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Gasoline Prices

This was written in response to a series of articles in the local media, both newspapers and television, about the aberrantly high price of gasoline in the Bay area. This issue still pops up from time to time.

The letter was submitted to both the San Francisco Chronicle and the San Jose Mercury News, but neither published it.

1 June 1997

I am bemused by the recent spate of articles in both the Mercury News and the Chronicle bemoaning the fact that gasoline prices vary across California, and are generally higher in the Bay Area than in other parts of the state. The raw facts — which should be neither surprising nor of particular concern to anyone with even the most rudimentary understanding of free-market economics — have been veiled in mystery and innuendo, implying some vast oil company conspiracy and the specter of evil oil companies (gasp!) actually profiting from our addiction to automobility.

Where is the mystery here? Go to the grocery store. Go to a restaurant. Buy an ice cream cone. Better yet, try to rent an apartment or buy a house. Is there anything for which we in the Bay Area do not pay more than people in Fresno, or Bakersfield, or even Los Angeles? Is this to be taken as evidence for a conspiracy of avarice and fraud on the part of farmers and grocers and restauranteurs and ice cream makers and real estate agents?

Better yet, use the techniques of those businessmen you so love to despise and survey the local population to answer a single question: “How high must the price of gasoline be before you decide cut back on the number of miles you drive?” It’s the simplest principle of market economics: prices will rise as long as people are willing to keep paying them. The source of high prices in the Bay Area is not oil company greed but the generally high incomes and generally abysmal alternatives to driving that make us quite willing indeed.

What I find outrageous about this whole episode is not the price of gasoline but the fact that it is now possible for a reporter covering economic news, and the general populace reading it, to be so ignorant of what makes our economy work that they think this is news at all.

© Copyright 1997, 2005, Augustus P. Lowell

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