A Horde Of Hoarders

Every year around April 15th, someone has the bright idea to proclaim a one-day boycott of buying oil in the hopes of sending a message to gas companies for their unreasonable prices. This is an unwise decision for a variety of reasons, no matter how tempting it may be to show one’s displeasure in such a juvenile fashion by throwing the consumer equivalent of a pointless temper tantrum. Let’s look at a few of the reasons why such behaviors fail.

First, gas companies are not the only people who make money from oil. Even though we pay a given price at the pump, not all of that goes to the companies who sell the oil. Quite the contrary [1]. The commercials and other advertising that markets gas companies makes up about 8% of the price of gasoline. I consider this to be money wasted in general. 13% of the price of gasoline, on average, is taxes (this varies widely by state, and is the biggest factor in different gas prices from state to state and nation to nation). Another 14% of the price of gasoline goes into refining the crude oil into unleaded gasoline. Most of the refineries that we use to refine gasoline are in the Gulf states, especially in Texas. The remaining 65% goes to pay the price of crude oil.

This complexity is forgotten when people want to throw a hissy fit about the unreasonable price of gasoline. We cannot forget that a large part of the price of gasoline is political. If we don’t want to drill our own gasoline reserves, for whatever reason (maybe we have an unreasonable hostility to economic development, or maybe we are afraid of an oil spill or exploding rig and its impact on the environment), we have to get the gasoline from somewhere else, reducing available supply and therefore increasing costs for everyone else. If our state and federal governments raise taxes on gasoline, most often to fund politically and economically lucrative transportation projects, the price of gasoline goes up in ways that are hidden, because the price of gas at the pump is not broken down into its constituent parts.

There are additional and more practical concerns. For one, unless one changes one’s driving habits, there is no effectiveness to be gained in not buying gasoline on a particular day. Assuming that one can get a significantly large group of people not to buy gasoline in a particular day (say, April 15th), those who do buy gasoline on that day have an advantage of (presumably) paying lower prices because of lower demand, while there will be greater supply problems either just before or just after, where there is increased demand and increased prices.

If one wants to avoid this basic and fundamental problem, there are two main approaches one can take. First, one can change one’s driving patterns, through alternate transportation, limiting trips and/or carpooling, in order to reduce one’s use of gasoline during that particular period. Additionally, one can hoard gasoline ahead of time in order to weather out the storm, metaphorically speaking, at the risk of causing disruptions in supply at gas stations for everyone else who is unable or unwilling to game the system so.

If you are engaging in this sort of antisocial behavior, it’s good to examine what is that you are trying to accomplish. Do you feel somehow better for having thumbed your nose at an oil company? That’s great, except the people who suffer are going to be fellow motorists or the people who run gas stations and try to time deliveries in order to make a reasonable living by performing an important service to the public. Are you trying to show your anger at unreasonable gasoline prices? That’s great, but again rather pointless–the chief problems are political and geopolitical. So long as we get our oil from unstable and corrupt regimes (no shortage of them from Mexico to Iraq) or through risky checkpoints (like the Gulf of Suez or the Strait of Hormuz), we are going to have to face increased prices because of the increased risks and uncertainty. If you are prepared to boycott oil for a day, are you committed to wrestling with the larger problems at stake, or do you just want to make a statement? Your move.

[1] http://auto.howstuffworks.com/fuel-efficiency/fuel-consumption/gas-price1.htm

About nathanalbright

I'm a person with diverse interests who loves to read. If you want to know something about me, just ask.
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