Wednesday, May 16, 2007

Boycott This

So yesterday was apparently a national gas boycott day. While I didn't fill up my car yesterday, it was only because I still had gas in it. I'm not a big fan of boycotts and I'll tell you why...

Here is a breakdown of what determines the price of a gallon of gas here in California. Scroll down to see the current month.

As you can see by the chart, the oil companies really don't make much profit off of a gallon of gas. And the chart doesn't even show their costs for further research and exploration.

Although it feels much better (and easier) to point the finger at the oil companies and yell phrases like "price gouging", the only real way to make prices go down for any particular product, including gasoline, is to a) add competition b) increase the supply or c) decrease the demand.

Since there are already plenty of oil companies that are competing with each other to get your business, I don't think adding new competition will change anything. And I think the idea of them coordinating together on the prices are ridiculous, especially since there are regulatory bodies in place to ensure that this doesn't happen.

Ways to increase our supply include offshore drilling, exploration in ANWAR, building more refineries, etc. The primary reason that most methods of increasing the supply have not been pursued is because of the strong political pressure of environmentalist groups.

Ways to decrease our demand are basically either a) driving less or b) using more fuel efficient vehicles. Truly, while paying such high gas prices really sucks, in the long run the high cost will cause our consumption to decrease. This is not only because we'll make more efforts to car pool and maybe even ride the bus, but also because manufacturers will continue to make more of a concerted effort to build cars that consume less gas, since people are putting a much higher priority on gas consumption when they purchase a car. This is supply and demand again.

If you really want to point a finger, then I would suggest pointing it at your local environmentalist for not allowing the supply to increase. And maybe yourself for not reducing the demand.


running shoes said...

While I agree that you all in CA have higher gas prices and therefore, we in other states should quit our moaning, and that we all should drive more fuel efficient car or find someway of not depending soley on oil. I do think think that in some states, like mine, there is a reality to the price gouging. Our state is being investigated for the price hikes before and after Katrina. Because of our less dense population, car pooling and bus transportation is nearly nill. People seem to be in the dark about any sort of conservation. Today alone I've seen Huge discrepencies on gas prices- from the small 5 cent difference to the 11-13 cents per/ gallon difference.

running shoes said...

not abrasive... I agree with you on many points. It will take much more that one day of a semi-boycott to do anything about the prices. And then who knows... it's probably a losing battle, since we as Americans feel we are entitled to all and everything. We will continue to drive our big gas guzzling SUV monster trucks and continue to complain about the oil prices, just because... even if they come down.

counter stats