Wednesday, August 31, 2005

Activism To Lower Gas Prices

I got this e-mail today from a respected mentor. I had heard this notion before and stopped buying gas from Exxon and Mobil (I have been avoiding Exxon for many years: ever since the Valdez spill), but I wonder if any of you more economist-brained people out in PeaceBang Land have criticisms or comments on it?

The e-mail says:

"Phillip Hollsworth, offered this good idea:
This makes MUCH MORE SENSE than the "don't buy gas on a certain day" campaign that was going around last April or May!
The oil companies
just laughed at that because they knew we wouldn't continue to hurt ourselves by refusing to buy gas.
It was more of an inconvenience to us than it was a problem for them.
BUT, whoever thought of this idea, has come up with a plan that can really work.
Please read it and join with us!

By now you're probably thinking gasoline priced at about $1.50 is super cheap. Me too! It is currently $2.75 for regular unleaded in my town. [I just fueled up at $2.85 a gallon this afternoon. -- P.B.]

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.
But to have an impact, we need to reach literally millions of Exxon and
Mobil gas buyers. It's really simple to do!!

Now, don't wimp out on me at this point... keep reading and I'll explain how simple it is to reach millions of people!!

I am sending this note to about thirty people. If each of you send it to at least ten more (30 x 10 = 300)... and those 300 send it to at least ten more (300 x 10 = 3,000) ... and so on, by the time the message reaches the sixth generation of people, we> will have reached over THREE MILLION consumers!
If those three million get excited and pass this on to ten friends each, then 30 million people will have been contacted! If it goes one level further, you guessed it..... THREE HUNDRED MILLION PEOPLE!!!

Again, all you have to do is send this to 10 people and DON"T purchase ANY gasoline from EXXON and MOBIL. That's all.

How long would all that take? If each of us sends this email out to ten more people within one day of receipt, all 300 MILLION people could conceivably be contacted within the next 8 days!!! I'll bet you didn't think you and I had that much potential, did you! Acting together we can make a difference.

If this makes sense to you, please pass this message on.

PeaceBang here again. What I'm wondering if how the three hundred million people thing really works in reality. Because in my experience, this sort of e-mail goes from me to my liberal-minded, activist-type pals and they send it to their liberal activist pals, and then it gets back to me in about five minutes, and I keep getting it again for years.

In other words, is the pool of recipients really that broad? Or, in the style of "Six Degrees of Kevin Bacon," are we all doomed to be sending this e-mail back and forth like that bloody "Save NPR" e-mail petition we've been deleting from our in-box since 1997?


Blogger Obijuan said...

This one's been circulating since at least 2001. Snopes has a pretty good write up on it. Basically, they say this plan would never work. (Members of my home church have been having a fight by e-mail about this one for a few weeks now.)

Blogger fausto said...

It won't work, says this Wharton MBA, and not only because you could never get a boycott of ExxonMobil to stick.

It won't work because both raw (unrefined) crude oil and refined gasoline are undifferentiated commodities, not value-added differentiable products.

What that means in non-economistese is that the prices are set by pure market forces of supply and demand, which is effectively global at the raw commodity level, and regional at the refined commodity level, not by the pricing power of a dominant supplier. When supply goes down and demand remains constant, the price that clears the market goes up. That's one of the first lessons of Econ 101, and it's exactly what's happening now that a significant chunk of global (and an even larger chunk of national) production and refining capacity has been wiped out.

If you boycott ExxonMobil, it may force them in the short run to drop their price a few cents, but the margins at retail are very thin and they can't drop it more than a few cents per gallon and still cover their costs. Moreover, if you patronize only Amoco and Chevron, who supply exactly the same product and incur approximately the same supply/delivery costs, they will take advantage of the artificially high demand to raise their prices, thus providing ExxonMobil with an umbrella of pricing protection.

And that's even before you stop to consider that many of the retailers selling gas under the Exxon or Mobil names are independent small-business franchisees, not the big multinational corporations. Forcing the little guys to either sell below cost or not sell at all only pushes them out of business, and further concentrates the market in favor of the larger players. Walk down the empty Main Street of any small town with a Wal-Mart on the outskirts, and you'll see exactly where this ultimately leads.

Want to start a boycott that works? Pick a financially weak producer of a differentiated, but substitutable and artificially high-margined, product. If enough people buy only Tostitos, you can bet that the price of Miguel's Stowe Away Blue Corn Tortilla Chips will come down -- substantially. If enough people buy their morning coffee only at Dunkin Donuts, Starbucks prices will come down.

Blogger fausto said...

Which gets me to thinking:

Liberals like to accuse creationists and other religious conservatives of being willfully blind to scientific reality.

Are many of the same liberals willfully blind to economic reality?

Blogger Obijuan said...

Are many of the same liberals willfully blind to economic reality?

Yes. Especially if we can have a feel-good boycott about it.

Blogger Oversoul said...

Actually, we should tell government that we need the taxes (18.4 cents per gallon Federal, plus whatever your state tacks on; in my case 7.5 cents plus 7.5% sales tax) that they stick into the price of gas to go away; tax money which ends up getting spent on things like starting a civil war in a Middle Eastern country, shuttling the president off to his ranch every other week, or dilly dallying with allowing women access to the morning after pill.

Anybody got a case of tea?


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