This just in:
Now that the oil companies and the OPEC nations have conditioned us to think that the cost of a gallon of gas is CHEAP at $1.50 - $1.75, we need to take aggressive action to teach them that BUYERS control the marketplace..not sellers.
With the price of gasoline going up more each day, we consumers need to take action. The only way we are going to see the price of gas come down is if we hit someone in the pocketbook by not purchasing their gas! And, we can do that WITHOUT hurting ourselves. How? Since we all rely on our cars, we can't just stop buying gas. But we CAN have an impact on gas prices if we all act together to force a price war.
Here's the idea: For the rest of this year, DON'T purchase ANY gasoline from the two biggest companies (which now are one), EXXON and MOBIL. If they are not selling any gas, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit.
I received this email just recently. The sender had included me on a list of people that they thought should see this message. Presumably to encourage me to join the fight. Maybe they even hoped that I'd put it in the newsletter. I'm not going to do that. And, I'll tell you why. There are a number of good reasons.
First, variations on this idea are sent around via email every time gas prices spike upward. If the idea was workable, it would have done it's magic years ago.
Second, it will do nothing to change the economics of gasoline. Ultimately, what we pay for gasoline is most affected by the amount of gasoline available and the total amount of gasoline produced.
We can stop buying from Exxon. But if we buy from Hess, Texaco or anyone else we haven't changed the total demand for gasoline or the total amount produced.
Now if the email suggested that everyone drive 10% less or that they encourage the oil companies to build additional refineries that would change the supply and/or demand for gasoline. (if I recall correctly no new refineries have been built in the last 20 years - every one is basically running at full capacity now) I know that means some inconvenience (driving less) or doing something that we might not want to do (allow oil refineries to be built).
Third, Exxon won't be hurt, Mom and Pop Smith who own the local gas station will be. There is very little retail mark-up on gasoline.
"Most gas stations today double as convenience stores, and although they generate more than two-thirds of sales from gas, two-thirds of profit comes from in-store sales of cigarettes, drinks and food, according to the convenience store association." ">Wall St. Journal
Yes, some stations are owned by the big oil companies. And, if you quit buying gas from them you might force them to lower their price. But the mom and pop stations that compete with them won't be ABLE to drop their price. Right now with oil prices going up they have a very small mark-up on gasoline. They can't afford to lose money on gasoline to bring you to their convenience store.
In fact, if they did drop their price the result will be to drive them out of business. That means LESS competition. And according to my old college economics textbook, less competition means higher prices. Not a winning strategy for the consumer.
So to the extent the strategy causes a 'gas war' it only does so temporarily and then makes the problem worse.
Fourth, none of this has any effect on the real problem. Demand has increased. Supply hasn't kept pace and could be interrupted by political events.
"With real gross domestic product growing at a rate of 8-10% a year, China's need for energy is projected to increase by 150 percent by 2020. to sustain its growth China requires increasing amounts of oil. Its oil consumption grows by 7.5% per year, seven times faster than the U.S." Institute for the Analysis of Global Security
"Worldwide oil consumption increased by a cumulative 11.4 percent from 2001 to 2006 (2.3 percent per annum). The United States is the world’s largest petroleum consumer, at 20.6 million barrels per day (mbd). But while U.S. oil consumption has increased by 1 percent annually over the past five years, consumption in other nations, particularly China and India, has grown much faster due to their rapid output growth. Over the past 25 years, China’s annual GDP growth—about 9.5 percent—has averaged more than three times that of the United States, while India’s has averaged almost 6 percent, nearly double that of the United States. Federal Reserve Bank of St. Louis
In other words, China and Indea are consuming more and more oil. And, they will continue to do so.
OK, so what can the poor consumer do to fight higher gasoline prices? First, recognize that we can make a difference.
We can start by using less gasoline. Check your tire's air pressure once a month. Replace your air filter on schedule. Drive slower. Don't buy a bigger vehicle than you really need. Carpool if you can. Group trips to reduce the amount of miles you drive.
We can recognize that gasoline is only one part of a bigger problem. Even with conservation, worldwide demand for energy is going to continue to increase. Unless we expect millions of people worldwide to continue to live in abject poverty, we're going to have to make affordable energy available to them.
So we need to get busy exploring ALL possible ways of producing clean, cost-efficient energy. I won't get into specifics. No need to set off a political firestorm on a blog devoted to personal finances. But I admit to getting fed up with some of the politicians and political activists. It seems that there's no type of energy that acceptable to some of them. Not oil, not natural gas, not coal, not nuclear, not solar, not windpower, not...well, you get the idea.
If we continue to block all types of energy production we can expect higher prices for energy. It's really that simple. Maybe they're right. Maybe none of those methods are acceptable. Maybe some amazing new technology will save us. But, if it doesn't let's not pretend to be shocked when prices increase. Let's be honest enough to admit that we made choices that caused them to go up.
Keep on Stretching those dollars!
Gary
