Tuesday, August 22, 2006

Latte or oil?

I walked into Starbucks today and bought myself a latte. Flipped out my wallet and casually paid out a princely sum of $3. I actually felt pretty good being in the coffee shop and enjoyed the latte as well. The whole experience is enjoyable from the time you step into the coffee shop. I guess that is why I pay the $3 for my small cup of latte. I am rather satisfied with my explanation.

I then go to the gas station to fill gas in my car. $3.04. good lord I used to pay $0.91 in 1998 as a poor student. What has the world come to? This is definitely the oil companies price gauging. That $55000 a second profit making oil companies. They all deserve to be taxed and punished for manipulating the market like this. Unbelievable!

The irony is that even after contrasting the two purchases I still feel I am justified in my thought process. Oil is an essential commodity and cannot be priced like the Latte that I had earlier in the day. Oil is what the economy runs on. If the price of oil was set like the latte in Starbucks I would think that I would be doling out my pay check just to get to work everyday. Hence the sense of outrage at the way the oil prices move and the suspicion of price manipulation during hard times by the profit making oil giants are justifiable in my mind until proven wrong.

But in that case what defines essential commodity? You would safely assume that a college education is an essential commodity in today’s world. Yet where is the outrage.
Private universities and schools set tuition fees indiscriminately. So why aren’t we asking the question. Is it because we view private universities as something that is a luxury and that there are always cheaper options such as community colleges and public schools? Is the argument that since it is a private university they should have the pricing power that the market gives them, however unreasonable as it might be? Then why do we look at private oil companies differently. Why the outrage when market forces help them price their product higher. Why doesn’t the government set up a cheaper alternative if they think that they can do better?

If oil is as essential as a primary education, then let the government provide a cheaper alternative where the prices are fixed to be affordable to the common person on the street. Lets not walk into Starbucks and expect the latte to cost as much as the coffee that I just brewed in my kitchen.

1 comment:

sukracharya said...

Basically in economic theory, pricing where the consumer is made to take a good at a specific price or leave it is monopolistic pricing... governments do their best to break up monopolies, by using laws like anti-trust etc.... this works well... for example, if you dont want to pay for Latte in starbucks, you can get a 50 cent coffee in a shell gas-station store.... same with education.. same with water - you ca buy a perrier clear water bottle paying through your nose or open your household tap... oil business on the other hand is a cartel, controlled by OPEC as well as the oil companies and no one is unable to do anything about them in the US... US government would not create its own public company because the Oil lobby is too strong and they fund many govt activities.. so its upto the public to take the alternative... go for hybrids, one car per family, car-pooling, public transportation etc.