cdifoto wrote in post #5590383
Gasoline doesn't follow the general rules of supply & demand. It's not a luxury item. We need it, particularly in rural areas of North America because the infrastructure to stop using it altogether does not exist. Some of us are doing as much as possible to minimize our dependency, but there is still a requirement. We need gasoline to get to work to make money and we need gasoline to get to the store to buy food and clothes. That's a bare minimum and the more rural you are, the more fuel you need to burn just for those basic needs. Sadly there are only a few oil companies and even fewer significant source. The process of finding and procuring crude oil in and of itself is dangerous and expensive, so there aren't many companies willing to jump in and compete with those already established. Because of this, they have us over a barrel. Pun very much intended.
It definitely follows the general rules of supply and demand. Supply curve is shifting to the left, and demand curve is shifting to the right: this means lower output at a higher price. What you're describing is very inelastic demand, which just means that the demand curve isn't very steep: it doesn't affect how the whole thing will shift as a result of a growing society.
Now, the reason the supply curve is so low is because it's artificially manipulated by a collusive cartel operating as a natural monopoly: the kind of thing that's outlawed in most developed nations. But, since it's a bunch of sovereign nations, there's nothing we can do about it, aside from invading, which isn't likely to happen. On the bright side, though, the higher the prices go, the more tempting it is for one of the OPEC members to cheat on their agreement and increase output, which could have very positive ramifications for us...
