About a week or two ago I was having a conversation with some of my co-workers on the high cost of gasoline. It's something I'm sure thousands of people were doing at the exact same time. It's a pain for every one.
Towards the end of the conversation, one of my co-workers jokingly said "It almost makes sense to just go out and fill up now before the price goes up tomorrow!"
That got me thinking: does that really make sense?
The Law of Supply and Demand holds true in every free market, making it also true in oil and gasoline. Despite all the influence a weak dollar or outrageous speculation may have, supply and demand still play a major role in determining the price of gasoline. That's why prices go up in the "driving season," which starts later this month. The more people drive, the higher the cost. It's simply due to higher demand.
So let's say the price goes to $3.90 a gallon next week or the week after, which is very likely since it's damn near that right now. People will freak out and say "Oh God I need to buy gas before it hits $4.00 a gallon!" So, many people, who do not need to fill up necessarily, go out and fill up the rest of their tank.
What happens? Well, supply and demand takes hold. Depending on how widespread the "buy it sooner than later" mentality is, this method will artificially drive up the cost of gas because all the oil companies see is a rise in demand. They don't care why this is happening; they just see that people are buying gas left and right. Maybe the companies think it's an early start to the driving season, who knows. What happens once more people than normal gas up in a short span of time is that it appears as if the demand has gone up (which it technically has since so many people want to buy gas), and the price is raised as a result. It's basically a self-fulfilling prophecy (pardon the pun).
The moral of the story is: if every one stayed calm and bought gas when they needed it, and didn't go out and "panic buy" to beat the market, the likely result is that the gas prices will stay lower for longer. Once you start buying more for no particular reason, it only accelerates things and we get caught up in a vicious cycle of higher and higher gasoline prices until people simply stop driving.
Nuclear power anyone?
Towards the end of the conversation, one of my co-workers jokingly said "It almost makes sense to just go out and fill up now before the price goes up tomorrow!"
That got me thinking: does that really make sense?
The Law of Supply and Demand holds true in every free market, making it also true in oil and gasoline. Despite all the influence a weak dollar or outrageous speculation may have, supply and demand still play a major role in determining the price of gasoline. That's why prices go up in the "driving season," which starts later this month. The more people drive, the higher the cost. It's simply due to higher demand.
So let's say the price goes to $3.90 a gallon next week or the week after, which is very likely since it's damn near that right now. People will freak out and say "Oh God I need to buy gas before it hits $4.00 a gallon!" So, many people, who do not need to fill up necessarily, go out and fill up the rest of their tank.
What happens? Well, supply and demand takes hold. Depending on how widespread the "buy it sooner than later" mentality is, this method will artificially drive up the cost of gas because all the oil companies see is a rise in demand. They don't care why this is happening; they just see that people are buying gas left and right. Maybe the companies think it's an early start to the driving season, who knows. What happens once more people than normal gas up in a short span of time is that it appears as if the demand has gone up (which it technically has since so many people want to buy gas), and the price is raised as a result. It's basically a self-fulfilling prophecy (pardon the pun).
The moral of the story is: if every one stayed calm and bought gas when they needed it, and didn't go out and "panic buy" to beat the market, the likely result is that the gas prices will stay lower for longer. Once you start buying more for no particular reason, it only accelerates things and we get caught up in a vicious cycle of higher and higher gasoline prices until people simply stop driving.
Nuclear power anyone?
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