Jay Dreyer

'Gas tooo high' Lunacy

With the recent rise in gasoline prices, well intentioned people have forwarded me the following email a couple of times:

Subject: gas tooo high

IT HAS BEEN CALCULATED THAT IF EVERYONE IN THE UNITED STATES DID NOT PURCHASE A DROP OF GASOLINE FOR ONE DAY AND ALL AT THE SAME TIME, THE OIL COMPANIES WOULD CHOKE ON THEIR STOCKPILES.

AT THE SAME TIME IT WOULD HIT THE ENTIRE INDUSTRY WITH A NET LOSS OF OVER 4.6 BILLION DOLLARS WHICH AFFECTS THE BOTTOM LINES OF THE OIL COMPANIES.

THEREFORE SEPTEMBER 1ST HAS BEEN FORMALLY DECLARED “STICK IT UP THEIR @$$ ” DAY AND THE PEOPLE OF THIS NATION SHOULD NOT BUY A SINGLE DROP OF GASOLINE THAT DAY.

THE ONLY WAY THIS CAN BE DONE IS IF YOU FORWARD THIS E-MAIL TO AS MANY PEOPLE AS YOU CAN AND AS QUICKLY AS YOU CAN TO GET THE WORD OUT.

WAITING ON THIS ADMIINSTRATION TO STEP IN AND CONTROL THE PRICES IS NOT GOING TO HAPPEN. WHAT HAPPENED TO THE REDUCTION AND CONTROL IN PRICES THAT THE ARAB NATIONS PROMISED WEEKS AGO?

REMEMBER ONE THING, NOT ONLY IS THE PRICE OF GASOLINE GOING UP BUT AT THE SAME TIME AIRLINES ARE FORCED TO RAISE THEIR PRICES, TRUCKING COMPANIES ARE FORCED TO RAISE THEIR PRICES WHICH EFFECTS PRICES ON EVERYTHING THAT IS SHIPPED. THINGS LIKE FOOD, CLOTHING, BUILDING MATERIALS, MEDICAL SUPPLIES ETC. WHO PAYS IN THE END? WE DO!

WE CAN MAKE A DIFFERENCE. IF THEY DON’T GET THE MESSAGE AFTER ONE DAY, WE WILL DO IT AGAIN AND AGAIN.

SO DO YOUR PART AND SPREAD THE WORD. FORWARD THIS EMAIL TO EVERYONE YOU KNOW. MARK YOUR CALENDARS AND MAKE SEPTEMBER 1ST A DAY THAT THE CITIZENS OF THE UNITED STATES SAY “ENOUGH IS ENOUGH”

PLEASE FORWARD THIS ON TO EVERYONE YOU CAN!!!!

So, the theory goes, if you just don’t fill up your gas tank for one day, this will somehow cause such economic catastrophe for the oil companies that they will have no choice but to lower gas prices.

Right.

Unfortunately, this email completely ignores the laws of supply and demand, which isn’t surprising because if they did not ignore them, there would be no email to write. These types of emails appeal to those who believe everyone else is to blame for the high cost of gasoline except for themselves. Take a look – oil companies, “Arab Nations” and “this administration” are all blamed.

The funny thing about this email, however, is that indirectly it is correct. If you “stick it to the man” and don’t fill up your tank for a day, and another day, and another day, the price of gasoline will decrease. Why? Simple supply and demand! If no one demands a commodity, the price will continue to fall until it finds a matching demand level. How do you do this? Well, it’s pretty simple – don’t drive! Try using a carpool, take the bus, get out and walk, don’t purhcase gas-guzzling vehicles, don’t live an hour’s drive from work, etc.

Ahhh…but you don’t like those options, eh? Well, in that case, you’ll need to find a way to increase supply. So, start drilling for oil in Alaska, the oceans, the Great Lakes, your backyard, etc. While you’re at it, don’t be opposed to the creation of new oil refineries in your neighborhood, either. According to MSNBC, no new refineries have been built in the US since 1976. Why? Well, nobody wants an oil refinery in their backyard. So instead, the remaining refineries we do have are running at capacity which has restricted supply despite a huge increase in demand.

And don’t get me started on price controls, either. I’ll let this article, and this one, or this one take care of that nonsense.

Bottom line – if you want lower gas prices, you need to either decrease the demand or increase the supply. A day off from the pump won’t do diddly.

Update
I’m not alone here…Freakonomics agrees.

| posted 08/31/2005 01:44 PM