…what would the price of gas be? Would it just be a straight 20% reduction?
Over in this thread we’re discussing Bill O’Reilly’s idea of a boycott until the oil companies drop their profits by 20%. If you have any comments on the notion, that’s the thread for them. Here I want to know if that would really have a noticeable effect on my weekly fill-up?
This is off topic, but there’s an interesting article in the Washington Post yesterday or the day before about how the rise in gas prices are really hurting the gas stations.
[QUOTE=ultrafilter]
…what would the price of gas be? Would it just be a straight 20% reduction?QUOTE]
Definitely not. It would be much less than a 20% price drop. Making it real simple, suppose it’s a company owned oil company and it costs $2.50 to search for, extract, refine, deliver, etc. a gallon of gas. Suppose they sell it for $3.00. Their profit is $0.50. A 20% drop would mean a profit of $0.40, so they’d have to sell it for $2.90. That’s only a 3.3% drop in the price.
This is hard to figure out at least using what I have found. I have found that “Refinery Costs and Profits” make up only 15% of the cost of a gallon of gas. If you say that each component is 7.5% and then take 20% of that then you get a 1.5% reduction in the cost of gas. At $3.50 a gallon that = a reduction of $0.0525 cents a gallon reduction.. I don’t think O’Reilly’s plan would be all that effective.
Here are some sites with breakdowns in case you wan to figure it yourself:
That final figure is worded in a confusing way. It should read 5.25 cents per gallon.
First define oil company.
In the longer run, an effective boycott would paralyze the economy, so what you save on cheaper gas will cost you in your salary when you’re laid off.
Not sure how you come to that conclusion. I’m not sure I’m knowledgeable enough to disagree (IANAE) but I would challenge you to explain your rationale. A boycott would have the effect of reducing demand of a commodity that has just seen a dramatic reduction in supply. Prices would necessarily come down to some degree. I don’t see how it could have a negative effect on the economy as a whole.
The problem with such a boycott, unlike the car trade-in, is that it is an unsustainable artificial drop in demand.
There was an email chain letter that went around a couple of years ago (probably still is) urging people to boycott gas (maybe even a particular brand) to force prices down. What the writers never figured out was that prices go down, boycott ends, prices go back up.
An effective boycott might drive most gas stations out of business before it affects the wholesale price of gas. That would effectively drive the gas price down since they would all sell off their assets and nobody is buying gas. However, since they are all now in default, the bankruptcies run up the chain to oil companies, and the economy collapses. Nobody buys consumer or business goods anymore, and the country is in shambles.
For the boycott to work, you have to not have cheaters. For example, I’d probably be a cheater, since the price of gas means very little too me until it’s too expensive to afford, and although I detest the price, it’s still affordable. There’s probably be lots and lots and lots of other cheaters, too. So, that’s why I mentioned “successful boycott.” Assuming the boycott can be successful, then, we’ll assume that there are no cheaters or insignificant quantities. That means that the vast majority of the country will not go to work, because they won’t buy gasoline for their cars/trucks/scooters/bikes. Merchandise and parts won’t move in trucks. Planes won’t fly because no one’s going to the airport. Trains won’t move because no trucks are arriving at the terminals. Stocks drop like rocks because, damn, GM’s not producing or selling anything. Real trouble, 'cos Toyota’s not, either! Massive layoffs done via telecommuting and pick slips via email (since the post office can’t move). But… gas prices will drop. Of course since my unemployment payment is only $200 per week, I can now less afford to fill my car at $19 versus $55 when I was gainfully employed.
Without an effective boycott, you’re just kind of hurting yourself, because you could be out driving around if you weren’t home hoping no one else is out driving around.