I heard on the news last night that some well meaning (but misguided) souls have been trying to arrange for yet another gas boycott to protest increasing prices. Unfortunately, gas boycotts don’t work — and for good reason. People don’t actually drive less. Rather, they fill up the day before or the day after, but end up using just as much gas. In other words, overall demand is unchanged, and the boycott has no effect whatsoever.
If you want to make a difference, the answer is simple: drive less.
saladdin,
The articles are talking about fuel prices. I’m talking about oil prices. Fuel prices are based on numerous factors, one of which is the price of oil. In my comment I stated that oil prices will decrease as demand decreases. Which, to a degree, will decrease fuel prices.
So, yes, decrease in consumption of gas will decrease the cost of oil and eventually fuel… in the long run. In the short term… who knows.
Tom,
Then explain this:
Consumption in US down but prices still rising.
“Gas consumption so far this year is down about 0.2 percent compared to last year, according to the Energy Information Administration.”
http://www.kansascity.com/105/story/585815.html
Vs this
The average price of gasoline jumped 15 cents over the past two weeks to a national average of $3.62 per gallon of self-serve regular, according to the biweekly Lundberg Survey released Sunday.
http://money.cnn.com/2008/05/05/news/economy/gas_prices/index.htm
saladdin
I actually heard on the radio the other day that driving less will bring down gas prices… An oil analyst was, in a nutshell, saying this:
If consumers drive less, there will be less of a demand on oil, which means more supply. The issue of supply (or lack of) has been a major driver in oil price increases in the past couple months. More supplies means oil can be sold at a cheaper price, which will flow down to cheaper gas.
So for all you naysayers, driving less not only costs you less, but also drives down gas prices!
This is off topic but Rick, though you didn’t come out and say it, it seems you are implying that private industry is “efficient” and government is “inefficient.”
Even being a fan of the free market as I am, I never have or will buy the thought that private industry is efficient. For every governmental screwup you can find there is one just as bad in the private world.
In my experience people seem to be ok with govenment support (roads, police, firemen, teachers) but not the taxes associated with those things.
saladdin
It’s interesting how little people know about gas pricing, but how much they THINK they know. People assume the public is being gouged because some hack who calls himself a reporter states that Exxon made $10 Billion in a single quarter. Most reporters conveniently ignore the fact that to make that $10 Billion in profits, the company sold over $100 Billion in product, and paid close to $25 Billion in taxes!
A simple way to figure things is this:
Assume you spend $10 at the gas station, then you go to McDonald’s and spend $10 to buy yourself and your kids lunch. You have spent the same amount at both businesses, but…
Exxon will have made just under $1 in profit off your $10 purchase. They will pay $2.50 in taxes and royalties.
McDonald’s will have made $1.60 in profit. I’d have to double-check their latest 10K to see the taxes they will pay, but I guarantee it is far less than $2.50!
Care to guess which company, Exxon or McDonald’s, is “gouging” people?
The fact of the matter is that most consumers are woefully undereducated about how the economy works. They assume if prices are going up, someone *must* be making a huge windfall in profits off of them, and they always point the finger at the most obvious target without bothering to actually do some research to find out if it is true. A few might wait until they get some half-arsed “news” report (most news, especially on TV, is Infotainment at best and downright lies at worst) that appears to validate their assumption before they go off, but many don’t even wait that long.
saladdin:
Your mistake is thinking both groups of people are the same. There are 300 million people in this country. Not everyone believes the same thing.
I, for one, believe very strongly in the free market and the inefficiency of government. Therefore, I oppose universal healthcare (at least so far as it is managed by the government) and I oppose regulation of gas prices. It’s very consistent, actually.
As a side note, I also oppose government subsidies to the oil companies. They seem plenty capable of making money on their own.
It’s funny to me that for a country that screams “free market” from the roof tops everytime someone mentions universal healthcare that so many people want the government to fix prices and regulate an entire industry, such as oil/gas.
Boycotts won’t work and neither will only buying from one gas brand.
Poor Mr. Smith rolls over in his grave everytime someone mentions setting limits to the amount of profit Exxon can make. I never thought I would see the day where we had Congressional hearings asking a company “Why are you making so much money? And pretty please stop doing that.”
saladdin
Mike, you took the words right out of my mouth, “Even driving less won’t convince the gas companies to lower prices…But at least it will save you money.”
Agreed. Even driving less won’t convince the gas companies to lower prices – for every person who drives a little less, someone in China or India starts driving for the first time. But at least it will save you money.
I think there are many ways to decrease our dependence on oil (drive less, drive more fuel efficient vehicles, decrease heat/ac consumption, upgrade siding/windows, and, just make sure we turn stuff off when it isn’t being used), but they all involve some form of changing behavior. And, I think gas prices are finally starting to result in that …
I agree boycotts do not work. And although I do not have a solution as many of the posters have, I don’t think that Washington is smart enough to regulate the price of gas. Look at all the other things they have tried to regulate.
Yes, don’t boycott the gas station for a day, boycott gas USAGE for a day. Walk, run, ride a bike, carpool, take the bus! My husband who has biked to work many times in the past now rides the bus most of the time. With a prepaid set of bus tickets, it’s only 25 cents each way. It doesn’t take that much longer than driving. He has time to read or go online with free wi-fi. He also gets a little exercise walking between the bus stop and home or work. He also finds it wonderful to put the bike on the front of the bus on the way to work, and then bike as long as he wants to get exercise after work and come home on the bike.
I’ve cut down on gas usage drastically by deciding not to take part in as many activities that I’d normally get in the car to do. Saves time sitting in traffic and gives me more time to do fun things in my neighborhood or at home.
Ron, I don’t really want to stray into a political discussion here, but the estimates that I’ve seen have been that drilling in ANWR would reduce gas prices by about $0.01/gallon, and even that would take years to achieve.
Also, what happens when we eventually start running out of oil in ANWR? That’s a short term solution at best.
Matt (and others),
The reason gas has gone up so much is NOT due to increased consumption/demand. It is due to the dropping value of the dollar. Most oil exporting nations denominate their oil in dollars, and since a dollar is worth so much less vs. other currencies than it was 7 years ago, it now takes many more dollars to purchase the same amount of oil. Thus, the price of oil goes up.
If you want lower gas prices, don’t engage in these stupid boycotts, and don’t complain about ANWR, as the increased supply due to opening up ANWR will barely affect the price of oil. Rather, compalin to your government officials, particularly the Federal Reservce and Ben Bernanke, how they are handling the dollar.
Again, the reason for the sharp increases in teh price of oil is caused by the weak dollar. Since 2000, the price of oil has increased 237% in dollars, but only 74% in Euros.
Link http://www.chycho.com/?q=node/1685
Don’t forget the impact of India as well. Their economy has flourished in recent years and there has been an exponential increase in automobiles and driving there.
The answer (until a technological breakthrough) is more supply. Drill in ANWAR, drill in the Gulf of Mexico, drill at the North Pole, drill off the coast of Florida and California.
Some ignorant politician recently remarked that it would take 12 years to get the oil flowing from ANWAR…but we started talking about it in 1994. Today, that supply would be hitting the markets. Politicians only think about the next election, at most 2 years down the road.
Russia, by contrast, has started drilling in the Caspian Sea, even though they won’t get any significant oil from it for 20 years. They are planning ahead, rather than staring at their navels and hoping things get better…somehow.
I agree, Boycotts dont work, a system that would work is if we show our buying power by only buying gas from one conmpany, for example whoever is the cheapest. here in atlanta the cheapest is always quicktrip, thats the only place that i buy gas, if we all can do that the other companies who are making a lot less will either drop their rates to compete or go bankrupt
Matt wrote:
“I’m still convinced that demand isn’t driving the price of oil but speculation.”
Matt, unless you bring the facts about global production, reserves up/downstream and consumption over the last few years to the table. And with that you support your conviction. I’d agree that there is speculation, but on your conviction.
Gas is still considerably cheaper in the U.S. than a lot of places in the world, even with the rising prices.
I pay about $4.50 per gallon here in Japan, but it doesn’t matter so much to me because the cars are so fuel efficient. I only pay about $50 per month on gas, even with a 40 minute roundtrip commute everyday.
Although it’s from 2005, check this out: http://money.cnn.com/pf/features/lists/global_gasprices/
So yeah, gas boycotts ARE stupid.
It’s different if there was a free economy with gasoline, but there isn’t. Everyone needs it. Just like everyone needs water and electricity to their house (and I know you don’t “need” it in the strict definition, but you get my drift). It’s not like we can go buy different electricity from different companies, it’s all regulated by the government. The same should apply to gasoline as there is only one company delivering it (there is only one source).
I can’t believe so many people believe we should be “controlling” gas prices. This is never the right approach. Here in Massachusetts there are regulations to control the price of milk. Seems like a good idea until you see stores getting in trouble for charging “too little” for milk. So far I have seen no mention of stores getting in trouble for charging “too much.” When government takes control you will always pay more. China has their gas price set by the government at $2.94, problem is it’s been set at this price of over a year. They were paying a significant premium until recently. The problem is now the government is considering bumping up the rate again probably about $1, once again they’ll be paying more. How does the Chinese government do this? It buys futures just like Southwest airlines. I certainly trust a capitalist enterprise like Southwest to make good decisions on playing the futures market. Do I trust that the Treasury or DOE could do such a good job. No way in he…
To really control gas prices, they need to make it a public utility like electricity. I have been touting that for years.
The bottom line still is, if you drive less, you pay less for gas in total than you would if you drive more. Our family of 3 has used an average of 6 gallons of gas a week for the last 5 months. People I work with who complain about prices are buying 20 or more a week between multiple cars.
At 6 gallons a week, I can easily absorb $4-5 per gallon gas. If I was buying 20 every week, the story would be different.
Nickel,
I understand this but the price of oil has gone up pretty drastically in the past few years in the order of 2-3 times. I don’t think the consumption increase around the globe is matching that not to mention many of the industrialized countries are stockpiling oil to levels that they probably don’t need.
I’m still convinced that demand isn’t driving the price of oil but speculation.
I totally agree!
My fiance and I drive less than 10 miles a day. We put our money where our (rented) house is.
I agree – the gas boycotts are stupid. We do have to drive less to make any difference.
Riding a bike – I’m really concerned for my safety. I’m concerned while I’m driving in a car, let alone while I’m on a tiny bike… plus the extra amount of time it takes. Time is money too!
I don’t know the solution – I do know that we all complain but we all still keep paying whatever price gas happens to be that day.
Drive Less – It can mean drive less miles, and it can mean drive less of a vehicle.
You can pick up a decent motorcycle or moped for under $1K. These vehicles get 40-60+ MPG! They also cost ~$300-$500 to insure for an entire year!
It’s not for everyone, but if you drive alone and don’t “need” storage capacity, buying a $1K motorcycle and driving that through the summer will save you significant amounts of cash over the next 2-3 years.
Option 2 is buying a $250 bicycle, which is what I did for my trips to work.
You are correct, Nickel – it is the world-wide demand that is impacting international oil prices. There are other geopolitical factors at work, but the root problem is basic supply/demand economics.
Matt: Remember, we’re not the only part of the demand equation. Consumption is increasing everywhere, particularly in places like China.
It would be nice if it did work. I am baffled by the seemingly never ending increase in Oil and Gas prices – what’s driving the price so high? Some of it can be explained by the geopolitical situation but where’s the demand in all of this? We can’t be needing more oil to drive up prices so much.
The gas boycott is an interesting idea that you’re right will never work. Leaning on our local politicians might have more of an impact though. Writing a letter to your local officials can get the message to the government that the prices are too high and that something needs to be done to curtail the spiral – just an idea