I got an interesting e-mail from a friend of mine – a rather educated individual at that. It was forwarded on several times, which means the odds are strong you’ve already had it passed your way already.
The e-mail is a rallying cry for consumers, asking they fight back against increasing gas prices by boycotting gas stations entirely on May 15th. The notion here is that by cutting demand temporarily, we can shock the system into dropping prices. Or maybe even get the attention of “Big Oil,” and force “them” to see the error of “their ways.”
Suffice it to say, this simply won’t work for a variety of reasons. Some you might know, some not so much.
First, let’s examine this romantic notion that “if enough of us get together” we can force a temporary burp in the market. Theoretically, this could be done, but only if the effect were permanent. In reality, there is nothing here that asks anyone to permanently alter their behavior. The net result is that you’ll drive just as many miles as before, and either top off the tank on the 14th or ‘squeeze the E’ on fumes to last to the 16th. More people will be at the pumps the day before and the day after – and a look at the weekly receipts will not even register as a hiccup at the retail level.
Next, there is the concept that such as demand shock would even matter to “Big Oil.” These efforts are no doubt spurred on by customer frustrations at the rise in gasoline prices juxtaposed with the announcement of “record profits” in the petroleum industry. What these reports fail to consider is the record costs that accrue along the way. As a whole, the profit margins in the oil industry have remained constant, in the range of 8 to 10 percent. There’s not a lot of margin out there, especially at the retail level. The guys who own the gas stations would eat the brunt of the wrath, as they only profit 7 cents on a gallon of gas. (They make their living selling other items in the store at a much better margin.)
Finally – it makes very little sense to direct the anger at the oil companies. Most of the seasonal ups and downs in gas prices are a simple matter of supply and demand. Every spring, just before Memorial Day, the refineries have to go offline for a few days to re-tool for a summer-time “clean” blend. And again, just before Labor Day, the refineries close up to switch everything back over. It’s at these moments when the supply drops, and prices shoot up.
If you want to do something about it, ask your congressman to consider streamlining these environmental regulations. We don’t need to get rid of “clean” gas – but we don’t need as many blends as we have. Currently, there are 55 different EPA mandated fuels being refined every summer, to meet with various differences and codes across the country. That also means that the gas you pump in the summer isn’t always coming from the closest place – the tanker trucks bringing it to you have to travel farther, driving up the costs.
Surely we could agree to trim those down to the cleanest five blends. The efficiencies we garner (in mileage and in market forces) would mean cleaner fuels in more places, and with less of a summertime sticker-shock than we have now.
But I guess it’s easier to just delay filling up for a day, and pretending as though you’ve done something.
[tags]Ike Pigott, Occam’s RazR, economics, gas, boycotts[/tags]
Phew – I thought you were going to tell me the e-mail was for the Paris Hilton letter writing campaign!