May 15, 2008

gas prices: upward sloping supply curve?

as fuel prices are endlessly racheted higher and higher, I sometimes have trouble seeing any drop in usage. I can only assume that gas in extremely inelastic.

I wonder if perhaps we have come to a developmental plateau as a society. I wonder if in the ensuing couple of months and years and decades, if we will see a back-slide in our economy's technological advancement.

A lot of economic models assume that cost will merely rise as the something (say gas) i more greatly used and with this increasing price, more people will enter the supply side of the market.

A lot of Economic models do not assume a vericle supply in both short and long term. I would hypothesys that that is what is happening. The demand curve is moving ever to the right and intersecting an ever high part on the verticle S curve. Eventually this will diminish an found supplies dwindle and are stockpiled by fearful hoarders wanting for themselves. They will be reluctant to sell because they know they can get an ever-higher price. They never see it falling in price so they won't sell.

As these supplies dwindle and are hoarded, wonder if we will backslide as a world, national and local economy to more local and isolated areas of activity, less specialization across countries and less sprawl as people will want to bike and walk (and maybe horseback ride) to work.