Monday, August 08, 2005

If you don't care what something costs, the price goes up

Frank Michael Russel in today's Merc news round-up notes that the price of crude oil has reached $64. He notes that demand is a huge factor: "Investors are noticing that higher gasoline prices are having little effect on driving habits." Until demand drops - that is, until people start driving less because gas costs more - the price will stay high.

I'm just surprised that this reason hasn't been given more often for the high price of oil. It's not something that sits well with many Americans; cheap gasoline has become a right, not a wind-fall. SUV sales are slowing, but not very quickly. And the Chinese are just beginning to get the driving habit.

I imagine similar price insensitivity has kept prices for cable TV and broadband access high, too - not to mention credit card debt.

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