ANOTHER ill-concieved gas boycott?
So I was listening to the radio on the way to work this morning, and my favorite morning show (Lamont and Tineli on 107.7 The Bone) was getting all pissed off at the gas prices again. They do this on a pretty regular basis, and honestly, in a pretty ignorant way. They've got the usual "it sucks for us, so obviously somebody is actively screwing us over, and we need to righteously fight back." This is such an easy trap to fall in to, to assume that any problems you have with society are the result of malice, and you need to actively fight the evil perpetrators.
There are only two things that will reduce gas prices: Lower demand, or higher supply. Either, we need to buy less gas, or the gas companies need to pump more gas (or find an alternate source of gas, of which a few are being researched).
So what were the Lamont and Tineli proposing? Why, the same boycott that happened a few months ago, where they choose one gas company, and everybody buys ALL of their gas from that company, boycotting all the others. The THEORY is that those other gas companies will have massive stores of gas they aren't selling, and will be forced to lower their prices in order to sell any of it.
This theory is deeply flawed. If this boycott went off as planned, and nearly everybody focused all their buying power on just one gas company, the non-boycotted gas company would be facing ridiculous demand, more then they could supply. They'd start buying gas from all of the other companies, which aren't selling anything. They wouldn't have any motivation to lower their prices at the retail outlets, because they can still sell their gas, for full price, to the one company that IS selling, since that company now effectively has a monopoly and can charge whatever they want. If this goes on too long, the other companies would even start shutting down their own retail outlets, and pretty soon you have an ACTUAL monopoly in retail gasoline, and things are now MUCH worse.
Now, this result is HIGHLY unlikely, because it would rely on nearly everybody actually following the boycott. That's not going to happen. However, if the boycott happens to a lesser extent, you'll just get a lesser version of the same result. The boycotted companies will still likely sell some of their gas to the non-boycotted company, the non-boycotted company will still raise their prices a bit, and any gas stations owned by the boycotted companies which are already not doing so great might be pushed over the edge and get closed down, reducing somewhat the number of competing stations.
In the end, you haven't really accomplished anything. You've strengthened one company a little, while weakening the others, but the supply and demand curves remain in the same place, and the prices will quickly equalize back to the same level.
I actually called them up, and got on the air, too. I communicated the key points here, but of course they didn't really believe me. They had the "Well, we have to do SOMETHING!" attitude, and after I was done talking them they went on an angry rant about how they were being screwed over at the pumps and needed to screw back.
At least I can hope that some of their listeners heard the logic of my words.
There are only two things that will reduce gas prices: Lower demand, or higher supply. Either, we need to buy less gas, or the gas companies need to pump more gas (or find an alternate source of gas, of which a few are being researched).
So what were the Lamont and Tineli proposing? Why, the same boycott that happened a few months ago, where they choose one gas company, and everybody buys ALL of their gas from that company, boycotting all the others. The THEORY is that those other gas companies will have massive stores of gas they aren't selling, and will be forced to lower their prices in order to sell any of it.
This theory is deeply flawed. If this boycott went off as planned, and nearly everybody focused all their buying power on just one gas company, the non-boycotted gas company would be facing ridiculous demand, more then they could supply. They'd start buying gas from all of the other companies, which aren't selling anything. They wouldn't have any motivation to lower their prices at the retail outlets, because they can still sell their gas, for full price, to the one company that IS selling, since that company now effectively has a monopoly and can charge whatever they want. If this goes on too long, the other companies would even start shutting down their own retail outlets, and pretty soon you have an ACTUAL monopoly in retail gasoline, and things are now MUCH worse.
Now, this result is HIGHLY unlikely, because it would rely on nearly everybody actually following the boycott. That's not going to happen. However, if the boycott happens to a lesser extent, you'll just get a lesser version of the same result. The boycotted companies will still likely sell some of their gas to the non-boycotted company, the non-boycotted company will still raise their prices a bit, and any gas stations owned by the boycotted companies which are already not doing so great might be pushed over the edge and get closed down, reducing somewhat the number of competing stations.
In the end, you haven't really accomplished anything. You've strengthened one company a little, while weakening the others, but the supply and demand curves remain in the same place, and the prices will quickly equalize back to the same level.
I actually called them up, and got on the air, too. I communicated the key points here, but of course they didn't really believe me. They had the "Well, we have to do SOMETHING!" attitude, and after I was done talking them they went on an angry rant about how they were being screwed over at the pumps and needed to screw back.
At least I can hope that some of their listeners heard the logic of my words.