High oil prices and conserving
Here is an article from Politico about Bush’s Energy Policy press conference Monday, July 14th. The editors of Politico who penned the headline have it all turned around. What Bush said was that the American public is already conserving, and that is what the market does–high prices tell consumers to conserve. Bush mentioned that people are driving less (and we see that in the drop off in auto accidents), and people are buying smaller cars.Â
Bush has it exactly right (not that its the first time, but…, well, you understand the surprise). Some of the commenters to the article are also on the right track, noting that if we cut demand by government-forced conservation, other countries, such as India and China, will respond to lower prices by buying more. If you and I are forced to conserve (this artificially pushes demand down, not just quantity demanded) enough to push prices down, consumers will then start conserving less in response to the lower price, using gasoline in government approved ways, not in the ways they wish (this will not push prices back up, though, as this is a change along a demand curve, a change in quantity demanded and not an increase in demand). All that is accomplished is that we are driving in government approved ways and not driving the ways we want.Â
More importantly, with India and China playing an ever larger role in world oil demand, if we push our own demand down through government-forced conservation, very little will happen to world prices. And we cannot push our own oil prices below the world market, because we pretty much have the freedom to export (look it up in the constitution). If oil prices in the US dip below world prices, we sell to the rest of the world (you know, as in buy low, sell high).
-MC
August 3rd, 2009 at 11:48 am
When gas prices goes up it does force the US consumers to conserve; however, when gas price are low consumers feel that they can afford to take trips and commute to different places. It seems that the US is just out to make a dollar because when US prices drop below world price they then sell to the world at a higher price rather than keeping the price low in the US. If they keep the prices low in the US then consumers will buy more and we can simulate the economy in the US. Rather than forcing consumers to by less or avoid buying gas and the amount of gas being purchased being to be at a low.