Gas prices.... Gouging?

[Morrigoon]

PtM: when people can't afford it, they don't buy it. Demand drops. Then price drops, until everything equalizes.

[Name]

to play devils advocate,

The value of gas is the same as the value of anything, it is worth exactly what people will pay for it. The same is true for anything that you have, from a rare coin, to a figurine. If there is literally noone wanting to buy it, it is relatively worthless, as noone will buy it.(you may be able to get a few dollars for said fictional knick knack or coin in a garage sale, but that is beside the point.)

Now, economically speaking, as long as they can increase the price and increase their profits (as it is the most basic economic policy to maximize profits), then they are completely within the statutes of economic law and such(for lack of better terms at the moment, and I don't feel like getting out the economics text at the moment). To those that cannot afford to purchase gas, well, in a pure free economic system, they would have to figure something else out.

But have no fear, we in the good ole USA don't operate under a free economic system(not even the most free in the whole world), so uncle sam will come in and save all those poor souls that would get left behind otherwise.

[Prudence]

Because I'm in class and reading umpteen hypotheticals makes one start thinking like that all the damn time enough already with the damn hypos egads can't I just think like a normal person for 5 minutes?!:

Is there ever a point where a commodity should be regulated? For example: suppose that locally accessible water supplies were contaminated. For the purposes of this hypothetical, assume that all bodies of water and rain water are contaminated and the contamination can not be reversed. Water demand would nonetheless continue. Should water vendors be permitted to charge whatever they want for water, knowing that there are no other options and that humans require water to sustain life? Is the expectation that people should then, in such hypothetical, physically move to areas where water is cheaper or available in nature? And if so, is that an acceptible operation of market force? Or do we want some outer boundaries?

[Name]

Sorry, can't wrap my head around that one, as water is only a two element compound, there are too many ways to make water, and purify water, and strip varies contaminates from water. everything from simply boiling, to reverse osmosis, to name only two.(besides, isn't it robbery enought to charge 3 to 5 dollars for a bottle of water at various events?)

And on another note, right now it is the local govt that handles water delivery(at least here) and would probably be the same in your hypothetical, with the lowest bidder being the main supplier for the local govt.

[Morrigoon]

You know, every time there's a major landslide, or hurricane, or other disaster that takes out (usually rich) people's homes, people complain, saying "why should we help them rebuild when it's so obviously a place people shouldn't live?

Likewise, if the water was unpotable in a certain area, and permanently so, such that a temporary influx of clean water would not be enough to sustain it, then people would either pay what it cost to get water in there, or they would move. And under that logic, they ought to.

I'm not saying gougeing doesn't happen... just that there is economic justification for the behavior, and in order to control prices, you'd have to give pretty good justification why the company doesn't have a right to make as much money as demand will allow.

One good justification would be that without clean water, we'll die. Will we die without gasoline? Not necessarily... we'll just be royally inconvenienced (I know current gas prices inconvenience ME!)

And yet, with all these complaints of pricing, does anyone ever discuss the possibility of getting the government to lighten up on its share of the price problem? NO.

People love to talk about price controls as some sort of utopian rule. Look, price controls only work in this country for the same reason that companies do business with Wal-Mart: we're too big a customer to ignore. Guess what... there are other customers who are growing in importance now. If we go to far controlling things, we'll find companies preferring to do business elsewhere. It may surprise folks to discover that there are places in this world where you cannot automatically expect things to be availible, regardless of your willingness to pay for it. If the profit margins sink too low, supply will just shift to places where they aren't. Companies will always act in their best financial interest, even if that means only doing business abroad.

This same principle applies to why companies keep leaving California and the US. The more we do to control their employment practices, the more sense it makes for them to move their operations abroad. Everything we do to "help" the American worker must be weighed against the possibility that it will end up hurting the American worker because the regulations make it more profitable to do business elsewhere.

Getting back on topic... if California, for example, decides that gas companies are gougeing and put price controls on fuel, those gas companies will prefer to sell gas to all the other states. Taking this to an extreme... why would they sell gas at a $0.02 profit in CA when they could sell it for $1.00 profit in, say, Nevada? So they will sell as much as they possibly can in Nevada, Colorado, Oregon, Washington, Idaho and Utah, and then, if there's anything left, they *might* sell it to California. Imagine how fun a fuel shortage would be!

[Morrigoon]

To add: if nothing else, the limited supply would cause the same "big brother" government to have to control how fuel is used, allocating a certain amount to consumers, and a certain amount to industry. Well, with fuel limited, production (of other products) will be reduced, which means it's both unnecessary and unprofitable to keep all their employees on, so folks will find their hours cut or get laid off, making it even MORE difficult to purchase gas.

Now mind you, I'm not talking short-term price controls (though even short-term ones would negatively affect business decisions about whether to open or move operations to California), because with prices fluctuating for event after event, this would be an almost continual problem. How do you determine what is market forces, what is inflation, and what is gougeing?

[sleepyjeff]

Originally Posted by Name

) To those that cannot afford to purchase gas, well, in a pure free economic system, they would have to figure something else out.

But have no fear, we in the good ole USA don't operate under a free economic system(not even the most free in the whole world), so uncle sam will come in and save all those poor souls that would get left behind otherwise.

12 years ago when Universal Health Care was the big issue of the day Rush Limbaugh said "mark my words, if they get this the next thing they will want is Universal food insurance and then gas insurance and on and on"

Rush was(once again) right

[Name]

Originally Posted by sleepyjeff

12 years ago when Universal Health Care was the big issue of the day Rush Limbaugh said "mark my words, if they get this the next thing they will want is Universal food insurance and then gas insurance and on and on"

Rush was(once again) right

Nice,
I was just making a guess based on the past efforts of the government when gas prices were in a similar flux(back in the 70's, not a personal experience, but what I gathered from reading and such)

[Prudence]

I need to learn to write more vague hypotheticals. Clearly I'm not ready for textbook work.

I'm not, at this point, arguing that gas is a necessity. I'm wondering if you (Morigoon) would ever find any type of price control? Imagine the wacky, improbable scenario of your choosing that involves people who are unable to alter their circumstances and are dependent on a vendor to provide them with something necessary to continued life. Is there any point in some "nucular" wasteland imaginary landscape where it's appropriate to set price controls? Or in that case would it be an issue of natural selection at work and if you can't get out/survive then your DNA should be allowed to expire?

(and just so we're clear -- I'm not intending any judgment of answer. I'm mostly just curious. I'm not going to point the quivering finger of doom at you if I don't agree with your answer.)

[Ghoulish Delight]

The problem with just saying "demand will drop if price gets too high" is 1) gas is as close to inelastic a product there is and 2) even assuming its inelastic enough to hit a ceiling, so much of our economy depends on gas that by the time it hits that ceiling and begins to drop, the damage to the economy may be too wide spread. Prices of every single domestic good will be affected as every single domestic good relies on oil and gas. A prolonged spike in gas prices will have long lasting inflationary effects that the market may not be able to absorb.