Why The Gas Strike on May 15 Won’t Work (and what will!)
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I recently received an email from a source who I will keep anonymous (for the sake of protecting a friend) informing me that a large number of people will go on a “gas strike” on May 15. The concept behind the gas strike is similar to that of previous gas strikes; consumers will refuse to go to the pumps on May 15 in an effort to force gas companies to reduce the excessively high costs of gasoline.
For those of you who are considering participating in this gas strike without adopting any other additional tactics, be warned: a gas strike in and of itself will not work in the long run. The effects of such a tactic are short-term and do not solve the greater issue, which I will explain further. Gas strike attempts have been made in the past, and the problem of high prices at the pump clearly still exists; hence the precipitation of this proposed gas strike.
So what will work? To understand the answer to this question, we must first understand simple economics as well as the elements that contribute to the cost of gasoline at the pump.
Simple Economics: Supply and Demand
The following diagrams will illustrate how prices are set on products in general, based on the concept of supply and demand. First, we need to take a look at how supply and demand as individual components affect price. The relationships between supply/price and demand/price are fairly straightforward in principle.
SIDE NOTE: For those of you who have studied economics, I understand that the supply/demand curves are parabolic in nature and not linear. I chose to straighten the curves for simplicity and illustrative purposes, and to make a greater point.
Available Supply vs. Price Relationship
Demand vs. Price Relationship
As the diagrams illustrate, demand has a direct relationship on price and available supply has an inverse relationship. Again, this is fairly straightforward. When we merge the concepts of available supply, demand and price together, we end up with a series of relationships similar in concept to the following diagram:
In the diagram above, the price points (the green dots) are set based on the supply of the product and the demand for the product. Our goal as consumers is to purchase our gasoline at the lowest price possible (D2 in the diagram) by reducing the consumption and thus increasing the available supply. The problem is that we find ourselves moving in the direction of D3; our consumption of gasoline is increasing while the overall supply remains relatively constant, thus creating an effective relative decrease in available supply.
The problem with a single-day gas strike is that it does nothing by itself to address the problem of consumption; we may not purchase gasoline on a particular day, but if we continue to use the same amounts of gasoline that we normally would, then there is no long-term incentive for those who set prices to lower them. There may be a temporary reduction, but the price will slowly crawl back upward to the point we presently see gasoline at and we will be back in the same position we began.
Based on the information above, the answer appears to be to reduce consumption of gasoline where and when we can, rather than simply to boycott a series of gas stations for one day. This is part of the solution; however, when other factors are examined, a more effective solution reveals itself.
Gas Price Elements: What Goes Into The Cost of Gas
In order to understand the costs of gasoline, I have included a diagram below (Source: How Stuff Works: “How Gas Prices Work” via the United States Department of Energy):
The largest contributor to the cost of gasoline is the cost of crude oil; the cost of crude oil alone makes up over 59% of the base cost of gasoline. A closer look at the diagram reveals that distribution, marketing and profit for a gas station as a collective make up 11% of the cost (in Canada, the gross profit for a gas station on gasoline is 2%; I am unsure as to the gross profit in the United States). This provides yet another reason why a gas strike isn’t a long-term solution; the gas stations simply have no wiggle room to reduce costs.
So, based on this, the key factor in the reduction of gas prices over which we as consumers have control isn’t just the gas; it’s the crude oil. By reducing our consumption of crude oil, we increase its readily available supply and also lower its demand, thus effecting a change in price.
How We Can Reduce Crude Oil Consumption.
Reducing Gasoline Consumption
By not driving our cars as much, we reduce the amount of gasoline consumed and therefore the amount of crude oil consumed. We need to look for ways to reduce consumption by carpooling; combining trips such as work and shopping errands; purchasing more fuel-efficient cars (e.g. a four-cylinder sedan vs. a 6-cylinder minivan if at all possible); and using other means of transportation, such as public transit, where it is appropriate to do so.
Reducing Home Energy Consumption, Particularly Gas Appliance Consumption
We can look at ways to reduce home energy consumption by purchasing/upgrading gas appliances to more efficient units (e.g. a high efficiency furnace or a low-energy-usage washer/dryer). Many appliances come with a tag containing their energy ratings so that we may shop and compare.
In some cases, the rebates offered by government agencies can offset the increased purchase cost of a high-efficiency home unit. The Canadian Federal Department of Energy Efficiency offers a number of energy-related rebates at any given time, as does the aforementioned US Department of Energy. A good home appliances retailer will be able to provide you with more information in this regard, but these links should also be of use.
The US Environmental Protection Agency has also come up with an EnergyStar program, designed to educate consumers and businesses about which products we should purchase in order to ensure maximum energy savings (e.g. gasoline savings at the pump) and preserve our environment for future generations to come.
Adopting and Supporting Energy-Efficient Leisure-Time Activities
We can take a walk in a park. Perhaps we can go fishing (catch and release, please, for the sake of the fish). Maybe we can go outside and read a book under a tree. Whatever we want to do, we can help each other and ourselves by not going outside.
In other words, the solution to rising gas pump prices is not a gas strike; it’s up to all of us to look at ways to reduce our consumption of crude oil and gasoline wherever we can do so. If each of us does a little bit here and there, it will go a long way.
May 5th, 2007 at 4:15 pm
A much better explanation for why the gas strikes don’t work than I expected. Do you ever read The Economist?
The thing is, hundreds of millions of people around the world ( especially in China and India ) have been lifted out of poverty and into lower middle class over the past few decades. Some have done better than lower middle class, and car ownership is on the rise. We haven’t even hit the exponential part of that curve yet. More to the point, at least for the time being, is that China is the world’s factory. Because of cheap labor, everything is produced there, and while this holds down the prices of most things people might buy, it means China needs a great deal of energy to fuel its racing economy.
Demand is sharply on the rise, and will continue to be. When CNOOC tried to buy Chevron (?), that should have been a major wake-up call. We in the west aren’t the only ones who want gasoline, or the only ones who can pay for it. Canada is sitting pretty on those oil sands, though.
Eventually the market will take care of the situation on its own, but it will be painful. The price of gas will continue to climb, and at some point ( $8/gal? $12? ) most people will stop using it. Demand will fall, price will fall MUCH more slowly, and hopefully by that point we’ll be in love with our hover-chairs.
I live in Seattle, and use my bike for most travel under about 15 miles. Which is about 90 % of what I do; go downtown, to the grocery store ( with a backpack ), to a local park, etc. There are no fossil fuels being burned, it’s fun, and it’s ultimately much cheaper than the gym. ( I paid about $600 for my bike, and have almost 1,100 miles on this one. )
May 6th, 2007 at 12:19 pm
No, sir, I have not read The Economist. I’ve got a thing about printed media; it doesn’t like me, and I don’t like it. It’s a mutual lack of respect.
Nevertheless, I’m glad to see at least one person understands this as well. Demand is sharply on the rise and this is what the whole situation boils down to.
The problem with Canada sitting on the oil sands is that we whore out our land far too cheaply to everyone else as opposed to keeping it for ourselves ans aving our own citizens money (but that also becomes something of a taxation issue.)
May 7th, 2007 at 4:38 am
You should check out their web site. ( Economist.com/index.php ) There are more articles about putting statistical analysis to interesting uses, like saving the last wolves in Ethiopia, and global politics than anything else. But then part of the reason I like them is our domestic news media is stale and horrible. We’re force fed American Idol. I don’t have a TV because of all this.
May 7th, 2007 at 3:52 pm
People have forgotten the gas crisis of the 70’s and the days when gas lines were up to miles long and you could only buy gas on odd or even days depending your tag number (among other things). The gas guzzlers of that era, the big honking V8 engines, died a fairly quick death after that and you hardly saw them at all for a loooongg time. Now we have soccer moms riding around in Expeditions, Yukon’s, Denali’s and Hummers that get 8 miles to the gallon !! Like the 70’s, these gas hogs need to die a quick death. As before, the only ones you’ll see driving them are those that truly need something that big — and the rich who don’t give a crap, they just want to show off their ego and their wallets. California has a gas guzzler tax in the works and well they should.
With Chavez down there in Venezuela taking over and nationalizing big oil such as Chevron, Exxon, BP and Conoco/Phillips, do you think things are going to get BETTER ?? Nope.. that could force much higher prices and people who are already maxed out on credit and debt are going to be in deeper trouble because they’ll have to put gas in the car instead of paying a credit card bill.
The ramifications are far reaching..much more than the pain at the pump. I, for one, would rather ride a horse !!
May 7th, 2007 at 4:14 pm
Hey now, Diane. Let’s not go disrespecting soccer moms…some of them are hot. Especially the ones who drive Escalades.
Seriously, this will be the market correction factor that we will all seek. I wouldn’t be surprised to see a gas guzzler tax kick in other places as well, although in certain rural outlying errors at least a 6-cylinder vehicle is necessary, so as long as they allow for that I’m all for it.
May 7th, 2007 at 8:48 pm
The scary part is there are essential MEDICINES that are made with the help of gasoline. You don’t wind up putting it into your body, but it’s needed for some of the chemical refining. I don’t remember what this stuff treats, but it’s generally associated with age. God willing, that’s a problem we’ll all face. Health is more important to me than a particular mode of transit.
Here’s a question, though. The wife and I have been talking about trading in our car for a hybrid. But that hybrid took a lot of carbon emissions to manufacture and to get to me, PLUS my car will still be on the road, just with a different driver.
They should have strong tax incentives for telecommuting. It’s insane that many of us commute to computers, and there’s just no reason for it. We can all come in one day a week for meetings, and solve the traffic problems facing all western cities, and at the same time let up some pressure on the gas situation.
Until then, watching anchors on the news b!tch about gas prices is like a reality tv show. How high will they go? A friend pays $100 to fill up her SUV.
May 7th, 2007 at 11:39 pm
Sorry, John: I’m not sure what your question is. It’s probably a real beaut, but I can’t figure out where you were going with that thought.
I’m down with the tax incentive idea, if only for reasons of personal bias. I telecommute and usually end up driving 2-3 times a week to see clients now (most of the rest of my driving is within a 25 KM radius of where I live). Anything under 20,000 KM per year would be a rebate of X…20,000-40,000 KM would be a 0…and over 40,000 KM would be a tax of Y. Makes sense to me (although we’d probably have to adjust my arbitrary figures.)
May 8th, 2007 at 3:37 pm
whether it works or not (and i’ve personally witnessed positive results from the previous strike), the nation is being asked to DO NOTHING to solve the problem, so what’s the problem. If it works, let’s continue to do it until we get what we want. The only reason it was short term is bc americans are too damned lazy to continue any process and followup to achieve the results we need. We have the “let someone else do it attitude” in everything we do. So what if u think it won’t work, it won’t cost u anything to participate. like i said previously, we can win this by DOING NOTHING. get with the program.
May 8th, 2007 at 6:12 pm
That’s precisely the point, Katie: it doesn’t work. It hasn’t worked in the past; if it had, the effect would be long term, and we wouldn’t be at the point we are now.
The point that I was trying to make is that in order to have a long-term effect, we need to look at ways to decrease our consumption as individuals, not to “go on strike” and “DO NOTHING” as you put it.
Doing nothing solves nothing. That’s why it’s called doing nothing. Reducing consumption reduces dependence, which reduces demand, which reduces price.
In other words, use economic drivers for long-term benefit rather than what will amount to at best a one-day temporary adjustment.
(Oh, and I’m Canadian, by the way, although I’m equally affected by any crude oil price adjustments.)
May 8th, 2007 at 8:08 pm
Not buying gas for one day but still driving and using it up, so you buy more later, is DO[ing] NOTHING. Doing something that has no results is worse than doing nothing, because it gives the impression that action is useless.
Things you can DO are carpool, take public transit, leive and work close together, walk to the store instead of driving, et cetera. Like you said, these are things you can’t wait for someone else to do for you.
May 8th, 2007 at 8:09 pm
Oh, and to Adam, the question is whether buying a hybrid really helps anything, if the car we have no isn’t going to be decomissioned. If someone else buys it and keeps putting gas in, maybe I’m better off doing something else?
May 8th, 2007 at 11:09 pm
Here’s how I look at it: if the sum total of gas consumed by the hybrid + the old car is less than the sum total of gas consumed by old car + whatever other car someone else buys, then yes.
In all likelihood, this would hold true.
May 9th, 2007 at 12:47 am
have you also noticed that the price of E85 has gone up ? now what does petroleum price going up have to do with that?? E85 is mostly corn or sugar, so has the price of corn gone up?? has the demand for corn gone up just like gasoline?? i think we are missing the point, when oil companies continue to make billions of dollars profit we the american consumer are gettting goudged by the oil companies and our government is letting that happen! why does the price of gas go up overnight?? did the gas in the tank at the gas station all of the sudden become rarer and more expensive?? it is the same gas that was there, it is called fleecing and screwing the american consumer and we are letting it happen. i race cars and the price of racing fuel does not go through the roof because some economist gets his mug on TV and spreads propaganda about how a barrel of oil has gone up in price or production is less due to instability or hurricanes!! the fact is our government and our president from Texas are letting this happen because of kick backs and special interests that make our government so screwed up!! do you really think that a senator who gets kickbacks and contributions to his party or himself is really concerned about what a middle class person is paying for gas?? we voted for these idiots and we are now paying the price for our stupidity! we can pay our professional athletes millions of dollars to play a child’s game, but we cannot take care of the backbone of america, the middle class. i know most people will think that this is crazy, but if you remember back to our previous president that could not keep his genitalia in his pants, he could keep people employed and the price of gas and consumer goods under control!! you do the math!! if my memory is correct, the gas crisi occured during the same political party’s reign! long live beauacracy!!
May 9th, 2007 at 10:07 am
I absolutely think a senator (or in my case, a Member of Parliament, or MP for short) couldn’t care less what the average working stiff pays for gas. I agree 100% that politicians will use this to try and sway votes and gain power. It’s already happening here in Canada; NDP leader Jack Layton is saying the exact same thing you are.
And I agree that oil companies make billions of dollars and gouge. I believe it’s the crude oil that’s responsible though, not the gas companies (except in cases such as Shell where the crude oil company is the gas company.)
This is why I’m saying reduce consumption. By reducing consumption, we reduce demand. By reducing demand, we reduce dependence. By reducing dependence, we lower prices since the product/service isn’t as valuable to us.
That’s the reason your racing fuel cost hasn’t gone through the roof; demand for racing fuel will never match demand for consumer-grade fuel. They’re effectively two different products, and you can’t really compare them as a result.
I personally wouldn’t have a problem with seeing you guys go back to Billy, either. I liked Billy. He was a lying philanderer, but at least we all knew that upfront. Billy rocked!
Again, this is simple economics….demand directly impacts price, and supply inversely affects price.
Beyond the economic measures, there are environmental issues to consider as well. Reducing consumption reduces auto-based pollutants. That’s always a plus. Let’s talk about that…or better yet, let’s ask anyone who lives in downtown Toronto what the smog index is today.
May 9th, 2007 at 1:59 pm
Well.. we can’t get Slick Willy back, but there’s a chance we might get HILLARY !!!!
Can ya see the lake from TO today, Adam ?? What can you see from the top of the CN tower ???
May 9th, 2007 at 6:12 pm
Weird…I was actually in that general area.
Mind you, I didn’t see the lake, but only because I was in the basement of a building and all of the other buildings blocked off my view of Lake Ontario.
Still, pretty smoggy out there. Blech.
May 9th, 2007 at 9:52 pm
I’ve also herd rumors of a STRIKE OUT WITH MAJOR TRUCKING COMPANIES. THEY WILL REFUSE TO DRIVE FOR 3 DAYS IN MAY. WHOLE COMPANIES WILL PARTICIPATE in an attempt to lower fuels costs.
May 10th, 2007 at 12:13 am
Where have you heard of this, Big Rigs? I’m just curious. Could you possibly provide a few links?
(I’m not doubting you or anything…I just haven’t heard of this.)
May 13th, 2007 at 12:23 pm
Any kind of “don’t buy gas today” strike is bound to fail. Sooner or later we have to tank up.
As for Venezuela, their crude is pretty messy stuff. They had to have special refineries built to process their murky crude. The only way nationalization could hurt us is when, not if, we will have to pay the oil companies for their lost lock on the Venezuelan economy.
It’s rather interesting to note that a number of refineries in the U.S. have been shut down with the lame excuse that they “need to be updated”. I guess the oil companies aren’t making enough profit to do that.
May 13th, 2007 at 7:40 pm
umm even if it lowers the prices tempararly it would be nice
May 14th, 2007 at 6:00 am
After taking a look at some of the replies here, I’ve decided to add my two cents. My wife told me about “the strike” a couple of days ago, and my first response was along the same lines as most people who gave it some thought, ie: it won’t work. What some would call a victory (assuming a decent number of people actually take part in the strike on the 15th) is just the oil companies’ way of “acknowledging” our little movement, so yeah, prices are lowered, for now… But what is their game-plan? Surely they realize prices are eventually going to go up so high its going to be insane to purchase their product, so what exactly is their plan? To understand this we have to leave behind the stereotypical assumptions of oil company execs being “bond like villains”. They are normal businessmen trying to sell a product that has been in and out of the spotlight for the last couple of decades. Global Warming, the war on Iraq, Steady Increase in the price of gas/gallon. All of these is what their average consumer automatically links to their business and it is because of this they have been in and out of the spotlight for decades. The general population is aware of this, so how is it they are still in business? Simple, they have the entire planet completely dependent on their product. They know it, we know it… So come may 15, we can threaten to hold are breath all we want, but they know we will come back for more eventually.
So whats their game-plan again? Its not a very complicated one… Just keep their product long enough out of the spotlight so that we keep on regarding global warming as a danger we will not have to face in our lifetime… (please watch Al Gore’s documentary: An Inconvenient Truth, wheather you like the guy or agree with his ideas/policies, he has summarized global warming for us all and it would be a shame not to hear what someone with that much knowledge on the subject has to say) And eventually when prices go insanely high, there will be a very small demand for oil anymore, therefore lowering the price of oil once again, and finally ending the era of oil, which by then the oil execs would have done their job and gotten the most out of their product. (thats it in a nutshell)
Just to clarify things, i am no tree hugger nor am I an idealist, i like driving my car, and i do NOT condone those honorable few who choose to ride bikes to work. If you really want to make a difference, buy a hybrid car next time you go to a dealership, thats my plan anyway. I know Toyota is reducing prices on their Hybrids because so many people were willing to buy them at this stage (the begining stages of the oil problem) In conclusion, I WILL NOT BUY GAS ANYWHERE ON THE 15th. Why? Atleast the price will go down for a couple of months, and when your in college, ever cent counts, even if you know low prices won’t last very long. But then again, most good things never do
May 14th, 2007 at 9:05 am
DON’T BUY ANY GAS “MAY 15TH - MAY 18TH”. CONSERVE THE GAS YOU HAVE JUST GO TO WORK OR SCHOOL NO JOY RIDING….ITS TIME TO TAKE A STAND AGAINST THIS GAS ISSUE….THESE OIL COMPANIES ARE MAKING BILLIONS OFF OF GAS, AND THE PRICE IS STILL RISING. THERE BANK ACCOUNTS ARE GETTING FATTER AND FATTER. THEY COULD USE THOSE BILLIONS TO HELP GAS PRICES GET LOWER. WE ARE MAKING CARS WITH LESS GAS MILEAGE. AMERICAS TECHNOLOGY HAS IMPROVED SO MUCH, BUT MPG IS STILL THE SAME SINCE THE 80′S…WTF? WE CAN SEND A GUY TO THE MOON; MAKE SMALLER CELL PHONES, BUT CANT GET BETTER GAS MILEAGE OR LOWER GAS PRICE’S….THAT’S A JOKE.. RIGHT NOW GAS IS CLOSE TO $3.50…..SO WHAT, SHOULD WE WAIT TIL THEY CHARGING US $6.00 A GALLON. AT 6.00 A GALLON IF YOU HAVE A 23 GALLON TANK YOU’LL ONLY SPEND $138.00 TO FILL UP. THAT’S NOT BUD RIGHT? ……EXXON MOBIL IS A MOB FAMILY AND WE ARE ALL BEING PLAYED, SUPPLY AND DEMAND…YEAH IF OUR SUPPLY IS SO LOW WHY R WE STILL MAKING CARS THAT RUN OFF GAS. THEY REALLY MEAN THEIR ACCOUNTS ARE LOW AND THERE TRYING TO GET MO MONEY…MO MONEY…MO MONEY….BLOOD MONEY….I’M SURE THE 2008 H2 WILL BE OUT SOON. IT WILL PROBABLY GET 9 MPG, OR WHAT, IS IT GONNA RUN OFF OF SALT WATER. SO IF YOU CAN, PLEASE DON’T BUY GAS “MAY 15TH - MAY 18TH”. I KNOW MOST OF US ARE TIRED OF SPENDING ALL YOUR MONEY ON GAS. I CAN BUY A PAIR OF SHOES EVERY TIME I FILL UP. I CAN USE GAS MONEY TO EAT AT RED LOBSTER EVERYDAY (I KNOW MY BIG TRUCK DRIVERS KNOW WHAT I’M TALKING ABOUT)…. WE GOT PEOPLE DYING BECAUSE OF THIS LIQUID GOLD, I HAD A COUSIN WHO WAS KILLED B/C OF GAS ….WTF? SO TRY TO SPREAD THE WORD SEND THIS MESSAGE TO AT LEAST 3 OTHER PEOPLE… WE NEED TO SHOW THESE OIL TYCOONS WHATS UP. DON’T FORGET NOW “MAY 15TH -18TH” GET THE GAS YOU NEED ON THE 14TH AND 19TH. HUNDREDS OF PEOPLE ARE JOINING IN….LETS TURN IT TO THOUSANDS OR MILLIONS OR LETS MAKE SOME BILLIONS LIKE EXXON DOES.”
May 14th, 2007 at 2:28 pm
Hey Adam, someone mentioned that not buying gas from one particular brand would work better than not buying gas from anyone at all. I’ve been trying to wrap my brain around the idea but it doesn’t seem to make much sense to me at all. Anything you could add to shed some light on the situaion? (keep in mind i realize any kind of strike is a short term solution, but nevertheless, i’d like to know…) Also, a lot of people have their own opnions on the subject but its not entirely clear to me if they are for or against the strike, so i was wondering if you could have a sublink to this one with some sort of poll regarding the situation. I know its probably too late since the strike is tommorow but i thought i’d ask, thanks!
May 14th, 2007 at 3:43 pm
I think that if everyone tries to conserve their gas from the 15th to the 18th that is great and it will definitely lower the prices. So what if it is temporary you old jerks! At least it is something. It is better to do this “pointless” strike than to do jack squat. We need to be doing this every week. buy gas on monday and don’t do it again til next monday and everyone needs to join in. Once that happens, the prices will be permanently lowered. But of course that will never happen because we have jerks like some of you who will only acknowledge the negative. Think about the positive and stop pumping!
May 14th, 2007 at 6:46 pm
“I’ve also herd rumors of a STRIKE OUT WITH MAJOR TRUCKING COMPANIES. THEY WILL REFUSE TO DRIVE FOR 3 DAYS IN MAY. WHOLE COMPANIES WILL PARTICIPATE in an attempt to lower fuels costs.”
Imagine the impact this would have on the whole of the economy. Florists would be ruined; flowers are guaranteed for five days from purchase. If those three days make a long weekend, some Safeway Organics food could spoil before arriving or being sold. It’s really shocking how much is shipped around the world on trucks.
So … little strikes really aren’t a long-term solution. Not driving is a hell of a lot more meaningful than not buying gas, because you’re actually not consuming the stuff, at least temporarily. But as a society we need to find ways to be less dependent on gasoline. Which generally means REAL change, not just fuel efficient cars, but carpooling; we should have tax breaks for apartment dwellers, eat less meat ( that’s a big one - a vegetarian diet has as much impact as switching from an SUV to a hybrid! ), there should be a small tax on incandescent light bulbs to encourage people to use LED and compact florescents instead.
It’s not just our sense of entitlement to cheap gas, and as much of it as we want. What’s at stake here is drought, blue skies with clean air, melting ice caps, asthma … stuff that makes paying $4 for a gallon of gas seem pretty trite.
May 14th, 2007 at 7:35 pm
Exactly, Forrest. There is a lot more on the line here than most people choose to acknowledge. Getting gas companies to lower prices, assuming it does work (which it won’t) only serves to give us more of an urge to consume resources that in turn create environmental issues.
Emily: the problem with your scenario is the same problem with the gas strike in general. It doesn’t solve the issue of supply and demand. If you wait a week and then consume the same amount of gas, you’re not reducing the demand. Your demand for gas is exactly the same as it was before, because your consumption of gas is the same.
Let’s assume we tried your solution. Let’s assume we got everyone to not buy gas on any day except for Monday. What would happen?
We’d see lineups from here to Timbuktu in every gas station in North America, and oil companies would take advantage and jack up the price. Again, supply and demand.
On the weekend, gas prices would drop significantly since there would be no apparent demand for gas (we’re all buying it on Monday, right?) What would happen then? Do you think someone would break ranks and go buy gas while it’s cheaper on the weekend? I know I would, and I know I wouldn’t be the only one.
So what would happen? We’d all be in the same boat we’re in right now.
And so we come back to this whole strike issue. What happens? A temporary adjustment at best. Hey, it’s better than “nothing”, but so is not spending as much money on gas because you don’t need to because you figured out alternative ways to not consume gas.
People who point this out aren’t jerks, either. People who point this out are the ones who understand basic economics; use less of something and it becomes less valuable to you. No one is pointing something like this out with malice aforethought; we’re pointing it out because it’s the truth.
May 15th, 2007 at 8:32 am
I just bought a bike and now im gonna move down south so i can buy a horse i think everyone should get a horse and go back to the day, no more rat race road rage or high gas prices.
just my opinion
scott s.
May 16th, 2007 at 11:01 am
Well as we all know gas prices are getting higher and there’s no more bang for your buck, when taking into consideration how much it will last. But I was writing to inform you guys, coming from a major city Chicago—actually the city and not the suburbs, gas prices are as high as 3.99/gal. If Chicago prices are this high—ranked second on list, I wonder what the number one city for high gas prices see at the pump.
May 16th, 2007 at 11:09 am
Oh and by the way—-the 3.99/gal is unleaded…glad I don’ use diesel or the other one. Imagine their frustration.
May 18th, 2007 at 9:39 am
[…] is May 18, and another gas strike has come and gone. Many of you have found this site searching for results on the effectiveness of […]
May 18th, 2007 at 12:31 pm
Well I haven’t heard anything about May 18th being another strike day, but either way I’m not buying gas today…Got out the old 10 or 18-speed huffy….way to go
May 18th, 2007 at 6:00 pm
[…] stations themselves. Their margins are almost razor-thin as it is (see the graphic I included in my gas strike post for more information), so that means someone has to absorb the additional costs. Crude oil […]
May 21st, 2007 at 9:35 pm
Gas prices are still high as any number of four letter words that fit.
So, is our friend and benefactor Nostradamus, or is Adam more like captain obvious? He had foresight into the future of gas prices after the strike, and predicted them accurately. Is that amazing, or is it something we all knew?
Maybe it’s hard to admit that our entire way of life is coming to an end, but it’s not as big a deal as I think everyone is afraid of. I have to disagree with Adam and Forrest. They talk about trucks driving our produce thousands of miles, but the ONLY reason our food isn’t grown locally is momentum. Not that we have to give everything up that won’t grow locally, but things that can be driven 10 miles instead of 1,000 probably should. That alone would impact gas prices, be good for local economies all over the US and Canada, and it’s far more healthy. People who eat locally grown food are shown to have less trouble with seasonal allergies, because all year round they’re building up a tolerance to local pollens.
A big part of the problem is that we’re so used to cheap gas, we’ve built up a sense of entitlement, and we don’t use it efficiently. There’s plenty to waste, and it’s cheap compared to Europe. We drive large, empty cars on congested freeways, and then we pay more to park them. If we could all learn to carpool that would put another dent in the problem. Personally I hate commuting, so I live really close to work.
May 21st, 2007 at 11:35 pm
I’m one up on you, John…I SLEEP really close to work. I get up out of bed, take five steps, and I’m in my office. Ahhh the joys of working from home.
I’m not really sure if I agree with you or not on the locally grown situation. While there is an obvious logic in terms of gas consumption savings in terms of locally grown product vs. product that has to be transported, it probably isn’t a tenable solution for all products (e.g. oranges in Canada).
Having said that, I think there are probably alternatives to shipping products that fall under this category via more efficient means. Light rail comes immediately to mind; there are a number of train tracks in the Greater Toronto Area for example that are rarely used at best. Increased usage of trains = decreased truck usage = less congestion on roads = less gridlock, congestion and environmental issues as a result.
I can’t really lay claim to being any kind of a psychic on this issue; I just applied a little common sense based on economic principles. I guess that makes me Captain Obvious. If I do this a few more times though, I’ve been told I can move up in rank to Major Lee Obvious.
May 22nd, 2007 at 12:05 pm
Just trying to help get the word out about this new vehicle that has been developed in Europe. I saw it in popular mechanics. Its Outstanding, It doesnt consume a single fossil fuel, not a drop of gasoline. You use 1Qt vegetable oil to lube the engine, and replace less than conventional cars I believe. It runs on pure air and emits pure air. I know a dream come true huh!? Get this, the estimated cost of the vehicle brand new to own is only around $12k! I really want one of these cars! They need to import them into the US! If you want one they have a list on their site to sign up for one when the are availible. My hope is that enough people in the US will sign up to be contacted when they are availible that they will see the opportunity and start selling them here in a few years or maybe sooner. So tell everyone you know. Check it out!
http://www.theaircar.com/
May 24th, 2007 at 9:59 am
Well update gas is at 4.09 in Chicago…wowwwwww
May 24th, 2007 at 12:39 pm
Chicago’s one of the more expensive cities for gas though, isn’t it?
May 24th, 2007 at 8:20 pm
In all honesty, Adam, you should get some type of tax break to reward your behavior of working in the home. And being successful, of course, the government shouldn’t simply give you money for not leaving the house, but if you’re able to be a contributing member of society and not a part of the global auction for gas, and not congesting the highways so tax payers have to fund more lanes, if you’re putting in more than you’re pulling out, you SHOULD BE rewarded.
More to the point, giving you money for this behavior is why they call it a “tax incentive” - it will entice other people to do the same, when it’s possible but perhaps not as convenient. Employers should be given generous tax breaks as well, since I think most people would prefer to work at home, if they were allowed.
Even two days a week. If I get Monday and Friday off, and you get Tuesday and Thursday, this won’t make gas any cheaper, but it will make the freeways more free, and cars will at least be operating closer to their peak efficiency.
May 27th, 2007 at 5:33 am
I understand your point in supply and demand economics, and the logical reasoning from it that prices will not fall. And I also fully agree that people need to look at consumption avenues to decrease their individual demand. But I disagree as to your pessimism concerning the effects of a gas strike for several reasons.
First, I think one of the other commentators has a very good point. In addition to your supply/demand graph, their should be an accompanying graph of an oil company that shows the mark-up in oil prices. Unfortunately, the price of any product does not always fall where supply meets demand, and I believe that is the case we are dealing with in the U.S. Rather, we have a competitve, or monopolistic industry that results in corporate mark-up. While I like the breakdown of the cost of oil presented by the US government website, the fact is it is not the US government distributing oil. Private exploration and collection companies, such as Enron or BP are making a profit somewhere along the way.
Second, strikes do work! A lesson in macroeconomics will show that. If strikes were ineffective, labor unions would not exist, and minimum wage would not be so high. While they may be temporary solutions, strikes demonstrate a reservation price that is not. The crawl back to the normal prices will not occur because consumers demand will once again stall at that price, causing strikes once again. Strikes have a long-term effect. The gas strike proposed is just an example of a smaller, less-organized, union in economics. While strikes are ineffective in markets where the price is the point of supply and demand, in all other market structures, including the oil market, they leave a lasting price ceiling, a collective reservation price.
In a way, the strike is a crystallization of the demand curve, and while it may not change the natural market price, it has the capacity to change the price to consumers by adjusting the amount of profit third-parties can make off our demand for oil.
Again, I completely support the idea of going green and utilizing ways to be less oil-dependent, but the US economy does not follow the basic rules of supply and demand that exist only in theory, and I believe the attempts made by the may 15th strike are honorable, and if followed, could work.
May 27th, 2007 at 5:23 pm
I agree with a lot of what you’re saying, Amie.
There are a small number of major oil companies that are pulling in near-record or record profits, profits that are not redistributed to the general public for the greater good in turn.
I also agree that strikes can work, but only if four criteria are met first:
Did the “gas strike” accomplish any of these things? No, it did not. The proof of that exists both in the fact that we are having this particular discussion and in a study of historical gas price charts. Gas prices have gone the other way since the gas strike date.
The other flaw in the “gas strike” argument in its conventional sense, again, goes back to consumption. In order for the strike to crystallize the demand curve, there needs to be reduction in the net purchasing volume of the product. Not going to the pump on a particular day, and consuming the same amount of gas as we normally would, does not decrease the net purchasing volume of the product.
There is a way for a gas strike to work, but it needs to include both a lack of purchasing, and more importantly, a lack of consumption.
December 31st, 2007 at 12:45 am
I remember the 70s, after gas went from .30 cent a gallion up to a high of $1.50 it setteled in at $1.20, then came the national ressession, that hit hard by 1980, people were leaving their houses and there was a huge housing crash on the front range.
Today the same thing is going to happen, and it will be much worse, gas has went from $1.40 to a high of $3.59 by summer 08 it will surpass $4., the last 2 years people been piling up debt on credit cards to get gas, this is the tip of the ice berg, the next few years are going to put the ressesion of the 80’s to shame.
The higher gas prices are going to drive all prices up if they stay up, except for 1 wages,
Stop and think in 1973 minimum wage was apx $2. hr Gas .30 gallion, today 2007 Gas $3.09 gallion minimum wage $5.65.
Gas has went up 10 X’s while Miniumum wage 2 1/2 X’s
I know many families in my area where Husband and wife were both works 2 and 3 jobs each when gas was $1.48, now there credti cards are full, and many are failing to make their mortgage payments, as they need gas to get to work.
Get Ready for an economic crash that will make the Great Depression look like they had it easy.
December 31st, 2007 at 1:23 am
Interesting thoughts, Bruce. I can’t say that I remember anything about the 70s (mostly because I wasn’t even 3 years old when they ended), but I wouldn’t be surprised if what you’re saying comes to pass.
There needs to be a sharp market correction in general, and I think a lot of things are going to be negatively affected…gas being a very big one.
(There’s actually a future post that I plan on writing that talks about this).
Good comments. Thanks!
March 21st, 2008 at 4:36 am
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April 3rd, 2008 at 11:21 am
thanks for tring to bring down the amout of gas.
April 9th, 2008 at 9:54 am
look…first off in your little diagram you forgot to mention the extreamly outrageous profit margin for theese crooked greedy companies. second and most importantly…you talk like the owner of some major corporate greed filled gas company trying to plead people away from doing what is almost right and protesting this crooked act of coorporate greed. I say almost right because in my opinion we should take control of the situation by taking what is rightfully ours (our fuel that we more than paid for in taxes and and the gas company’s owners hookers and fancy cars from thier what should be illeagal profits) and then take the lives of the rotten greedy gas company’s owners and operators truly responsible for the whole situation. I was in the military for many years and killed many people that i argue were really people. just as i argue that real people would not attempt to put society into “reverse” as they are trying to do now. To cause an economic shutdown is a threat to our well being. I respond to threats in my own manner…SELF DEFENSE!!! Don’t JUST strike against gas prices, Strike against the communist garbage that has caused this to happen to us…If all you have the means to strike with is physical violence, well than use that. I sure as goddamn hell will too. and we wont be the only ones either. Fight for our rights to survive!!!!!!!!! Pick up your pitchforks and whatever else you have to DEFEND yourselves and march up to theese evil empires and destroy them all!!!!!!! TAKE WHAT SHOULD BELONG TO US ANYWAY…OUR RIGHT TO SURVIVE!!!!!
April 15th, 2008 at 7:17 am
No, I believe the whole country needs to ban together and go on a long term strike until prices drop. The whole country needs to come to a complete stand still, no goods being moved, sold, or bought. If we don’t do something soon the prices will just keep rising until it hits $6.00 or even $7.00 a gallon then you won’t have a choice, you won’t be able to afford to live anymore. I say the whole country goes on strike!!
April 25th, 2008 at 1:20 pm
it seems like their is a conflict in the passionate and the passion. people who feel the price of gas to be important do not complement the vision of the people who trumpet the value of protecting the planet. it’s as if gas prices dropped you all seem to imply that we could just go back to good old fashioned regular gas consumption.
a strike isn’t going to promote this brave new world everyone is dying to be a part of, we have to strictly forbid ourselves to continue our current rate of consumption. i feel that tennant works on different fronts besides just gas consumption. moreover, ‘americans this’ and ‘americans that’ is truly do nothing. americans aren’t the problems. the dynamics of the usa is the problem, maybe if the contradiction of the usa being united. i think we’re getting better. we just never realized how bad we were. personally i cant disparage my own country. It is as though we feel our indifference fuels the world for tomorrow, which doesn’t even come off sounding arrogant anymore because of the blasphemously wild ridiculousness of our chief.
striking gas will bankrupt the gas companies but it won’t make the middle east come down in price. They have other customers many of which pay more than we do, albeit fewer customers. The war did not work. The president never knew if it would. This is government’s problem and this government is not a problem-solving staff.
You can’t strike on gas companies hoping for them to shut down or lower their prices. But you can strike anyway. The media may ask you what you plan to do, or what you’re really thinking. What can you do but smile and shrug. Maybe ask them what time Survivor comes on you wouldn’t want them to miss it just cuz your out their sleeping throughout the night with 300 of your closest new acquantances not letting anybody in, after all you wouldn’t want the people at home to not find out who got voted off.
I mean that isn’t the most direct tongue-in-cheek but i do think it addresses the idea of do nothing vs. gas strike vs. reality of the whole situation. Obama 08
April 28th, 2008 at 7:32 pm
I agree for the most part. However by going on with the strike we are showing them [We as a people are fed up and tired of there price gouging and this is our way of telling them there will be changes when we stand together as one] How about this idea. pick 2 of your off days a month it don’t matter when and does not have to be in unison with days or other people and don’t burn one drop of gas. if we all stand together and do this and keep doing it for at least 1 year I guarantee it will put a hurting in there wallets and they will get the message. this would cut billions of dollars a year off profits
April 29th, 2008 at 1:28 pm
Whether we don’t buy gas that Friday it will be purchased another day so regardless of when it is it’s not like it would matter.
April 29th, 2008 at 8:54 pm
Even though I agree that we should have a gas strike, the oil companies have already made enough profit that if we were to it probably wouldn’t make that big of a difference. The one thing that needs to happen is that we get that big, stupid, no good, moron of a president out of office, this man has run this country into so much debt that our grandkids, grandkids will never get this country out of debt.
April 30th, 2008 at 10:20 am
I see/hear people talk about striking, car pooling, combining trips, public transportation, more fuel efficient vehicle; but I don’t see any mention of slowing down. If ALL drivers drove 5-10 miles ‘under’ the posted highway speed limits, rather than majority driving 10+ miles above the posted limit, there would be an automatic reduction in consumption. It will vary by vehicle, however a reduction (nationwide) would occur. A reduction will cause a decline in consumption, thus increasing supplies and as a result of increased supplies the average price per gallon will decline.
April 30th, 2008 at 10:00 pm
Just stumbling about, looking for info to send to people about the gas strike that is scheduled for May 2nd (this Friday). Saw something about it not working in the grand scale. Granted, one day of America (perhaps the world) not buying gas may not crumble the oil companies who are currently raping the common citizen. But, there is one thing that it will do, providing that everyone, private and corporate alike, participate. It will show that there is a comorodity amongst all of us who stood up and said “I’m mad as hell, and I’m not going to take it anymore!”
I have stood by and listened to the morons who praise the automotive industries who have put out hybrid vehicles that get up to 40 MPG. WOW! Guess what? I used to own a Geo Metro that got 50 MPG back in the mid 1990’s. I wish I had that car today. It ran great! I’d fill the tank and drive for close to two weeks before re-fueling it. Around the turn of the century, the Metro was discontinued by GM. also discontinued were the two next highest fuel efficency vehicles on the road of the time. Gee, this was about the same time that the auto manufactuers started hyping SUV’s up our wazzos. This has been a long and drawn out process, with roots that trace back to the 1970’s. Now, speculations are that by the end of the summer, gas may be as high up as $5 a gallon. INSANE! Where’s the harm in taking at least a single step and saying that we’re sick of being mindless puppets in a play which pays Exxon / Mobil $40 million in pure profits after the bills for every part of their production have been paid. Do they even notice that the audience is sick of their crappy production? Doubtful. Friday, May 2nd will at least be the first tomato in the face of the cast of characters who laugh at US! Oil, Automotive, and government have been in bed together on this since forever. The film “Who killed the electric car” shows people who loved their saturn EV (electric vehicle), only to watch them being carted away by GM at the end of their lease and shreaded like a bundle of documents down Faun Halls girdle. All I’m saying is, Don’t just sit there and wait to be a victim and a sucker. DO SOMETHING!
Good luck to us all.
May 1st, 2008 at 4:00 pm
Hey, thanks for the helpful information. I’m a broke, college student just looking to get by in a ravaged economy. I’ve been getting texts and emails about this “gas strike” on May 2nd and I just knew it wouldn’t solve the entire problem and knew I needed to refresh on my simple economics and supply and demand. You’ve cleared up my head! I’m not going to gas strike tommorow because its not going to help the big picture and as you pointed out so clearly……….gas prices are just going to go back to the same high prices as we continue consuming. The government knows were unhappy but there is going to have to be drastic changes all over for us to get through this.
May 1st, 2008 at 6:38 pm
I appreciate this movement from society. Even though there may be a false sense and expectations of changes in gas prices I think that this is a good and affective effort. Thank you so much.
Please write me back in response.
May 1st, 2008 at 8:24 pm
Why is your demand curve pointing upward? I didn’t know gas was a Giffen good. Your chart (although I’m probably reading it wrong so please correct me on this) is saying that as price goes up people consume more (quantity demanded goes up). Conversely, your supply curve is downward slopping in your diagram which clearly violates the law of supply: the higher the price, the more producers are willing to supply (ceteris paribus). Your X-Axis should be labeled “quanitity” to distinguish the axis from the curve (especially if you combine both curves). Nonetheless, I like your analysis on the issue. Good job.
May 1st, 2008 at 11:54 pm
Some of the very principals that America was founded on are now being put to question.
In due time you will see everything become globalized whether you like it or not. In order to push for a more common good for an ever-so-steadily growing middle-class, your very freedoms will start to be taken away. I wouldn’t be at all cautious to presume that we will be given a ration of gas in an effort to try to steady our economy.
Be prepared to be taxed heavily out of what you EARN in your meager middle to high-middle-class salaries, so that more and more Americans can sit on their asses and have illegitimate children.
Sure middle-class maybe rapidly growing around the world, but look at how many more unemployed people there are as well. And who is going to pay for little Tyrone’s broken arm? Well Tyrone’s dad sits at home and collects unemployment checks… OH, so you mean you’re going to take more money out of MY check to pay for Tyrone’s health care instead of telling his dad to get a job?
In the words of Rollo from the hipster movie Juno, “That ain’t no etch-a-sketch. This is one doodle that can’t be un-did, homeskillet.”
May 2nd, 2008 at 2:57 am
Well they wanted China to become a consumer society, well thats what we get !!!
May 2nd, 2008 at 11:12 am
the only way a gas strike is going to work is that it’s long term. let’s look at other successful strikes. the bus boycott for example. it was long term. a one day strike is going to do nothing but make us strike again…for one day. it’s crazy.
May 2nd, 2008 at 3:49 pm
Lets bring back the stanley steamer. It only goes 25-35 mph but hey, its cheap! Thats how you could make a strike long term.
May 3rd, 2008 at 4:17 pm
Not sure that the one day strike had any effect, but did participate myself.
Now, to really accomplish anything at all of significance, we need to all band together and start a class action law suit against the oil companies, and possibly even the federal government for its complicity in these many artificial inflations of the gas prices. Only when it begins to cost the oil companies will there EVER be any relief for the common person.
May 3rd, 2008 at 4:34 pm
May 4th, 2008 at 10:06 am
Your diagram of what goes into the cost of gas is not very accurate. It is missing out on oil company profits. Since 2006 I dont believe the cost of any of the four you listed have risen a substantial amount(except distribution). So why do we pay 50 percent more per gallon???
May 4th, 2008 at 2:36 pm
Well, May 3rd came & went without much change. It was disheartening to see the lines at the local Wawa gas station stacked three cars back each that morning. Oh well, maybe next time the word will get out louder & stronger.
May 5th, 2008 at 2:17 am
i think your partly right on the economics but you have to consider we never realy did it as a whole country cause idiots like you didnt want to do it on fear of some stuff considering that most of the stock market sales will drop and oil CEO’s will be grinding their teeth cause they wont be able to stick a big amount in there pocket think of besides the prices and sales on gas its just one bigger leap to destroying the greedy people that like to put us out on the street no thank you i think i rather live in a country thats willing to stand up united instead of makeing fights with eachother about how this will and will not work part of me wants to think that your a CEO hopeing to talk alot of people out of doing it sorry but this is america if we stand united you will fall one way or another unless you change your direction and stand with us instead of being greedy and going against us. take your damn gas and go to helll.
May 6th, 2008 at 2:24 am
E85 is Not the answer to the gas problem. The damand for corn will just rise causing not only E85 to rise but our food cost to rise dramatically. We need to invest in other forms of energy. Energy that is renewable!!! The cost of corn has already started climb and poor people will be the ones to suffer. Specially in 3rd world countries where they rely on support from other countries to feed hundreds of thousands…