Author Topic: The truth about gas boycotts  (Read 361 times)

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Offline Matthew

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The truth about gas boycotts
« on: May 30, 2007, 05:55:28 PM »
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  • Frustrated drivers

    Consumers, faced with record gasoline prices, have also set their sights on the world's largest publicly traded oil company. Several letters calling for boycotts have reportedly been circulating on the Internet.

    Modeled after the May 15 'Buy no gas" day (widely viewed as ineffective since it simply shifts gas purchases from one to another), the latest round of letters urges urges customers to stop buying gasoline from a particular oil company, often Exxon, for a month or more.

    The idea is that one oil company will accumulate so much gasoline it will have to slash prices to move inventory, which would in turn spark a price war with other oil companies, lowering gas prices for everyone.

    "Totally boycott one gas company until their price drops to $ 2.00/gal then only buy that gas until the other oil companies drop their price," wrote one reader to the CNNMoney.com energy blog. "If consumers did this they could literally set the price they pay for fuel."

    Unfortunately for frustrated motorists, experts say this idea won't work either. First off, just because the service station says Exxon doesn't mean it's Exxon gas.

    "Exxon doesn't own the service stations, they could care less," said Tom Kloza, chief oil analyst at the Oil Price Information Service, which tracks energy prices.

    Kloza said if the mostly independently owned Exxon service stations stopped selling gasoline, Exxon the oil company would just sell its gasoline in bulk to another retailer, like Hess (Charts, Fortune 500) or Marathon (Charts, Fortune 500) or Sunoco (Charts, Fortune 500).

    Even today, Exxon will ship its gasoline to another retailer in a different part of the country if Exxon has an oversupply and the other retailer has a shortage.

    "They are all using the same gasoline, it's a fungible commodity," said Peter Beutel, oil analyst at Cameron Hanover. "It's like shoveling water," he said of the proposed boycott. "It wouldn't do a thing."

    Worse, if a service station did close due to a boycott, it might actually force prices higher as fewer competitors could lead to rising prices, he added.

    Both Kloza and Beutel said reducing demand was the best way to lower prices. Kloza said if every American used 4 ounces less gasoline a day, it would significantly bring down prices.

    Beutel said cutting out one out of every 20 trips - by carpooling or consolidating errands - would reduce gasoline demand by 4 percent a year and knock up to $1 a gallon off the retail price.

    "The minute gasoline demand goes negative, people start freaking out and selling gas futures," he said.
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    Offline Kephapaulos

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    The truth about gas boycotts
    « Reply #1 on: May 31, 2007, 12:39:47 AM »
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  • Selling gas futures? What are gas futures? :confused1: And which people would start freaking out if demand for gasoline decreased?
    "Non nobis, Domine, non nobis; sed nomini tuo da gloriam..." (Ps. 113:9)


     

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