Gas Prices and
the Energy Crisis
Why are gas prices so
high? Why hasn’t the economy forced their prices back down? What can we do to
stop them? After nearly eating a mold encrusted muffin I bought at a Shell
station this morning, I’m feeling particularly inspired to tackle these
questions and present the most effective and realistic solutions I have seen
for lowering gas prices.
Today I stopped at a
Shell station on the way to work to grab some breakfast. I was low on gas and
hungry, so the Circle K food store seemed like the perfect solution. I picked
out a delicious looking ham-egg-n-cheese muffin. The gas prices were abnormally
bad, so I decided to just fuel up my stomach and make the car wait. When I got
to work, I opened up the breakfast my mouth was watering over for so long only
to find the entire bottom of it was covered in a dull
grayish-turquoise-mold. So I started out
my day with an empty stomach and empty gas tank. It has been a while since I
have felt comfortable filling up a full tank of gas because the gas prices have
been so bad lately. Sometimes I feel like I’m playing the stock market just
buying gas every couple of weeks. So why can the gasoline industry get away
with these unfair and unreasonable prices on something we all need to survive?
Once again, it all boils down to simple economics.
What causes such high
gas prices?
To understand how gas
companies can get away with these prices, you must first understand how our
market economy works. The key to economics is supply and demand. When demand
rises, prices can rise. If enough people need something badly enough, they will
pay more for it. When a resource less common, it is more valuable. This is why
a diamond is so valuable, while water is so cheap. Diamonds serve no purpose
other than looking good, but we will die without water. Oil is relatively rare
compared to other natural resources, and practically EVERYONE needs gas for
their car.
As if the sheer
economics weren’t making oil companies rich enough, the top oil producers organized
a cartel to further strangle consumers. A cartel is an organization of
producers of a certain good who all agree to charge a set price on what they
produce. This creates an effective monopoly, which is devastating to market
prices. The reason you can go to Wal Mart and buy a shirt for 1/10 the price of
the same shirt with a brand name printed on it is because of market
competition. One supplier undercuts another, and people buy from the cheaper
one. The first supplier must then either raise quality or lower prices to keep
from losing all its customers and dying off. This happens in just about every
sector of the economy and causes most products to become affordable to the
everyday consumer. In a monopoly, there is no competitor to undercut the
supplier, so there is no need to lower prices or increase quality. They can
charge whatever they want and no one can do anything about it. This is why you
can’t just go down the street to the thrift gas station and buy the cheap gas
for affordable prices.
How Can We Lower
Prices?
So what can we do
about this? Are we just helpless to the economy? We are still consumers, and as
such, we technically still hold the power in the economy. It just takes a lot
of organization to effect change. If people don’t buy a producer’s goods, they
make no money, and therefore have to bring people back to buying their
products, or go out of business. In my opinion we have three main options. We
can create competition, forcefully lower prices by boycott, or make the
necessary progression into the next era of energy solutions so we no longer
need oil.
The first solution
would be to bring in new competitors for the oil industry who would not be a
part of the cartel. In order for a monopoly to exist, they must keep
competitors from entering the market. If a new company were to come in and
offer reasonable gas prices, we would all buy from them. Unfortunately, because
of the Middle Eastern control of the world’s main oil reserves, it will be very
difficult for anyone to gain a good enough supply of oil to sustain America
and compete with the oil cartels. If this could be done, the competition would
drive cartel prices to compete with the market and all gas prices would go
down.
The second solution
would be to directly control the economy through public boycotts. There was an
organized attempt at this, but it failed miserably. The public set out one day
where they would not buy gas. The gas companies lost millions of dollars in
sales on that day, but they knew the American people couldn’t live without
their precious gas for long. The next day they simply raised prices to higher
than they had been and made up for their losses immediately. If we want to hurt
them, it has to be for more than a day. I heard one proposal for a boycott that
could actually work. If the public would buy gas from only the smaller
companies, the larger companies would suffer a sustained loss. With their
customers in steady decline and no hope for people to come back, they would be
forced to lower prices to bring people back to their company. With their prices
lowered, people would flock to them, and their competitors would be forced to
lower prices to keep up. This would keep fluctuating until they found
equilibrium at an affordable price.
The third solution is
in my opinion the best. It is also very difficult to accomplish. It would
involve weaning our economy off our oil dependency. Our oil reserves will be
used up eventually. The only question is when. We have the technology for
electric driven cars. We have other options to generate electricity without the
need for fossil fuel. I won’t go too in depth on this right now because there
is too much to cover on the logistics of moving our society off our oil
dependency. I will say that we need a solution. When you think of what happens
when the power goes out in a city for a day, you might imagine what would
happen when the whole power grid goes down indefinitely. If we don’t find a new
source of dependable power, this could become reality. We have lots of options for
personal transportatoin. Many people are taking to carpooling and biking short
distances. Smaller modes of more efficient transportation such as Segways and electric
scooters are becoming more popular. We just need to bump this up to a larger
scale solution.
My neighbors used to
drive a sleek black BMW, but they recently traded it in for a disgustingly
orange Volvo. They are extremely happy with the trade-in because they got the
car from a scientist who equipped it with a special engine that runs on vegetable
oil. They stop at a restaurant every now and then to pick up the oil left over
after frying their food. The restaurants are always happy to part with it
because it saves them the trouble of disposing of it. And in return, my
neighbors get to live without ever having to pay for gas. If these were on the
market, I know I would buy them (preferably not the old, ugly Volvo model). As
more fuel efficient vehicles come into the market, gas demand should diminish
and prices will have to go down to keep up.
The oil prices of
today are a symptom of a larger, more eminent problem. Our technology is in a
race against our oil consumption. We will either come out with clean, cheap
energy, or society will be thrust into chaos and depression as our last energy
reserves are used up. Our fuel consumption seems like such a menial problem,
but in order for our society to continue on its current course of prosperity,
we need to find ways to adjust and adapt to the changing world we live in.
I would like to hear your input on this too. What solutions would you propose to drop gas prices or replace our oil consumption with better energy sources? What energy solution would you see our society going toward in the future? I appreciate your feedback so don't hesitate to reply.