How’s this for a conspiracy? Millions of greedy people have conspired to reduce the standard of living for a whole class of good, solid Americans.
Yep, these greedy consumers are forcing gas station owners and the oil industry workforce into taking less money for the gas that they sell.
There should be an investigation, right?
Politicians were more than ready to investigate “greedy oil companies” when gas prices were high.
Now that gas prices have dropped by about nearly a dollar a gallon, doesn’t the same logic apply? Isn’t there a secret plot by consumers to line their own pockets with their own money? Shouldn’t Congress call for hearings and prosecutions?
Hardly, because both conspiracy theories are absurd.
Markets—that good ol’ supply and demand—determine the level of prices. And the recent drop in gas prices is no exception.
The end of the summer driving season means fewer people are taking long trips and using more gas.
The suspension of the shooting war between Israel and Hezbollah calmed fears about a supply disruption.
And the oil companies have increased their efforts to find more oil because of the incentive of higher prices.
All of which has led to more supplies, lower prices and—perhaps most importantly—a boost to the economy.
Federal Reserve Chairman Ben Bernanke said the increase in gas prices since 2003 has cost the economy somewhere between 0.5 percent and 1 percentage points of growth in gross domestic product.
It stands to reason, then, that a drop in gas prices can boost the economy, especially by freeing up capital to invest.
Hmmm. A drop in gas prices is a lot like a tax cut, but without the Democratic critics—and without the call for congressional investigations.