Wednesday, 9 August 2006
Couier-Journal Scare Story: What if Gas Hit $5 a Gallon?
The Courier Journal decided to front page a story on "What if Gas Hit $5 a Gallon?" Personally, I am not worried about gas prices going much higher. The reality is that the oil market has a glut of product. Many oil buyers are holding barrels because they are waiting for the price to go higher so they can sell it for more than they bought it. In many regards it is similiar to the dot com build up of the 90's. At some point the artificial prices will create a bubble burst and prices will drop back under $2 a gallon.
The only thing that could cause gas prices to soar is the instability of the Iranian regime. In theory they could do something stupid (like build nuclear weapons) that could cause fear in the finacial sectors. But let's say that it does happen and gas prices go up to $5 a gallon.
They would not stay there very long for one simple reason. Competition of the free market system. Once gas prices go over $3 a gallon alternative fuels become reasonable to produce and sell. Why pay $5 a gallon for gas when you can pay $3 a gallon for an alternative fuel. As people move to the alternative fuel demand for gas will decline which again will lower the cost of gasoline until it is the same as the alternative fuel.
Simple economics!
So why did the Courier-Journal run this piece? To scare people into thinking gas prices will reach $5 a gallon soon. Why? To give the illusion that our robust economy is struggling. Why? To continue to sow discontent heading into the election season.
Why do I say that? Check out this stat from the articleThe nationwide telephone survey of 1,020 adults found nearly half of those surveyed believe gas prices could rise as high as $5.50 a gallon.
Why do 50% of people think gas could rise to $5.50? Because of scare stories like this one the main stream media is continuing to propogate. If prices are high and the economy is "rotten" it must be because of Bush, the war in Iraq, and the Repulicans in Congress. Hmmm, I love the smell of propoganda in the morning.
