I read an article from MSNBC today about a proposed "gas boycott" on May 15. The organizers want people to refrain from buying gas on that day to "stick it to Big Oil" — they think that if enough people don't buy gas that day, the oil companies will lose millions and will be forced to reduce gas prices. Yeah, right.
The article explains why a "gas boycott" will will have exactly no impact on long-term gas prices. I've been saying this for years; I even had a letter to the editor published in the local paper a few years ago when one of their columnists suggested it. I didn't do all the math that the author of the article did, but it seemed obvious to me that it was hogwash. First off, if you didn't need gas on the 15th anyway, then your refusal to buy gas that day is meaningless, so only the participation of those who would have filled up that day will have any effect. For those who do need gas on the 15th, refusing to buy gas that day just means that you'd fill up on the 14th or the 16th instead, so the total revenue of the gas companies would be even over that three day period. Gas prices would fall on the 15th, but would come back up again on the 16th as demand returned to normal — they might even go higher.
The only way to permanently reduce gas prices is to permanently reduce demand for gas, which means permanently reducing consumption. Making gas guzzlers more expensive and hybrids cheaper would be a good step — when I bought my Sunfire a couple of years ago, I would love to have bought a hybrid, but even given the lower gas costs over the life of the car, I couldn't afford the initial cost. My Sunfire was about $21,000 including all taxes and fees and such; hybrids started around $32-35,000 (they might be a little cheaper now, but I don't think they've come down all that much). If you assume that the car uses $40 of gas per week, and the hybrid uses half, or $20 a week, then it would take eleven years before the cheaper gas offsets the $11,000 extra cost. Now, I don't know exactly what kind of mileage a hybrid gets compared to a standard car (is it half? More? Less?), but until the prices come down significantly, or I get a big bonus at work, I won't be looking hybrid.
Aside: I know this is an unfair comparison because my car is pretty cheap, and they don't make hybrid Sunfires, so I'd have to upgrade to a Camry or something like that, which is more expensive to begin with. I'm comparing apples to oranges, but the fact remains that I would like to have bought a hybrid but couldn't afford one.
4 comments:
I bought a VW Golf Diesel for about $25000 (including all taxes)It gets about 45-50 miles/gallon (20km/litre). I think this is as good as any hybrid, and it has been very reliable and affordable to own. I've put 150000km on it in the last 4 years and have only had to change the oil (every 16000km), put new brakes on (after 140000km) and buy a new set of tires (after 80000km).
Here are my thoughts on a boycott (posted on another site) and I do believe it would work:
You "the boycott will not work because of supply and demand, blah, blah, blah" people are pretty sad. Have you tried it? How do you know it will not cause some type of positive change for the average American? Or maybe you read it in some book or on the internet (or maybe you own Exxon stock). Do you really think that if one of these companies were to start missing $100 millions everyday that they could just shift it to somewhere else and make the same amount? Are you serious? I am sorry, economics degree or not, but that is just stupid. Yes, I read the snopes.com type "explanation". They will just sell it to us via some other company and then prices will go up. This reasoning does not make sense either. And guess what - our prices are going up anyways during the next vacation weekend. Maybe a refinery will break down again or there is something happening in the mid east again. You know it and I know it. You may also have noticed that they do not site any specific cases where a large boycott failed. If one does a web search, all these sites will come up “so and so expert says boycotting one company will not work” and we buy it - simple, done - end of story. I can't guarantee it will work, but if millions of us stopped buying gas from one company something would happen. We should try it. Prove me wrong? Do something. You really should not live your life by just saying that "this won't work" and just sit there. Lets not do anything and then just hope for some change. All we have is our sheer numbers at this point - and it would be so simple to do this - try it for a year. We have nothing to lose, right?
I'm not even sure where to start to respond to this comment. I do not have an economics degree, nor do I own any stock in any oil companies, and I have not read the snopes.com explanation, though I've found in the past that their analyses of such things are usually pretty good. I am not saying that gas prices are fine and that this is a bad idea, and I'm not suggesting that it not be done, I'm just saying that if it happens and gas prices are not affected, don't be surprised.
First off, if the oil companies started to miss hundreds of millions every day like you said, then yes, things would definitely change. But this gas boycott thing is calling for a one day boycott. Missing tons of money in one day will not affect them one iota. Remember that Exxon made something like $40 billion in profit last year -- not revenue, profit. "Try it for a year"? OK, perhaps you can go for a year without buying gasoline, but I cannot.
Secondly, there have been a number of gas boycotts in the past. I can remember at least three in the past few years, and I certainly don't remember noticing any significant drop in gas prices, at least not one that lasted more than a day or two. The last time it was proposed was when I wrote my letter to the editor of the local paper, which was September of 2005. I predicted a fairly small one-day price drop followed immediately by prices rising again, and that's exactly what happened.
As for "Do something, don't just sit there", I already telecommute at least one day a week. My car is a 2005 Sunfire, which is pretty fuel-efficient, and my wife has a Montana, which is one of the more fuel-efficient mini-vans. I don't use the A/C in my car unless it's really hot. We have an automatic thermostat at home that turns the heat or A/C down during the day when we're not there and overnight, and we use ceiling fans to help cool the house in the summer. I may not always be Mr. tree-hugging-environmentally-friendly guy, but I'm always conscious about using energy and try to avoid wasting energy whenever possible. I'm even trying to convince my kids not to use the wheelchair-accessibility buttons in stores to open doors for them because using them when you don't need to wastes energy, and also leaves the door open longer, so any air conditioning or heating in the store escapes through the open door.
As I said, I'm not saying that gas prices are fine. I'm saying that this particular attempt at reducing them will not succeed long term. I think a better solution (though it means spending taxpayer dollars) might be a government inquiry into the insane amounts of profits that the oil companies are making.
Hey, thanks to all those who participated in the gas boycott yesterday! You really showed Big Oil who's in charge, now didn't you? Thanks to the boycott, gas prices dropped like a rock!
Oh wait, no they didn't. I paid 106.7 today. Big surprise.
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