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Gas Out Redux

March 25, 2003

A few years ago, March 2000 in fact, I came across an e-mail that was impossibly dumb.  It called for a "Gas-Out."  The idea was to boycott gasoline for a few days. This action would drive the price of gas down, and at the same time, it would show "Big Oil" that if they tried to raise prices again, we'd hurt them.

The increase in gas prices have prompted a version of the original to circulate again. Here is the latest "Gas-Out" e-mail followed by some appropriate comments.

* * * * *

I hear we are going to hit close to $3.00 a gallon by the summer. Want gasoline prices to come down? We need to take some intelligent, united action.

Phillip Hollsworth, offered this good idea: This makes MUCH MORE SENSE than the "don't buy gas on a certain day" campaign that was going around last April or May!

The oil companies just laughed at that because they knew we wouldn't continue to "hurt" ourselves by refusing to buy gas. It was more of an inconvenience to us than it was a problem for them. BUT, whoever thought of this idea, has come up with a plan that can really work.

Please read it and join with us!

By now you're probably thinking gasoline priced at about $1.50 is super cheap. Me too! It is currently $2.02 for regular unleaded in my town.

Now that the oil companies and the OPEC nations have conditioned us to think that the cost of a gallon of gas is CHEAP at $1.50–$1.75, we need to take aggressive action to teach them that BUYERS control the marketplace, not sellers.

With the price of gasoline going up more each day, we consumers need to take action. The only way we are going to see the price of gas come down is if we hit someone in the pocketbook by not purchasing their gas!

And we can do that WITHOUT hurting ourselves.

How? Since we all rely on our cars, we can't just stop buying gas. But we CAN have an impact on gas prices if we all act together to force a price war.

Here's the idea: For the rest of this year, DON'T purchase ANY gasoline from the two biggest companies (which now are one), EXXON and MOBIL.

If they are not selling any gas, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit.

But to have an impact, we need to reach literally millions of Exxon and Mobil gas buyers. It's really simple to do!! Now, don't whimp out on me at this point.

Keep reading and I'll explain how simple it is to reach millions of people!!

Also, the only way to get the gas prices down to the lowest level is to not buy from EXXON and MOBIL. Even if EXXON and MOBIL gas prices come down and are lower than the independent gas stations, continue to buy from the independent, otherwise the gas prices will go right back up.

I am sending this note to about thirty people. If each of you send it to at least ten more (30 x 10 = 300) and those 300 send it to at least ten more (300 x 10 = 3,000) and so on, by the time the message reaches the sixth generation of people, we will have reached over THREE MILLION consumers!

If those three million get excited and pass this on to ten friends each, then 30 million people will have been contacted! If it goes one level further, you guessed it. THREE HUNDRED MILLION PEOPLE!! Again, all you have to do is send this to 10 people and DON'T purchase ANY gasoline from EXXON and MOBIL. That's all.

(If you don't understand how we can reach 300 million and all you have to do is send this to 10 people. Well, let's face it, you just aren't a mathematician. But I am ... so trust me on this one.)

How long would all that take? If each of us sends this email out to ten more people within one day of receipt, all 300 MILLION people could conceivably be contacted within the next 8 days!!! I'll bet you didn't think you and I had that much potential, did you! Acting together we can make a difference. If this makes sense to you, please pass this message on.

PLEASE HOLD OUT UNTIL THEY LOWER THEIR PRICES TO THE $1.30 RANGE AND KEEP THEM DOWN. THIS CAN REALLY WORK!

 * * * * *

Let me focus on the crucial economic error in this plan: namely if we stop buying gas from one company, they will be forced to reduce their prices. When they reduce their prices, other companies will have to do the same. Then we will have cheap gas forever and Bush won’t have to go to war for oil ever again. (Or some nonsense like that.)

Let's just assume the e-mail is persuasive and many people stop buying gas from a single seller. This seller would see a drop in demand and the individual storeowners would see a drop in revenue. With a decrease in demand, they would lower their price to attempt to attract more customers.

Suppose, due to the boycott, people would still not go to Exxon and Mobil stations. Where would they go?  They’d drive across the street to a non-boycotted gas station. Here, the owner will see extra customers, each making additional purchases. As a result, the price is bid up. Thus, those following the boycott would be paying even higher prices than they are today.

I think this idea is great, because I’ll be going to the boycotted stations, and getting my gas really cheap. All the while, the economically ignorant will pay gouge-like prices.

The author of the e-mail is assuming that the boycotted gas station will respond to the forces of supply and demand, while the non-boycotted stations won’t. They will simply look across the street and cut prices. Never mind how many customers come through your store. Never mind the number of gallons of gas you’re selling. Never mind the accounting books showing your sizable profits. In other words, never mind the forces of supply and demand. Just look across the street and follow the competition.

Additionally, the author believes that by raising prices really high today, "Big Oil" is conditioning us to think, "gas is CHEAP at $1.50."  Perhaps, the author is applying some of that new, Nobel-type "behavioral economics."  

Despite what he is attempting to do here, one cannot ignore the laws of supply and demand. While it is true that prices are formed from the subjective valuations of the economic actors, we cannot suspend the laws of supply and demand whenever it suits our goals.

Notice how the author uses these laws when they help his case, but jettisons them when they don’t. Economists don’t have that luxury. We have to follow the laws of economics wherever they take us, even if we, personally, don’t like the results. The price of gas is not $1.50 because we are conditioned to think of it at that price. It is a function of supply and demand. Making such a conclusion is as silly as me saying that a Dow Jones Industrial Average of 10,000+ has conditioned us to keep it above 10,000 points.

As Ludwig von Mises has pointed out in his article "Profit and Loss," resources are allocated according to who is best at serving the needs, wants, and desires of the consumers. Poor entrepreneurs are driven from the market regardless of whether their errors come from bad decisions or just bad luck. As these ineffective managers waste money and resources, they are forced out and lose their control over productive factors. Efficient managers are able to retain their earned profits and expand their control over resources.

If the manager of a non-boycotted store saw additional customers buying gas and cut his prices because he looked out the window, he won’t stay in business too long. Fortunately, this is the way it should be. The market system, by rewarding efficient managers and curtailing the activities of wasteful managers, ensures that resources are used in a manner that minimizes their misuse. All the while, the market also meets the most urgent needs, wants and desires of consumers. It may not be a perfect system, but it is far better than any other.

If people want to protest high gas prices, there are things they can do. They can call for getting rid of gas taxes, for opening up drilling rights, for freely trading with all countries that supply oil, and for eliminating regulatory restraints on production. In short, they can call for a free market, the only means by which gas will end up being priced no more or less than it should be.

Thus do I propose that the following mass email replace the one currently circulating:

* * * * *

I hear we are going to hit close to $3.00 a gallon by the summer.  Want gasoline prices to come down?  We need to take some intelligent, united action.

I, Paul Cwik, a lowly economist, am offering this idea: This makes MUCH MORE SENSE than the "don't buy gas on a certain day" campaign that was going around a couple of years ago or the "don’t buy from Exxon or Mobil" campaign going around this year!

The oil companies just laughed at those plans because they knew we wouldn't continue to “hurt” ourselves by refusing to buy gas.  It was more of an inconvenience to us than it was a problem for them.  BUT, finally we have a plan that can really work.

Please read the three-step plan and join with us!

Step one: be a smart shopper and only buy gas from the cheapest station in your neighborhood.  In other words, boycott gas stations that charge higher prices.  Now be careful, the station with the lowest prices can change!  Keep close watch for such actions!

When the oil companies realize that we will only buy cheap gas, they will have to react appropriately if they want our business. The high priced stores would then see their customers driving across the street to the cheaper stations. Their demand will shrink and they’d have to cut prices to stay in business.  

Of course, supply and demand will determine the underlying price of gasoline, but there are many factors that raise the price you pay at the pump. If we are united in action, we can make meaningful changes.

The second step is to petition the government to get rid of the price-gouging taxes on gasoline.  It’s true tax levels vary from state to state, and can you believe that in some states 50% of the price of gasoline is taxes!  But this is beside the point.  Any amount of tax reduction will help your bottom line.

The third step of the plan is to petition your state legislature to get rid of the costly environmental regulations that force oil companies to create “special blends” of gasoline.  These blends have minimal benefit to the environment and add costs at the pump.  The gasoline companies cannot take advantage of the benefits of mass production because each regulation mandates a specific blend of gasoline.  As a result, the costs soar and your pocketbook takes the hit.

Keep reading and I'll explain how simple it is to reach millions of people!!

I am sending this note to about thirty people. If each of you send it to at least ten more (30 x 10 = 300) and those 300 send it to at least ten more (300 x 10 = 3,000) and so on, by the time the message reaches the sixth generation of people, we will have reached over THREE MILLION consumers!  (Assuming we don’t all know the same 10 people.)

If those three million get excited and pass this on to ten friends each, then 30 million people will have been contacted! If it goes one level further, you guessed it. THREE HUNDRED MILLION PEOPLE!!  Again, all you have to do is send this to 10 people and follow the three-step plan. That's all.

(If you don't understand how we can reach 300 million and all you have to do is send this to 10 people… Well, let's face it, you just aren't an econometrician, but I am ... so trust me on this one.)

How long would all that take? If each of us sends this e-mail out to ten more people within one day of receipt, all 300 MILLION people could conceivably be contacted within the next 8 days!!!  I'll bet you didn't think you and I had that much potential, did you?  Acting together we can make a difference.  If this makes sense to you, please pass this message on.

PLEASE STICK TO THIS THREE-STEP PLAN AS LONG AS YOU OWN A CAR.  ALWAYS BE A GOOD SHOPPER AND, THUS, A GOOD AMERICAN!!!  THIS REALLY CAN WORK!!!


Paul Cwik teaches economics at Campbell University. Send him MAIL. See also his Mises.org Daily Articles Archive


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