Lower fuel prices affect not only gasoline and energy purchases but also the cost of all petroleum-based products, many of them an integral part of production activities. The lower the costs of these inputs, the lower the costs of production across the board, the greater the increase in output and job growth, and the lower the prices for consumers.
While the media misses the boat, even some who like lower prices fail to understand the benefits.
Straight-line forecasting can lead to errors in gauging the future price of fuel.
What's it worth to save some money on the purchase of gasoline for your car? Depending on where and how much you drive, hybrid vehicles promise to lower your transporation costs through reduced gasoline purchases. And as gasoline prices climb, that may be all you need to know to investigate a hybrid car for family transportation. But higher fuel prices may be driving up the price of the very vehicles that offer greater fuel efficiency and savings for the consumer.
When does the market get prices 'right,' according to consumers? To read the news or listen to broadcast media, one might think that the answer is 'pretty much never.' People just aren't happy with prices, of everything from gasoline to groceries. Yet it's not true that markets generally get prices wrong, in spite of the fact that we consumers think we know better.
Water and gasoline aren't substitutes in refreshment, thirst-quenching ability, or industrial use. There are a few market comparisons that may be worthwhile, though. Due to the effects of weather and politics, both are more scarce. And on the demand side, use of both water and gasoline usually rise each summer. Most of us feel lucky that compared with gasoline, water is still plenty cheap. We might be better off if it weren’t.
Politicians' posturing and pontificating over gasoline prices are based on ignorance of economics.
Gasoline prices might have soared, but there is a silver lining for consumers: Costs of many other products have fallen.
It is a maxim in economics that "more is preferred to less." True, when it comes to the consumption of most goods. But sometimes, as we have seen lately in the rental car market, less appears to be prefereed to more. In an environment of high gasoline prices, consumers are flocking to energy-efficient models.
Almost every report on the gasoline situation following Katrina has focused on supply, or consumer frustration. But in markets, consumers have an enormous influence on price, a fact that is poorly understood or appreciated. Post Katrina, consumer demand is leading the way.
North Carolinians are conserving gasoline now that the price has spiked. Don’t expect their conservation efforts to continue if prices fall back down, just because political activists want them to.
