Demand for Petroleum is Not Perfectly Elastic

Apparently 50% of liberal voters think the demand curve for petroleum is perfectly elastic. Here are the depressing results of a Rasmussen poll:

Sixty-four percent (64%) of voters believe it is at least somewhat likely that gas prices will go down if offshore oil drilling is allowed, although 27% don’t believe it. Seventy-eight percent (78%) of conservatives say offshore drilling is at least somewhat likely to drive prices down. That view is shared by 57% of moderates and 50% of liberal voters.

This makes no sense. The demand for gasoline is quite inelastic, so that relatively small changes in supply can lead to large price changes. Drilling offshore and in ANWR is no panacea, but it wouldn't take much of an increase in supply to have a noticable impact on prices. This shouldn't be a left-right issue. Now, you might plausibly say "Yes, prices would be lower, but CO2 emissions would be higher, so we shouldn't drill." But believing that prices aren't impacted by supply in a market with inelastic demand?

And what do voters think will lower gas prices? Ah yes, seizing the profits from developing alternative fuels:

Voters also believe 61% to 22% that oil companies should be required to reinvest at least a portion of their profits into alternative energy research. On this question, liberal and moderate voters are strongly supportive of the proposal while conservatives are more evenly divided (47% of conservatives in favor, 35% opposed)

Data released yesterday showed that Americans believe developing new energy sources is the best long-term solution to the nation’s energy problem. Forty-seven percent (47%) said private companies were more likely to solve the nation’s energy problem than government research programs. But, at the same time, only 52% said companies should be allowed to keep the profits from the discovery of any alternative fuel sources.

Yep, that's the ticket.

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Obviously, the reason why

Obviously, the reason why political affiliation effected the answer to a factual question is that most of the people reinterpreted the question to mean, "should the government allow offshore drilling." Not that it is any of the electorate's business anyway. But it seems even more idiotic to be asking random people empirical economic questions. Do pollsters ask random people empirical biological questions? I mean, I suppose such a poll might tell us how knowledgeable the electorate is, but it doesn't tell us much about the correct answer to the empirical question. I guess this tells us that many voters are ignorant of economics, especially liberal voters. But we already knew that.


But we already knew that.

Yeah, but I find it worthwhile to be reminded of it from time to time.

To be honest, the first part

To be honest, the first part of the article I quoted, while bad, is something I can deal with. The second, about not allowing companies to keep profits from developing alternative fuels, is completely disheartening. Apparently, 29% of Americans (19% are not sure) believe you can get innovation without incentives, or they are so consumed with hate for the nefarious BIG OIL that they just don't give a damn. Sure, we'll continue handing over $140 a barrel to the Saudis, but at least the energy companies won't make any profits! Yeesh.


I think it is obvious that some day, in the future, this offshore drilling will happen. The question is not whether that oil will be drilled, but if companies will be allowed to drill it now. If you look at the future curve for oil, it's almost completely flat... in that case, provided future exploitation of the offshore reserves is anticipated, allowing it now would not really affect oil prices. It would be useful only if reserves where low and the curve became inverted, showing a temporary shortage. Mind you, I don't know much about the oil market though, it's tricky.

I think it is obvious that

I think it is obvious that some day, in the future, this offshore drilling will happen.

You're more optimistic than I am.