How to cut gas prices

Bravo25

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"This make a lot of sense~

A man eats two eggs each morning for breakfast. When he goes to the
grocery store he pays .60 cents a dozen. Since a dozen eggs won't last a week he
normally buys two dozens at a time.

One day while buying eggs he notices that the price has risen to 72
cents. The next time he buys groceries, eggs are .76 cents a dozen. When asked
to explain the price of eggs the store owner says, "the price has
gone up and I have to raise my price accordingly".

This store buys 100 dozen eggs a day. I checked around for a better
price and all the distributors have raised their prices. The distributors have
begun to buy from the huge egg farms. The small egg farms have been
driven out of business.

The huge egg farms sells 100,000 dozen eggs a day to distributors. With
no competition, they can set the price as they see fit. The distributors
then have to raise their prices to the grocery stores. And on and on and on.
As the man kept buying eggs the price kept going up. He saw the big egg
trucks delivering 100 dozen eggs each day. Nothing changed there.
He checked out the huge egg farms and found they were selling 100,000
dozen eggs to the distributors daily. Nothing had changed but the price of
eggs.

Then week before Thanksgiving the price of eggs shot up to $1.00 a
dozen. Again he asked the grocery owner why and was told, "cakes and baking for
the holiday". The huge egg farmers know there will be a lot of baking
going on and more eggs will be used. Hence, the price of eggs goes up. Expect
the same thing at Christmas and other times when family cooking and baking
happens.

This pattern continues until the price of eggs is 2.00 a dozen. The man
says,"there must be something we can do about the price of eggs". He
starts talking to all the people in his town and they decide to stop
buying eggs. This didn't work because everyone needed eggs. Finally, the man
suggested only buying what you need.

He ate 2 eggs a day. On the way home from work he would stop at the
grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a day.
The grocery store owner began complaining that he had too many eggs in
his cooler. He told the distributor that he didn't need any eggs. Maybe
wouldn't need any all week.

The distributor had eggs piling up at his warehouse. He told the huge
egg farms that he didn't have any room for eggs would not need any for at
least two weeks.At the egg farm, the chickens just kept on laying eggs.

To relieve the pressure, the huge egg farm told the distributor that
they could buy the eggs at a lower price. The distributor said, " I don't
have the room for the %$&^*&% eggs even if they were free".

The distributor told the grocery store owner that he would lower the
price of the eggs if the store would start buying again. The grocery store
owner said, "I don't have room for more eggs. The customers are only buy 2 or
3 eggs at a time". "Now if you were to drop the price of eggs back down
to the original price, the customers would start buying by the dozen
again".

The distributors sent that proposal to the huge egg farmers. They liked
the
price they were getting for their eggs but, them chickens just kept on
laying.

Finally, the egg farmers lowered the price of their eggs. But only a few
cents. The customers still bought 2 or 3 eggs at a time. They said,"when
the price of eggs gets down to where it was before, we will start buying
by the dozen." Slowly the price of eggs started dropping. The distributors had to slash their prices to make room for the eggs coming from the egg farmers. The
egg farmers cut their prices because the distributors wouldn't buy at a
higher price than they were selling eggs for. Anyway, they had full warehouses
and wouldn't need eggs for quite a while. And them chickens kept on laying.

Eventually, the egg farmers cut their prices because they were throwing
away eggs they couldn't sell. The distributors started buying again
because the eggs were priced to where the stores could afford to sell them at
the lower price. And the customers start buying by the dozen again.

Now, transpose this analogy to the gasoline industry. What if everyone
only bought $10.00 worth of gas each time they pulled to the pump. The
dealers tanks would stay semi full all the time. The dealers wouldn't have room
for the gas coming from the huge tank farms.

The tank farms wouldn't have room for the gas coming from the refining
plants. And the refining plants wouldn't have room for the oil being off
loaded from the huge tankers coming from the Middle East.

Just $10.00 each time you buy gas. Don't fill it up. You may have to
stop for gas twice a week but, the price should come down. Think about it.
As an added note...When I buy $10.00 worth of gas, that leaves my tank a
little under half full. The way prices are jumping around, you can buy
gas for $2.65 a gallon and then the next morning it can be $2.15. If you
have your tank full of $2.65 gas you don't have room for the $2.15 gas.
You might not understand the economics of only buying two eggs at a time
but, you can't buy cheaper gas if your tank is full of the high priced
stuff. Also, don't buy anything else at the gas station, don't give them any
more of your hard earned money than what you spend on gas, until the prices come
down..

"
 

gadget_lover

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It's an interesting concept, but lets see how this really works. I'll use small numbers to make it easier.

Today:
7 gallons per week are delivered to Gomer's gas station. You drive 10 miles a day at 10 miles per gallon. Every friday you drop by Gomers and talk about the weather while you pump 7 gallons.

You go into attack mode.

7 gallons per week are delivered to Gomer's gas station. You drive 10 miles a day at 10 miles per gallon. Monday you get two gallons, wednesday you buy another two. Friday you buy another two. the next Monday you have to buy three. Unfortunately, Gomer has decided you like him since you are spending so much time at his station talking about the weather.

The only way anything really changes for Gomer is if you use less and buy less. Just don't be surprised if Gomer and all the other gas stations decide that they have to raise per unit prices to make up for the lower sales volumes. You can do that when there are only a few major players and they can all react to price changes instantly.

If you don't use less, you just change the point in time that you pay for it.

Daniel
 

zespectre

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I would respectfully suggest that someone take a class in economics. Amongst the holes in your argument... Chickens just keep on laying but gas producers can most certainly cut back production.
 

cobb

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Agree, economics is a complicated subject, not to mention supply side and demand side theory. Then mix in the purchasing behavior or humans, some psychology and socology and its just something difficult to sum up in a few paragraphs.

Much like a chef, a company is only as good as its sources. If OPEC limits supply of oil so they get thei 40+ per unit of crude, the others have no choice but to pass the cost on to the consumer.

What I like to know is how they were able to go from buying dozens of eggs to a few units. I guess we could do like our european friends and convert gallons to liters, but if you need 8 gallons a week to drive just to work and back, its not likely you can buy less unless you walk, car pool with someone or work 4 days a week. Still if you bought the liter equivent, its still 8 gallons or so when converted back over to standard measurements.

To be fair, I heard the price was lowering because demand went down 3% and capacity to refine was up some since hte first gulf hurricane.

I take the bus regardless and do not buy gas. Ticket fair was raised May of this year, but lowered back after protests from riders. Just today discovered the bus that picked me up today gets 323 miles per tank full where as the others get 550-600 per tank. Driver said something is with the engine, but they will not examine it.
 

evan9162

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the proposed solution does nothing to reduce gas consumption, supply, or demand.

Like gadget says, if you drive 100 miles per week at 20 miles per gallon, you need 5 gallons per week. It doesn't matter if you fill up twice a month, or put in 1 gallon every day - the amount of gas you're using is the same in the end.

And since everyone's gas schedule is offset from everbody else's, the station and suppliers won't see any difference in usage at all - there will still be a steady supply of fuel being used by consumers at the exact same average rate as before. The only thing this proposal would do would be to waste everyone's time by having them spend more time then necessary going out of their way to get gas more often than before.

In fact, this would actually waste more gas and cause more pollution, since there is a certian amount of fumes that escape during a fillup, and a certian amount of overflow/splashback/spillout that happens during a fillup, you will increase wasted gas, escaping gas fumes, and fuel spills. Plus, people will waste more gas by taking a daily detour to the gas station, which is an unnecessary trip. It will also introduce an additional startup cycle for each vehicle, wasting more gas and polluting even more. Plus, there will undoubtetly be longer lines and waits, which means vehicles sitting while idling, again wasting gas and causing an increase in pollution.

So, in short, the proposed solution would do absolutely nothing to accomplish the goals it would state, and would greatly inconvienence drivers, increase wasted gas, increase ground pollution, and increase air pollution.

The only way to really affect thing is to stop driving as much. Good luck getting people do to that.
 

Lynx_Arc

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I think the biggest problem is Oil from which gas is made is not an infinate supply but finite and that means sooner or later either it will run out or the price will be pushed to a level something else becomes more attractive. If you reduce consumption in one place to make it cheaper another place will take up the slack do to lower prices, increasing population and growing industry. Lowering prices will always encourage people to buy more and possibly be less conservative in their use and things that require gas as a fuel.
With the chicken analogy you can eat something else or do without but a certain amount of gas is *needed* by nearly everyone, and yes I mean everyone because unless you are self sufficient you buy stuff that is trucked, flown, shipped in from somewhere using gas or petroleum based fuel.

Driving less will mean cheaper prices for the guy that buys the bigger car with the large powerful v8 etc. I guess it is kind of ironic in that most likely the only way most people will conserve is when force to by higher prices because cheap prices encourages more wasteful usage.
 

cobb

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Sorry, I couldnt resist the smart comment that it is infinate. We just need to wait millions of years for more oil to be made naturally. :)

I agree, the market will find a new market. As gas goes up, folks will be forced to be more efficient, the auto manufactures and EVs maybe back and in full swing.

Lynx_Arc said:
I think the biggest problem is Oil from which gas is made is not an infinate supply but finite and that means sooner or later either it will run out or the price will be pushed to a level something else becomes more attractive.
 

Hookd_On_Photons

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cobb said:
Sorry, I couldnt resist the smart comment that it is infinate. We just need to wait millions of years for more oil to be made naturally. :)

Or maybe not?

For some interesting reading, Google "Abiotic Oil".

Take what you read with a grain of salt.

Then Google "Peak Oil".

Again, take with a grain of salt.
 

idleprocess

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That story doesn't work. It states that the only change in consumer behavior is that consumers buy fewer of the same commodity, more often. With no signifigant change in overall volume, simple repackaging will solve the problem in short order... unless people were normally buying dozens of eggs and wasting most of them.

The gasoline situation is much different from this story. There are more dimensions to it than the evil oil companies raising prices at a whim - although they're making money hand over fist right now, no doubt.

There have been no new refineries built in this country for decades. Supply has increased through upgrades to existing refineries, but those typically represent incremental steps rather than big jumps in capacity.

There are over a dozen formulations of gasoline sold in this country. Gasoline sold in Texas cannot be sold in California, etc. Refineries are typically set up to produce gasoline for one region ... another chokepoint given the tight supply situation from refineries.

Lastly, the oil companies musy buy oil on the global market. Sure, we still refine about 50% domestic crude, but domestic producers sell to the same global market. If Shell pays more for crude to be refined in Europe or CNOOC pays a premium for crude shipped to China, who are you going to sell to as the owner of an oil well?

For the past 2 decades or so, the global crude production industry was operating below sustainable maximum capacity. In recent years, they have been operating at close to maximum sustainable capacity. High prices will spur investments in production and exploration, but demand is growing faster than production can be increased...
 

Lurker

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Buying gas at $10 at a time will definitely shift some inventory from automobile gas tanks back to gas station storage tanks. This will create the illusion of a decrease in demand, but unfortunately this will be only a temporary effect. After about a week of this, gas retail sales numbers will be right back where they were and the additional inventory will be easily absorbed by the storage capacity inherent in the distribution chain.

This small effect would come at a great cost: added time and inconvenience to all consumers participating. It might also cause an increase in fuel consumption, since there is some fuel cost of driving into a gas station to fuel up and then restarting later and driving away, especially if the gas station is out of the way.

Furthermore, as people tire of the inconvenience and begin filling up again, there will be an apparent increase in demand.

A better strategy would be for each person to reduce their fuel use. Combine trips, carpool, use alternate trasnport, tune your car, replace your air filter and check tire pressure, drive slower, remove unnecessary weight from your car, choose more efficient vehicles when buying, etc.

The bottom line is that fuel is still very cheap in the US relative to our ability to afford it. We are still paying more per gallon for bottled water. As long as it is so cheap and readily available, people will continue to squander it. Gas may seem expensive compared to what we used to pay for it, but how many people that you know are really making a change in their lifestyles to cut their consumption (or have even checked their tire pressure)?
 

idleprocess

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Uhm ... there probably won't even be enough of a difference over a weeks' time to effect station inventories - since most folks need to fill up from nearly empty about once a week.

Comsumptions patterns would change drasticly, but consumptions rates will not change signifigantly since driving behavior has not changed.

In fact, such a "boycott" would likely net even more money for gas stations given impulse-shopping tendencies - more slurpees and potato chips sold...
 

Bravo25

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This was sent to me. That is why it is in quotes. The logic of the eggs makes sense, and I can see the point of fuel not going bad. But one point was to NOT buy anything else from the retailer. Only fuel. As little as possible.
 

AESOP

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Show me where you can buy just two or three eggs at a time. Therefore the egg story does not make sense either.

Nice try though.
Michael
 

idleprocess

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OK, well, so long as your overall purchase volume is more or less the same over the long term, it does not matter if you buy just enough gas to get you between gas stations or run your tank dry every time. Demand will be the same.

The only substantial change will be that the gas station will be packed with folks buying 1-4 gallons every day instead of 8+ once a week. Imagine the lines.
 
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