11 October 2008

How’s Your Gas?

Funny how I’ve not noticed much about this one in the news…but gasoline prices have dropped precipitously in the last week or so. I can buy a gallon of gas for $2.75 locally, which is a drop of nearly 30 cents per gallon. I’m willing to guess that supply and demand have taken hold of prices. Conservation of gas seems to be the watchword for lots of folks; I’m often asked what kind of mileage my little car gets. The recent economic downturn probably has something to do with less demand as well.

And interestingly, I don’t think that the federal government has had to “fix” this situation. There was no need to guard against price gouging or to levy “windfall profits” taxes. The market needed to work. It was painful for many for a while, but now there’s some “relief” at the gas pump. And maybe it will last for a while.

So while the federal government works to bailout just about every industry, I think it’s important to realize that sometimes things need to get a bit difficult before people become willing to make changes, like driving less or buying more efficient cars. And while I’m sure there’s not a direct analogy to be made, I wonder if in the long run all of this governmental buying of financial institutions won’t hurt more than a kind of “summer of $4 gasoline” for the financial world.

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