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By Andrew Holland on Apr 5, 2012 with 9 responses

Why We Complain About High Gas Prices

Who is to Blame?

I’ve been working for the past week on a fact-sheet for ASP on gas prices; what is causing this spike, and why they’re going so high. I will post a link to it when we publish it, but suffice it to say that we’re not going to come down and say that President Obama is responsible for high gas prices. Although I believe that there are some good reasons to be exploring for oil and gas here at home (e.g. balance of trade, new construction jobs), we should not delude ourselves into thinking that’s going to actually lower prices. More to come when we release the report next week, so keep an eye on this space.

I want to take a minute, though, to write about a few conclusions I’ve drawn after diving into the sometimes heated and nasty rhetoric around gas prices. One big conclusion that I’ve come to about gasoline in the U.S. is that we simply use too much of it; much more than is necessary. I think that’s mostly a factor of the low pump prices that we had grown accustomed to over generations. Though prices have been high and very unstable since 2005 when Katrina shut down refining in the Gulf, we have really only begun to change our economy to the new world of high prices. I wrote before about how the U.S. energy market is poised for a “Fundamental Shift” as we produce more oil and use less. However, I am somewhat surprised that it continues to take this long.

Why Gas Prices Differ From Other Goods

Along those lines, I think that we complain about gas prices more than about price increases in any other good or service. My hypothesis is that the unique way in which we buy gasoline has a lot to do with how we complain about it. Every time you fill the pump it’s relatively similar: you stand in front of the gas tank and watch the numbers click over on the meter. Other than digitization, this has not really changed since the 1950s. What has changed is the price; we remember how something that used to cost less than $20 only a few years ago now costs over $50. There’s a psychological process that goes through our minds saying: “this used to be so cheap – why has this gone up?” That quickly leads into a need to blame someone. Do we buy anything else in this manner – I don’t think so: groceries are a constantly varying basket of goods; electricity is a once-per month bill; housing is only paid for infrequently.

Adam Davidson had a great article “The Real Oil Shock” in the New York Times this weekend saying that even though we like to complain about how high gas prices are, we aren’t really changing behavior because of it. We aren’t driving less, we aren’t buying less of other things, like entertainment or groceries, and we even spend more on driving for social and recreational trips (about $13/week) vs. commuting to work ($8/week).

Lots of Finger-Pointing, But No Real Action

So — what are we doing about gas prices? Complaining. We are voicing our complaints loud and clear. And our political leaders are pandering to that. Newt has promised us $2.50 gas, while everyone in office seems to be scrambling to get out of the line of blame. But, I think that there’s an undercurrent here: we’re complaining because there’s a general feeling that things aren’t going in the right direction; gas prices are a part of that, but they’re not the only thing. People who don’t support the President will blame him for gas prices, while those that do support him will blame Bush’s policies and the Republicans in control of the House.

Of course, none of this is actually true; the price of gasoline is not the result of any of these people’s actions — it is the result of global market forces. The price depends on supply, demand, and threats of future changes in those.

  1. By Jeff Downs on April 6, 2012 at 12:25 am

    Crack Down on Speculation in the Oil Market- Tell The President To Crack Down On These Theifs!!!!Thanks BOB!MR&MRS.Jeffrey Downs

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  2. By Ana on April 10, 2012 at 11:49 am

    Agreed about the Speculators mentioned by Jeff. Any comment they make  causes gas prices to immediately jump up and keep going up for the next few weeks before leveling out. But do prices ever go down more than two cents when Speculators make a mistake? Nope! So much for supply and demand because Speculators rule the market.

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  3. By mac on April 10, 2012 at 1:13 pm

    To AHA and others.

    Ben Cole, and others, have alerted this blog for years about this.

    Like everything that happens  in this world is a pure Economics 101 classical supply/demand,

     

    I am laughing all the way to the bank.

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  4. By mac on April 10, 2012 at 2:13 pm

    WOW.

    Industrial espionage,  reverse engineering and Patent Wars.  Wow, I am so glad to tune  in to R-Squared to find out about all this…………

    OOpps,     I forgot Economics 101…..Pure Supply and Demand—- the Capitalist system in its finest hour………………………………………Barf

     

    Come on now Mac………. this is surely not true.

    Sorry, but it  IS true. 

     

    OOpps,  I forgot that this is just a fantasy that has nothing to do with the real world.

    Your little bon-bons about “pure markets” and a pure “capitalist” system are non-sense.  Hear me right wing Republicans and Libertarians ??

     

    Everybcdy knows it doesn’t work that way.  Why persist with an absurd and obviously false understanding of how the world really works???

     

    And the Chinese and , Vietnamese and others keep dumping products at below cost in Europe to gain market share ?????.  The Europeans said Na Na Na to the Vietnamese bicycle dumping scheme not too long ago.

    When will the U.S. grow some testicles ??

    Come on now Mac………. this is surely not true.

    Sorry, but it  IS true. 

    Awake from your ignorant slumber.

    It’s War……..

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    • By Optimist on April 11, 2012 at 5:52 pm

      It’s War……..

      ONLY in your mind, Mac. ONLY in your mind…

      Come on, mac, WAKE UP!

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  5. By Douglas Hvistendahl on April 11, 2012 at 9:03 am

    Until voters start putting in office more people who aren’t afraid to speak out, the pandering will continue. However, we can make moves in our own lives . . .. We just got a used car, which gets 50% more MPG than the average new car. There are plenty of other things also.

     

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  6. By Optimist on April 11, 2012 at 6:07 pm

    …and we even spend more on driving for social and recreational trips (about $13/week) vs. commuting to work ($8/week).

    $13/week!?! No wonder we do nothing other than complain: it’s too cheap to bother! I would say it would take a fourfold increase to get some real action going.

    Jeff & Anna: thanks for the humor. Blaming the speculators is SUCH a fun game. And it allows you to avoid the mirror! But as Andrew says, we somehow HAVE to find someone to blame. It can’t me, and all the driving I do…

    BTW: gasoline is different because (a) we feel the Arab Oil Embargo was all about Big Oil eating our lunch, but we’re too lazy to parse out between the different pieces of Big Oil, some of whom don’t even benefit from high oil prices (like pure refiners), (b) we feel we have no alternative, even though, again, we’re too lazy to DIY our own biodiesel, or ethanol still and (c) we like to imagine that our clueless leaders can fix this. Of course, the clueless leaders are also guilty of promoting this myth. See Newt “$2.50/gal” Gingrich, and many others…

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  7. By Optimist on April 11, 2012 at 7:07 pm

    BTW, Andrew: $8/week on commuting sounds way low. Elsewhere in the article the author mentions a figure of $40/week for fuel. $8 + $13 = $21. What is the other $19/week going to?

    At ~12,000 miles a year, and somewhere between 21 and 27 mpg, and $4/gal, $40/week sounds about right. But $8/week is only 10 miles a day (5 miles one way). Should that be $28/week (~30 miles a day)? That would also mean we spend only half as much on recreation as on commuting…

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  8. By Barry Pullen on February 20, 2013 at 7:26 am

    GREEDY INVESTOR’S IS TO BLAME THE PRESIDENT SHOULD TAKE ACTION AND PUT A CEILING PRICE ON GAS TO WHAT OUR ECONOMY CAN AFFORD HE HAS THE POWER TO DO THAT. INVESTOR’S IS ROBBING THE AMERICAN PEOPLE. PLEASE OBAMA DO THE RIGHT THING

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