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On Consumerism: Ruminations on increased gasoline prices

Steven Senne/The Associated Press
This month our nation’s gas stations raised their prices to all-time highs. It was not totally unexpected. The stoppage of initiating contracts to purchase petroleum products from Russia played a role.

By and large, consumers will pay the increased prices. At least for now.

This is far from the first time I’ve seen all-time highs at the gas pumps. For I remember the 1970s, which ended with gasoline rising above $1 a gallon for the first time.

First off, there is no shortage of gasoline. Supplies are plentiful.

When there is a shortage, it leads to actions such as we had in the 1970s and during World War II: rationing, and limited buying opportunities.

Those were times when one was limited to how many gallons one could purchase. During World War II you also needed a gas coupon issued by the government.

And in the 1970s, in addition to gallon limits, we had folks limited to purchasing gas only on certain days of the week (based on license plate number). We’re not going to do that this year. There is no shortage of gas. In the 1970s when there was a shortage, people sometimes stole gas from other cars, which is what led to locks being placed on gas tanks.

Another phenomenon from the 1970s was people stopped buying so many large cars and instead purchased smaller cars, which get more miles per gallon. Instead of cars with eight cylinders, they bought vehicles with six or four cylinders. (The more cylinders, the more powerful the engine, and the more gas consumed.)

And when eventually gas prices stabilized or went down, people got comfortable with gas prices and then started buying larger cars again. Until the next gasoline spike, and then the process repeated.

It’s happened time and again.

Remember, gasoline is a byproduct of oil. The key ingredients in oil pricing are supply and demand – and, to some extent, anticipated future supply and demand.

We consumers can’t control gasoline supplies, for which there’s no shortage anyway. But we can control demand. For gas prices to come down, there needs to be a reduction in demand.

A few of us buy small cars even in years when gas prices are low, for we know that eventually gas prices will soar again. Those are folks who pay attention to the past and the future.

But most consumers focus solely on the present. The norm is for people to look at current conditions and make decisions based on those circumstances.

One wild-card factor is that many carmakers have altered their businesses to focus on creating trucks, small trucks, and sport-utility vehicles instead of traditional cars.

But if demand for smaller vehicles is high enough, more smaller cars will be made and sold. It’s all part of the ongoing industry cycles and will remain so for as long as we build and drive combustion-engine cars.

Not everyone will want smaller cars. Some folks have never driven one and would hesitate to try. But for how long would they willingly buy gas at our highest prices ever?

Some folks can’t switch to smaller cars. Think of limousine services. And truckers – by that I mean folks who transport goods in vehicles for which a truck-driver’s license is needed. (Not the truck/car combinations that confuse me so much that I can’t tell a truck from a car.)

But what about the long term?

Let’s try to look down the road of time. Will gas prices be this high six months from now? A year from now? Two years from now? Maybe they’ll be even higher. Or maybe they’ll be a good deal lower. We don’t know.

Plus, there’s no way to predict how Russia’s waging unjustified war on innocent Ukraine will play out.

In the meantime, we try to make do.

If gas prices remain this high for a lengthy spell, think of the ramifications.

A major component in the cost of jet travel is airplane fuel. Passengers will see higher ticket prices.

Ships won’t escape the quandary. Half the cost for running a cargo ship is the fuel to get across the ocean.

Taxi drivers, truckers, and ride-share drivers are often independent operators, not technically employed by anyone else. They are thus responsible for all their own business costs, including fuel. Many will have to choose between raising prices or turning down business until fuel costs revert back to our accustomed level.

If they do revert back.

How will we know when consumers start to curtail their appetite for gasoline? Simple. When they stop driving to fitness centers to use the treadmills and stationary bicycles in a gym, and instead walk or bicycle to get there.

Arthur Vidro is one of the Eagle Times’ recurring financial columnists.

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