Hey economics stack exchange! Congrats on getting to beta! I wanted to ask a question that was running through my head on a road trip earlier today.

Let's say a magic fairy grants a person his wish, and gas prices would instantly be solidified (locked) to their current state for the next five years. (I understand logistically how complicated this would be). It's currently about $1.63/gallon where I live.

So now gas prices is more like milk, and we can go into the future planning road trips, and commutes with more accurate budgeting for how much we spend on fuel.

But what would life really look like for consumers with fuel prices locked down? in 6 months? In a year? And the same for fuel producers - how would locked fuel prices affect their future operations and business?

Would it be possible for gas to exist as a fixed-price commodity?

  • $\begingroup$ Did you know that gas prices were set by the U.S. government in the 1970s during the oil crisis? There were significant shortages, and massive lines: en.wikipedia.org/wiki/1979_energy_crisis#United_States $\endgroup$ – dismalscience Jan 3 '16 at 5:07
  • $\begingroup$ You can fix the price for all regions, but that just increases the incentive for people to pay in services or other goods if the equilibrium price changes. $\endgroup$ – Kitsune Cavalry Jan 3 '16 at 5:18

If the price is higher than the market price it will lead to less people buying gasoline. If the price is lower, more people will buy gasoline. The inverse is true of sellers.

In the first case, there will be over supply of gasoline, leading to a growing inventory.

In the second case, there will be more buyers than sellers, leading to a shortage.


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