks to take in running his ship;whether, for example, he should keep the ship in port during a storm or head out to sea, accepting a small risk that the ship may get into trouble. How will he make the decision and how, from the standpoint of efficiency, should he? Sending the ship out in a storm has, we will suppose, a two percent chance of getting the ship into trouble. We further suppose, in the light of our analysis so far, that if the ship is rescued the charge for the rescue will be the full value of the ship. It follows that the cost of to the owner of sending the ship out is a one percent chance of the ship sinking plus another one percent chance of having to pay the tug ten million dollars to save it. The owner will send the ship to sea only if his benefit from doing so is at least two hundred thousand dollars. This is the right calculation for him but the wrong calculation for an efficient outcome. Sending the ship to sea results in only one chance in a hundred of its sinking, since half the time it will be rescued. The rescue results in a ten million dollar loss to the ship owner but a matching gain to the tug owner. So it is efficient to send the ship to sea as long as the benefit is at least a hundred thousand dollars. To make it in the owner's interest to act that way, the price charged by the tug should be zero. As long as it is more than zero, the ship owner confers a positive externality on the tug owner every time he risks his ship, so he risks the ship less often than he should. So far I have assumed away the actual cost to the tug in time, risk, and fuel of bringing the crippled ship back to port. If we redid the analysis including that, the conclusion would be that the price that gave the ship's owner the right incentive to keep his ship out of trouble was just equal to the actual cost of the rescue. Readers interested in a more precise statement of the argument and willing to put up with the necessary mathematics will find it on the web page. [math icon] We have just shown that there are two efficient prices. One, the full value of the ship, gives the tug owner the right incentive to be in a position to rescue sinking ships. The other, the cost of the rescue, gives the ship owner the right incentive to avoid getting his ship into a situation where it needs rescuing. Just where between those two the price should be set depends on how sensitive each party is to the relevant incentives. If there are very few acts the tug owner can take that would be worth taking at a price of ten million but not at a price of five, lowering the price to five million will cause only a small amount of inefficiency on the tow owner's side. Similarly, if there are very few cases where it would be worth putting out to sea if rescuers only charged their costs but not if they charged half the value of the ship, then a price of five million would cause only a small amount of inefficiency on the ship owner's side. By trading off such considerations one could, in principle, find the least bad price, the price that minimized the inefficiencies due to inadequate incentives on both sides. The logic of the problem should be familiar from earlier chapters. The problem of two efficient prices, which I have gone into in some detail here, is simply Coase's problem of joint causation applied to sinking ships instead of air pollution or airport noise. It will reappear in the next chapter in the context of auto accidents, which are also jointly caused. The reason it looks different here is that those examples involve dual causation of bad things, such as pollution or auto accidents, which we want to deter. This time we are concerned with dual causation of rescues, which we want to encourage. The solution is one we found back in chapter 7. Put the incentive where it will do the most good. Our conclusion so far is that the efficient price is somewhere between the value of the ship and the cost of the rescue. A second conclusion is that there is no reason to expect bargaining to produce it. The bargaining occurs when the ship is sinking and the tug has already shown up, after all the relevant decisions, by ship owner and by tug owner, have already been taken. The only remaining decision is whether to rescue the ship or let it sink, and everyone already knows the right answer to that. Everyone knows it, but we may not get it. When the bargaining occurs, it is in a setting of bilateral monopoly. Each side is trying to get as much as possible; while they argue, the ship is sinking. That suggests one good argument for the present legal rule, which permits an admiralty court to rewrite a contract that is too favorable to one side. It reduces the risk that the ship will sink while the two sides are haggling. Alert readers may wonder how this analysis, in which the best possible result involves inefficiency on both sides, can be consistent with the Coase theorem. The answer is that in a fully Coasian world, a world where all transaction costs were zero, ship owners and tug owners would contract in advance to specify when tugs would be in places where ships might need rescuing, how willing ships would be to put to sea in storms, and the like. A sufficiently elaborate contract, in a world of zero transaction costs, would produce a result that was efficient on every margin. I have implicitly built transaction costs into my analysis by assuming that the contract is only negotiated after the ship gets into trouble. It would be interesting to investigate the actual market for salvage services in order to see where, between that simple picture and the fully efficient version, real arrangements end up."

-- David D. Friedman (son of Milton)
http://www.daviddfriedman.com/Laws_Order_draft/laws_order_ch_12.htm

5/21/2007 7:05:48 AM

At 3:00 alcohol is cheaper. you can get ethanol for 2:10/gallon i say everyone start converting now.

5/21/2007 8:12:22 AM

Quote :

"Is it your intention to disagree with everyone, LoneSnark? I understand that you probably view yourself as ruler of the economics' playground here. But--believe it or not--others, like me, actually have some coursework and interest in economics, too."

It was not my intention to disagree, merely offer a slightly different perspective of the same correct answer.

5/21/2007 8:45:48 AM

Quote :

"^ What difference does it make? Let me guess: You want to attack the source instead of the argument--as is your standard mode--right? I found it in Logic Land, which you should visit someday."

So I can read his sources. You know, the proper mode of action when you quote something is to say where it came from. And sometimes it is approrpriate to attack the source. Say, if anti-gouging laws were being heavily debated against by Exxon, I'd have every right to go to town on your source.

learn to post appropriately, or do not post at all.

5/21/2007 9:54:56 AM

Quote :

"Say, if anti-gouging laws were being heavily debated against by Exxon, I'd have every right to go to town on your source."

Only to the extent that you could point out that Exxon has a vested interest in seeing anti-gouging laws eliminated. Otherwise, what would it matter whether the source was Exxon or The Socialist Daily if the arguments are sound and reasonable?

5/21/2007 10:10:21 AM

nutsmackr, your argument in favor of source disclosure works if he is quoting statistics or the like so you can look up where they came from and attempt to counter the method used to determine them. But there were no statistics in his post, only a logical argument. As such, who is speaking is irrelevant, all that matters is whether or not you can counter the argument or otherwise poke holes in the reasoning.

5/21/2007 10:16:46 AM

^ Do you have any arguments against the sinking ship example?

Just curious b/c you seemed very anti-price gouging laws so I figured you'd have a counter argument for that example.

5/21/2007 11:52:22 AM

Quote :

"learn to post appropriately, or do not post at all."

nutsmackr

There, fixed it for you.

LoneSnark is right about me not having to post the link, but I'll do it--just for shits and giggles:

http://www.mises.org/story/1936

5/21/2007 12:43:03 PM

ok people have been saying the euro thing for a long time...

you see, they don't really HAVE to drive. they're all sort of packed in like sardines.
ohh and their hamburgers cost twice as much too.

5/21/2007 1:20:29 PM