Jan 13, 2009

Cow vs. Gas Tank

So I was out shopping for groceries last night and I picked up some milk. The price? $3.80 a gallon. On the way home from the grocery store I stopped to fill up the gas tank. The price? $1.59 a gallon. I am always amazed when I pay way more for a gallon of milk than I do a gallon of gas. Something just doesn't seem quite right.

After all, the cows that produced the milk may live within a few miles of my grocery store. You milk the cow, you ship the milk to a processing plant, do a little pasteurization and homogenization, put it in a container and then drive it to the grocery store. Seems rather simple. The gasoline on the other hand started off as oil in some far off land. It had to be painstakingly pumped out of the ground, shipped for thousands of miles to a processing plant, processed and processed and processed some more, piped for many miles and then loaded on to a truck and driven to my gas station. All that and the price is less than half of the milk price. Amazing. Gas is so inexpensive these days it almost makes you want to do this.

Ask your students to explain what is at work here with these prices.