Gas Prices, Criticism, and Ethics

There’s more than a little unseemly about the pervasiveness of complaints about the high price of gas. Of course, you can’t really expect anybody really to like high gas prices, at least from a consumer perspective. But disliking something is not the same thing as getting irate and pointing fingers.

Here in Toronto, gasoline prices hit an all-time high this past week. Talk radio jocks and editorialists were all over it. In the US, politicians are railing against oil companies. Of course, this is not the first time that high gas prices have spurred a populist pile-on. It’s a predictable phenomenon in response to perceived price-gouging. (And lets not forget the not-unrelated but misguided calls to boycott BP in the wake of the Deepwater Horizon blowout last year.)

But whining about the price of gas just might be unethical — or at least unseemly — in a couple of circumstances.

One such circumstance is if you really, really ought to know better. And lots of people, including most people editorializing for major newspapers, ought to know better. In fact, most of us ought to know better. We all ought to understand, as citizens, voters, and consumers, the basic interrelationship between supply and demand, and the factors that make price-gouging likely or unlikely, as well as something about how hard it is to anticipate the effects of the price controls some people favour. But I realize that that’s asking for a quantum leap in economic and financial literacy. (Ever notice that no one ever compliments gas companies or stations when their prices happen to be relatively low? This suggests that people think the low price is the right price, a the notion of a “right” price for a commodity is utterly at odds with any reasonably sophisticated view of economics.)

Another problem is when the gas-price complaints are aimed at gas stations themselves. Most of those are actually independently-owned small businesses, with precious little control over the price of gas. And as James Cowan recently wrote for Canadian Business, high gas prices don’t mean big profits for station owners. Picking on small businesses to express displeasure at the effects of fluctuations in worldwide commodity prices is thoroughly shameful.

Finally, I’ve heard surprisingly few people, in all this, bother to challenge the notion that high gas prices are a bad thing in the first place. What happened to everyone’s zeal for going green? Economics 101 says that when prices go up, demand goes down. And we all want demand for gas (i.e., consumption of gas) to go down, right? Now demand for gas, in particular, doesn’t change much when prices go up, but it does go down a bit. So if we want gas consumption to go down (as most of us agree would generally be a good thing) then we should be happy, in our less-selfish moments, to see gas prices going up. Now, admittedly, high gas prices don’t affect everyone equally. But nor do the high price of anything else. One of the few sane voices in all this is The Economist. A recent editorial there pointed out that the most effective thing that governments can do to take the sting out of high gas prices isn’t to do anything directly about those prices, but rather to insist on higher fuel-efficiency standards for cars. This suggests that the bad guys in this story, if you need to point fingers, are more likely to be found among the big auto makers than among the big oil companies. But even that is pretty lame. Car companies only make the cars that people show a preference for buying. Like it or not, not every unhappy story has a villain.

3 comments so far

  1. Paul Chippendale on

    I agree with all you say here. My particular view is that it is a very good thing that petrol (as we call it in Australia–gas is a different product) prices go up. Only then, will people start to use alternative sustainable fuel sources. This video is worth a look: http://www.youtube.com/watch?v=cJ-J91SwP8w&feature=player_embedded#at=33

  2. […] Gas Prices, Criticism, and Ethics (businessethicsblog.com) […]

  3. Gas Price Gouging in Georgia | on

    […] also: Business As Usual (plus Price Gouging) in Parts of HaitiGas Prices, Criticism, and Ethics Brought to you […]


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