National Security Secret
#143. Supply or demand don't determine cost or price as they should.
Cost per gallon for gasoline is a good example. But can it be proven?
Try a thought experiment:
- Demand for gasoline varies on a weekly basis (we're excluding holidays and seasonal differences to simplify the logic).
- When each work week ends - and a weekend begins - demand increases.
- From one week to another this remains consistent overall.
- So what justifies a price increase from Friday through Sunday or Monday?
Does the cost of producing gasoline increase then decrease each and every week? No.
Are there weekly changes in supply which don't meet demand? No.
Is there sudden or unexpected demand which exceeds supply? No.
Gas stations or their suppliers pretend they don't know about weekends. Narrowing the focus to individual days and ignoring the entire week may allow for price increases to correlate with "increased demand". But when prices increase ahead of changes in demand...
We find that mildly dishonest.
Some have called it price gouging.
Selling more gasoline on some days of the week and less on others doesn't justify raising prices by itself. Especially when it's consistent and planned for.
Would a price increase every Wednesday blamed on "increased demand" make sense due to a continual reason for drivers to pick that day to "fill up"?
Only if the goal was taking advantage of drivers.
Which is exactly what occurs on weekends.
What if rebalancing supply with demand only requires a phone call for a gasoline tanker with no change in supply or cost?
The phrase "that's just the way things are" has been accepted without question for too long.
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