The Great Gasoline Boycott

You may have received an e-mail encouraging you to boycott, for the next year, two major gasoline vendors (click for a sample), to help achieve lower gasoline prices.

It is an interesting idea—certainly better than the “don’t buy gas for one day” e-mails that have gone out—but it can't work, from an economics perspective.

There are two major factors affecting gasoline prices. The first is the price of crude oil. The second is demand on gasoline itself.

Currently, crude oil production worldwide is at or near a maximum, reserves are shrinking, and much of the oil obtained is less desirable (and more expensive) for use in gasoline production. In addition to decreasing supply, the rapid growth of industry and the middle class in China is rapidly increasing demand on crude oil worldwide. Crude oil prices are going to continue to increase until production increases significantly or demand decreases.

Then there is supply-and-demand for gasoline itself. Worldwide, refineries, which convert crude oil into gasoline and other petroleum products are typically operating 24/7. This means that gasoline production is at its maximum. Due to environmental and security issues, few, if any, communities are willing to allow refineries to be built in their areas, and refinery construction can't happen overnight in any case.

Do we really think that gasoline companies are inflating prices by 100%? They are making a profit, to be sure, but certainly not at that margin. (Ironically, considering the e-mail I received, our local Hess station—one company targeted by the boycott—is typically charges 10¢ per gallon less than its competition.)

If we are to reduce the price of gasoline, we must decrease the demand. This can be done via carpooling, using public transportation, and buying hybrid or elecric vehicles. (Another topic is why the hydrogen fuel-cell powered car is a bad idea, but I'll save that for another time.)

It is estimated that gasoline will have to stay consistently over $3.00/gallon before people will stop buying the worst offending SUVs (some of which get as few as 7–8 MPG) and get something more fuel-efficient. (Many SUVs do much better, and the average MPG for an SUV appears to be over 20 MPG. My thanks to Robert Hardman for correcting my original misstatement.) I'm ashamed that our minivan only gets 20 MPG around the city, but our choices were limited by the need for space for our 4 children and personal economics. If we did not have a daily need for a larger vehicle, we would not have bought one.

What we ought to be doing is forcing the government to make its fleet vehicle purchases electric-gasoline hybrids or straight electric, demanding increases in public transportation allocation, subsidizing hybrid vehicle purchases (and other energy-saving projects) through tax breaks, and building more nuclear plants—which the US has a near-perfect safety record in operating, and which do not contribute to global warming or other air pollution—to supplement or replace natural gas-, coal- and oil-fired plants.

Anyway, that's my typical more-than-2¢.

(Thanks to Maryjane Case for the topic suggestion.)

3 Replies to “The Great Gasoline Boycott”

  1. So, we are told crude oil is “shrinking.” Maybe that’s what they want us to believe. Maybe it’s true. All I know is that the rich get richer.

  2. It's politics. We can produce cars that get better gas mileage, but we run the risk of offending someone, or someone losing a job. Same goes for the penny, it costs more to mint the penny than it's worth, however we don't give it up because we would be reducing jobs in the mines.
    Darned frustrating.. we can.. we just won't.
    You should be able to drive whatever you want to drive, it's America after all, but why can't the Hummer get 30 mpg? Mercedes-Benz has an E320-CDI that gets 27/37 mpg. Jeep has the Libery CRD that gets 21/26, both are diesel, and you can't buy them (yet) in MA, CA, NY, VT and ME. Both the MB and the Jeep get about 30% better mileage than their regular gas powered counterparts. But we don't want that.. who is their right mind would want to drive 700+ miles between fill ups?

  3. Well, of course the rich get richer–it's their job. If they got poorer–eventually they wouldn't be rich.
    In the meantime, crude supplies are stressed because China and some other countries have upped their consumption, which has depleted the on-hand supply. Oil can only come out of the ground so fast. You can't accelerate the refining process, so it will take awhile for the cached supplies to refill, as most of what's being produced will fly out the door immediately in the near term.
    The reason SUVs don't get better mileage is a combination of chemistry and physics–the physics being that larger vehicles mass more. It takes more energy to move them, and internal combustion engines are only just so efficient, and no more. It just takes more fuel to move them, and the only way to change that is to either
    a) make them mass less, or
    b) find a better way to propel them.
    Why we haven't done than latter thing is largely a question of infrastructure: it took decades to build gasoline-dispensing stations across the planet, and it'll take a very long time to convert them to delivering some other fuel, all other factors remaining equal.

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