Not another gasoline e-mail !!!!

So I got another one of those "Don't buy gas for a week, we'll show those greedy gas companies! e-mails tonight. And from somebody who knows better (you know who you are). But don't worry- I still like you. Maybe you accidentally hit 'send' instead of 'delete' after you put everyone's name in the TO box. I'm just kidding, OK? I'm just kidding....anyway.. it was the one that compares high-priced eggs to gas and assumes that chickens just keep dropping eggs long past the time the demand is satisfied.

Truth is, you chop their heads off when they outlive their usefulness. But I digress. After telling how everyone bought fewer high-priced eggs, the story wraps up thusly:

"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 starting 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".

You of all people should have read this and said," But wait a minute, it is a pull market, not a push market". Your simple act of buying gas pulls the commodity through the system, thereby setting prices, not the other way around. Not a gallon of gas would move through a pipeline anywhere if someone at the other end wasn't demanding it.

Setting aside infrastructure cost considerations for the moment, let's see how the market works:

If a million gallons of gas are at the end of the pipeline and one consumer at the other end, the price of gas would be very very low- there is only the demand of one guy in a Subaru. He looks at the price on the pump and says, no, too much money. The owner of the station has bills to pay, and says, tell you what, how about this much? And the Subaru guy says, "Still too high. Look, I'm a decent kind of guy- I'll be fair, how about I give you 99 cents a gallon?" Gas station guy is sweating, but what's he gonna do? "Okay, sold."

Now picture the same million gallons are sitting there, and one hundred thousand consumers are at the other end. Now everybody only gets ten gallons. The guy in the Subaru is happy, he can go a long ways on that ten gallon allotment. But the guy in the Suburban needs thirty gallons to get somewhere and back. What does he do? He realizes that the market is at work! He offers to pay the gas station owner a little more per gallon, say two bucks, for the privelege of buying what he wants/ needs. If Mr. Subaru doesn't want to raise his bid, well, tough luck. No gas for him. By this effect, gas is "pulled" through the pipeline, and the price is determined. A million little decisions like this are made every day with commodities in a capitalistic system. Its what is called the invisible hand at work in economics. Now to address the concept of buying only what you need.

If we lay aside the impracticality of buying gas ten dollars at a time and focus on the end effect, we'd see that still nothing changes. The net effect of everybody buying gas ten dollars at a time would not change a thing on the market.At the end of the week, the same amount of gas would still have been sold, or "pulled" through. The market does not look at consumption in so narrow window of time as to be affected by this sort of action. What did you accomplish? Let's see:

In summation,you felt good doing it, but nothing substantive changed. In fact, you ran your tank low for too long and burned out your $500.00 fuel pump, and now have unintendedly made things worse for yourself. Congratulations! You now qualify as a liberal !