In grade school economics we are introduced to the idea that the market price of something is related to the demand- the higher the demand, the higher the price. However it occurs to me that the price of many mass produced commodities are dependent on economies of scale. Currently gasoline prices in the US are fairly low because of reduced demand. But if the demand should ever drop to the point where it was no longer enough to support the economies of scale used by the petroleum industry, wouldn’t you have the seeming paradox of the price going up once a certain threshold was crossed?
It’s not a paradox. You need to distinguish between price as a rationing device and price as an equilibrating mechanism. As the price of petrol rises, less will be demanded.* This would not be violated by economies of scale preventing the feasibility of some price/ quantity combinations. Markets are always a combination of supply and demand.
Can the effect you talk about be important? Sure. Insurance is an example. Unusual events are insurable, but common events are cheaper to insure against because there are economies of scale in risk-pooling.
On petrol, it may be true that prices are low partly because of reduced demand. But the supply side is important too. OPEC is a large player in the market and it tries to fix prices. Their response to lowered demand (a leftward shift in the curve) would be to cut production. IIRC, Russia (a non-OPEC player) is increasing production in a move that may signal a desire to tacitly join the body attempting to once again effectively cartelise the industry but may simply signal that they are strapped for foreign exchange. I suspect this is a major reason for the slump in oil prices.
*[sub]Technically this does not have to be true: snob effects and Giffen goods are possible. They can be excluded by appropriate use of the cet. par assumption and a combination of theoretical and empirical evidence respectively.[/sub]