the price driver is not so much the cost to produce as it is the rate of production. Neither of these are ever what determine the price. Price is determined by

the price driver is not so much the cost to produce as it is the rate of production. Neither of these are ever what determine the price. Price is determined by the intersection of what buyers are willing to pay and what sellers are willing to accept in payment. Now, the cost to produce, as well as the production rate (in relation to the consumption rate at a given price) may well feed into the seller's decision about what they're willing to accept. But that's a second-order effect. Sellers charge what buyers are willing to spend. They'll make more of it if there's a good profit to be made; if nobody will pay very much, they'll invest their money in producing something different. The price that a buyer is willing to pay is influenced by how important is the goal for which he wants to use the product, but also how readily he use an alternate product in substitution for this primary one. Thus, he may be willing to forgo the purchase of a vacation trip, because it's just not worth the money. He might also, in the longer term, substitute different goods. So in a longer time horizon, he might change jobs to one that allows him to telecommute, in order to circumvent gas prices. Or car manufacturers might see that they themselves are having trouble selling gas-guzzlers, and change production to alternate-fueled cars, like electric (whose power is ultimately generated by coal or nuke), or maybe engines fueld by natural gas, or something. So in the big picture, there are many safety valves allow this pressure to be dissipated.