Fighting Gas prices : will this work?

[radhak]

A friend sent me the attached pps as part of a long email chain. I don't like chain emails, but was wondering if the strategy in this one would work.

Essentially, it claims gas could go over $4/gallon this year, and the best way to fight it is to 'fight the leader', ie, stop buying at Exxon, so they reduce prices forcing others to do the same.

I am willing to try it, but wonder if it will work.

(The attached file is a powerpoint file, zipped to accomodate forum file-type validation).

[Ed62]

Maybe I'm wrong, but the only way I can see getting the price of gas lowered is to use less oil based products. You could also stop buying from the local station because it's five cents higher than the one across the street. But maybe that station needs that little extra to stay in business. Run him out of business, and the big boys can get anything they want. Just my opinion.

Ed

[Deadhead]

Essentially, it claims gas could go over $4/gallon this year, and the best way to fight it is to 'fight the leader', ie, stop buying at Exxon, so they reduce prices forcing others to do the same.

In my opinion, this ranks right up there with the so-called "gas outs". If you stop buying from ExxonMobile and start buying from ChevronTexaco then demand for ChevronTexaco goes up and they can raise their prices. If you stop buying from all "big oil" companies and start buying an off-brand, chances are that off-brand is refined in a "big oil" facility.

Like Ed said, the only way to affect the prices is to lower demand across the board. That means using less oil-based products. If $4/gallon doesn't change people's behavior, then it will go to $5/gallon and so on.

[LCHIEN]

A friend sent me the attached pps as part of a long email chain. I don't like chain emails, but was wondering if the strategy in this one would work.

Essentially, it claims gas could go over $4/gallon this year, and the best way to fight it is to 'fight the leader', ie, stop buying at Exxon, so they reduce prices forcing others to do the same.

I am willing to try it, but wonder if it will work.

(The attached file is a powerpoint file, zipped to accomodate forum file-type validation).

That strategy ignores several key components of supply and demand.
The chief one is that if Ex/mo lowerd their price because people are buying at other stations, The other stations will see an increase in sales and NOT lower their prices (why would they if sales are increasing) and maybe even RAISE them since they have a fixed supply and an increasing demand.

Assuming that gasoline is a commodity (interchangeable between brands) then it just won't work as the overall demand will stay the same.

[Russianwolf]

The flaw are really alot more.

1)local stations are usually owed by local folks that buy a franchise to have a Exxon sign. You don't hurt Exxon, you hurt the guy that owns the station (your neighbor). Exxon get's their money no matter.

2)the fuel that goes to the stations comes from one source. The refineries put the fuel into a pipeline and it carries it to distribution centers where its held in tanks. All the gas of each grade is mixed together regardless of who owns the refinery. As the trucks pull up with the Exxon logo, they fill up with "stock" gas and then add whatever additives make them "Exxon Brand". So if you buy less Exxon, the gas just gets picked up by BP and goes to the stations that are selling more. Exxon get their money no matter.


Just the 2 that roll off my head, but I'm sure there are more I could point out.

[ejs1097]

I've seen this pitch last year. This and not buying gas for 1 day will never work. Why, because the people abiding by this method is such a small portion of the overall population the oil companies wouldn't notice. Plus who knows where 7-11, Sheetz, WaWa, and every other convience store selling store brand gas comes from. you could be avoiding Exxon gas by filling up at Sheetz and be buying Exxon gas without even knowing it.

In theroy it may be a good idea but they never pan out in reality.

[rbfunk]

Sorry, it doesn't work that way.
Loring is correct that oil (gasoline) is a commodity. In fact it's the most traded commodity on the planet. Coffee is number two for those keeping score at home.
The first consequence of this program would be to put the station out of business. If I am sitting on gas that cost me a dollar, I have to sell it at a price not only to cover my operating expenses but to pay for my next delivery. If my next gallon is going to cost me $1.10, I have to base my price on that. If it's going to cost me $0.95, maybe I can play a little price war with the guy down the block. But if I can't sell what I have, I can't pay my bills or buy more gas. So I'm out of business and the guy down the street can raise his price.

As far as the big guys at HQ go. They can ride out the bumps a lot longer. If they have excess inventory there is always an independant station that will buy it. I'll bet that places like Wawa and Walmart aren't tied to just one supplier. If Exxon is a little short, there is the spot market or even buy from someone else. Not all refineries are owned by big oil.

The only way to lower prices is to increase the supply or lower the demand.
Bob

[jhart]

It seems to me that the real problem we have is the ability to refine the gas. the refineries are old, as none have been built for quite a few years. Nobody wants one in their backyard. Everytime one or more goes down for a problem or a switch over, the price of gas goes up due to supply and demand.

I believe that one of the solutions is to build additinal refining capacity. Not the whole answer, but would help a great deal.

Just my $.02 worth.

[scorrpio]

(The attached file is a powerpoint file, zipped to accomodate forum file-type validation).

Above message is brought to you courtesy of Mobil Oil

And I also agree - this method won't work.

[radhak]

It seems to me that the real problem we have is the ability to refine the gas. the refineries are old, as none have been built for quite a few years. Nobody wants one in their backyard. Everytime one or more goes down for a problem or a switch over, the price of gas goes up due to supply and demand.

I believe that one of the solutions is to build additinal refining capacity. Not the whole answer, but would help a great deal.

Just my $.02 worth.

If I remember NPR's piece on this right, the fed govt at various times in the past has tried to arm-twist the oil companies into revamping their refineries, and has always been told 'we dont have the money'. Since last year (with record profits), this argument has worn thin, so the expectation was that they might throw in the towel. But with motives stronger than altruism driving them (less refining capacity means smaller on-the-street inventory, leading to higher prices and hence profits), the oil companies will need to be dragged kicking-and-screaming by congress.

[Russianwolf]

I will also point out that corn based Ethanol is not a solution as it's currently being pushed by some.

Reasoning. about 1 year ago a 50lb bag of corn was about 5.60 locally (I feed deer in my yard), Today It is 7.30. That's an increas in price of 30%. The reason behind the increase is not the fuel delivery cost, it's the fact that more corn is being diverted to Ethanol production. "Great we have more fuel", right?

Well, if the cost of a bag has gone up 30% for me, it's gone up about the same amount for the Ethanol producers too. So the Ethanol that used to be $1 a gallon (pulling the number out of my head) is now $1.30 per gallon.

Also, Corn is used as a feed for livestock, so The Dairy and Rancher have to pay more to feed their stock which in turn makes the prices they have to charge higher and so on down the line........

So corn based Ethanol isn't the solution people are looking at it to be. There are other sources (switchgrass for example), but few are pushing them so far.

And I am in the minority. I can't wait to see $5/gallon gas. Because that's what it's going to take before consumers start demanding better milage and alternatives.

[prlundberg]

Maybe I'm wrong, but the only way I can see getting the price of gas lowered is to use less oil based products.

I agree.

Everybody wants lower gas prices, but nobody seems to want to reduce their consumption.

Building more refineries will help, but only short term.

On a sidenote, I also don't think biofuels are the answer, as they cut into our food supply.

[gsmittle]

I'd love to reduce my consumption, but I can't afford a different vehicle or to move closer to work. Moving closer to my work makes my wife have to drive farther.

My environmentally-concious #1 Son (which I encourage BTW) kept asking why I didn't drive a more fuel-efficient car until I showed him that the payments on a newer used car are not offset by the savings in gas. It's a real Catch-22.

Where this ties into the thread is that I imagine most of us aren't financially able to drive something more fuel-efficient right away.

$130 last time I filled up the old Suburban. Ouch!

g.

[Russianwolf]

I agree.

Everybody wants lower gas prices, but nobody seems to want to reduce their consumption.

Building more refineries will help, but only short term.

On a sidenote, I also don't think biofuels are the answer, as they cut into our food supply.

whether biofuels are an answer depends on a couple things.

1)source. Like I mentioned above, corn isn't a good answer because of the impact it will have in other areas. Switchgrass may be a better answer because it will grow in about any soil and has no other real economic impact (we don't use it for food or feed generally). Other bio-oils (soybean oil, grapeseed oil, etc.) can be a better answer due to higher energy content and multiuse.

2)multiuse fuels. Meaning is the fuel use of the biofuel its primary or secondary? We've all heard about them, people who go get the waste vegtable oil at McDonalds and filter it for use in their Deisels. So this decreases Petrol use and eliminates the waste that may otherwise go into the ground. There was an article recently about a couple in Cali who import grapeseed oil to sell to restaraunts, then by back the waste oil, filter it, and use it in the company vehicles (Deisels). The owner says he hasn't been to a gas station in 2 years.

I think Biofuels may be a short term answer, but not corn based Ethanol. I also think we need more deisel cars available. There is a reason that 50% of the cars sold in europe are Deisels compared with less than 1% here, and fuel prices are a big part of it.

[LCHIEN]

Above message is brought to you courtesy of Mobil Oil

And I also agree - this method won't work.

exxon owns mobil now. Has for about 10 years.

This is a social statement, not a political one:
You won't get the low mileage cars off the road and replaced by efficient ones until there is sufficient incentive to do so. People complain about $3/gal gas but they still drive. I heard of some plans to cut gas taxes in Texas - an election year ploy if i ever heard of one. The problem with cars is, it takes a year to plan model allocations, 2 years to design replacements and 10 years to get the existing ones off the road. If there is any argument for legislating by taxation, this is the one. They need to make the cost of driving now reflect future pricing, change the demand, to get our fleets of cars to something more efficient, inside of 10 years!


Another statement:
its partly the refineries, partly the oil companies, partly the political situation etc. The truth of the matter is, the whole supply chain - oil wells, pipelines, refineries is so tightly stretched its a disater waiting. Close a few refineries, close down a country supplying oil, lose a pipeline, the whole house of cards comes crashing down.