ANDY THOMAS: Old-Fashioned Way to Cure Gas Crisis
When creatures including humans ail, remedies are applied almost immediately in most cases. When something goes wrong, an attempted correction is right behind the problem. Human nature hates the anomaly of something sick or out of kilter. We need equilibrium to exist. We cannot, and should not, abide a malaise of any sort.
Why, then, do we sit and watch the price of gasoline smother and attempt to maim our way of life, like watching an anaconda squeeze its victim to death?
I don't know about you, but I'm mad as hell and want to see a halt to this crazy phenomenon that has the stock market reeling and people flinching as they ride by the gas pump. Our media love to feed the fire by unfounded rumors that a barrel of oil will reach $200 and gasoline $10 a gallon before long.
Elementary economics teaches us that demand for a good or service is relatively inelastic when the quantity demanded does not change much with a price change. Goods and services for which no substitutes exist are generally inelastic. The demand for gasoline hasn't changed with price increases, generally.
Oil speculators have us over a barrel (pun intended) and are making themselves and petroleum companies filthy rich at the expense of consumers. Cartels, lobbies, environmentalists and others have abetted the squeeze on gasoline markets.
While the ANWR (Arctic National Wildlife Refuge) has remained a hallowed ground and off-limits to oil well drilling, the steadfast protection of that area hurts every gas consumer in the U.S. Anticipated drill sites cover a mere fraction of the entire refuge. It is said that opening this oil resource could replace what we get from Saudi Arabia, which charges $140 per barrel for what it takes them $10 to produce.
Our Congress has really let us down by not enacting some remedies to the oil crisis. They are gutless when it comes to doing anything to relieve the pain of gas prices. So much for leadership.
An obvious solution to this nightmarish situation is rationing. When something, like water, for example, becomes scarce, we ration it. Keep in mind that the scarcity of oil is man-made. Production is limited by the nod of a sultan over in the Middle East. Iran, a big producer, even rations its own oil, in order to keep production down. Scarcity results in inadequate supply to meet demand.
As done in World War II, we can control demand by rationing. In economics, it is often common to use the word "rationing" to refer to one of the roles that prices play in markets. Using prices to ration means that those with the most money (or other assets) and who want a product the most are first to receive it. In economics, it is often common to use the word "rationing" to refer to one of the roles that prices play in markets.
In market economics, rationing artificially restricts demand. It is done to keep price below the equilibrium price determined by the process of supply and demand in an unfettered market. Thus, rationing can be complementary to price controls.
I distinctly remember World War II gas rationing. We had an "A" sticker on our windshield, which entitled us to four gallons per week. "B" holders got eight gallons a week, and "C" users got more. "X" users were able to buy unlimited quantities.
Rationing was handled through the federal Office of Price Administration. To get a classification and rationing stamps, citizens appeared at the OPA office in person and swore that they needed gas desperately and owned no more than five automobile tires (any in excess of five were confiscated by the government).
Each driver was given a windshield sticker that proclaimed his classification. Each gallon of gasoline sold was accounted for. The buyer surrendered his stamp at the point of purchase, and the vendor forwarded the records to the OPA.
World War II gas rationing began on a nationwide basis in December 1942 and ended in August 1945. Speed limits were 35 mph for the duration. For a short time in 1943, rations were reduced further and all pleasure driving was outlawed.
Rationing admittedly will create a hostile consumer base. People will complain and be upset -- until the price goes down. Petroleum suppliers will react to the rationing of gas by opening up the floodgates in fear of losing revenue and profits. Rationing will fix them, and prices will drop. It's called doing something about it.
Why doesn't President Bush establish a task force to study other ways of increasing gas supplies and/or lowering prices?
Andy Thomas lives in Pinehurst. Contact him at email@example.com
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