Wednesday, March 24, 2004

Why I'm Glad for High Gasoline Prices

I've heard a lot of frustration lately about the skyrocketing cost of gasoline. Of course, nobody likes paying more for something today than they did yesterday. That goes without saying.

Yet I still am glad for the high gasoline prices. Why? Because on my way home from work yesterday, I was actually able to get gas. Filled my whole tank, as a matter of fact. If, as many have called for, some sort of government price ceiling had been placed on it, I would not have been able to do so.

Prices are a way of equalizing supply and demand. When the demand exceeds the supply by too much, prices must rise, or people will begin to hoard the artificially cheap commodity and it will be no longer available. Remember the gas lines in the '70's? They occured after our friend--the Federal Government--decided to step in and control the price of gas. The result was cheaper gas--that nobody could get.

Higher prices cause people to make difficult choices: do I want to spend this hard-earned extra money on gasoline, or do I want to spend it on something else and figure out a different way to get to work? When the price is kept artificially lower than the demand, nobody has to make that choice, and the result is not enough gas to go around.

I didn't have to wait in line for my gas last night, for which I was grateful. I pulled right up to the pump and filled 'er up. Yes, it cost a little more than it did last week or last month, but to me it is still worth it.

Evidently it's still worth it to everyone else, too, since I haven't noticed any dropoff in traffic during my daily commute. Just about everyone has apparently decided that they'd rather spend the extra $4 to $5 extra per tank for the convenience of driving their own car to work rather than spending that money on something else, just as I did. I'm pleased that I still have that option--which I would not have if the price were kept artificially low.

People frequently complain that something is "too expensive." Well, "too expensive" is a relative term. "Too expensive" compared to what? Sure it would be nice if the price that pops into our heads were the actual price of a good or service, most of us realize upon reflection that it doesn't--that it can't--work this way.

The function of prices is not to individually please us. The function of a price is to determine the value a society places on a commodity relative to other commodities. Something is only "too expensive" if it makes you personally decide to spend your money on something else instead.

If gas were truly "too expensive," nobody would be buying it. Since everyone still is buying it, I have to assume that "too expensive" means "doesn't match the fantasy price in my head." Well, lots of things don't. But I'm still glad that I can get real gas with real money in my real pocket to drive my real car to my real job--all because of the current high price of gas.

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