The Wasatch Behind: Supply and demand
Holy cow," I growled as I hung up the gas pump nozzle and climbed back into old rusty bucket, my faithful pickup truck. "The cost of a barrel of crude oil has fallen from 146 dollars to around 114 dollars and the cost of a gallon of gasoline is still four dollars and ten cents here on the Wasatch Behind. That means crude oil is down by about 22 percent but gas is only down by seven or eight percent. What gives?"
"Beats me," Uncle Spud said as he cracked open the cap on a diet Coke that cost him $1.39 at the convenience store. (Coca Cola is $9.00 a gallon if you buy it in 20 oz. bottles from the roadside quickie marts). "Gas in Salt Lake is running about $3.98 but the national average is only $3.68. We're paying 40 cents more than folks in Toledo and we've got oil and gas wells all over our local wilderness scenery."
"Ah, but governor Huntsman is going to do something about the high price of gasoline," I smiled sarcastically. "They said on TV he's got people looking into it."
"Yea, but they've looked into it before," Spud reminded me. "And they'll keep looking into it until the price goes down on its own and the governor quits getting so many phone calls from mad voters. 'We're looking into it' is government code for 'shut up and quit bothering me.' The state and the governor have never done anything to help reduce the price of gas, or anything else."
"Well, they should do something," I insisted. "The high cost of fuel is impacting everything. The price of groceries, clothes, dog food and bullets are going through the roof. If the cost of crude oil is dropping, the cost of gasoline should drop, too. That's how the market usually works."
"But we have a free market economy," Spud insisted. "Government shouldn't get involved. It all depends on supply and demand."
"I agree," I offered. "It does come down to supply and demand. I expect the oil companies to supply me with gasoline and I demand a reasonable price. How's that for quick and easy redneck economics?"
"That's not how it works," Spud insisted. "In a free market, if a product like gas is plentiful, the price is low. If it's in short supply, the price is high. Things are supposed to work that way for everything we buy, sell, or trade."
"But I don't see gas in short supply," I insisted. "Any filling station in town will sell me all I want. I've just got to mortgage the ranch to fill my pickup truck and a couple of gas cans for the lawnmower."
"So far it's only a contrived shortage," Spud offered. "World consumption is increasing and rich and powerful speculators are betting the supply will diminish while the cost continues to rise. The speculation and trading in oil futures is part of what's keeping the price so high."
"So what can we do about it?" I asked.
"Not much," Spud said. "As long as people are willing to pay big bucks to buy the product, there isn't much incentive for the oil companies to drop the price. Again, it all comes down to supply and demand. The oil companies supply the gas and then demand we pay the four dollar price."
"So why don't we increase the supply?" I demanded. "We've got a gazillion barrels of oil in ANWR and in our off-shore reserves."
"Supply and demand," he said. "We can't increase the supply because the environmentalists demand legal action every time we try to drill."
"Since high fuel prices affect every aspect of our economy and our lives, why doesn't the government intervene and start a comprehensive emergency drilling program? It's the economy stupid. We can hash out the wilderness and polar bear issues as we go along."
"Supply and demand," Spud said again. "We've got to supply congress with demands that they do something. Nothing will happen until we do. Write or call your elected representatives and tell them you're sick of four-dollar gasoline. Ask them what they're doing about it, and then vote your pocketbook."
P.S. The answer is blowing in the wind. T. Boone Pickens for president.