Saturday, April 29, 2006

Pain at the pump

Gasoline prices are upward and onward, which means everyone in D.C. -- including the President, who really should know better as he's an oilman -- is running for cover, calling for investigations and rattling sabres. The truth is, there's nothing anyone can really do to bring down prices in the near future. That's the beauty of capitalism and the open market; trader A has a barrel he's offering for $70, and trader B is willing to pay $70. Voila, it's done.

Of course that's a simplistic explanation. There's a lot that goes into the price of crude, including the 'fear factor' or 'risk premium', the fact that we just use, use, use, and that oil is a lot harder to get out of the ground today than it was yesterday. This is also the summer driving season, when everyone jumps into their SUV and drives across the country. Demand goes up, supply goes down, and prices go up. It's the way of capitalism and as long as there are buyers, the marketplace will act accordingly.

Related linkage:

I smell gas: why high prices make politicians stupid

Going a short way to make a point.

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