Thursday, April 17, 2008

Why boycotting Gas Stations Won't Lower Prices

Believe me, I sympathize, but I've got to tell you - boycotting a gas station will not bring down the price of gas. Give me a few minutes to demonstrate why, as well as propose what we can do to lower gas prices (although it will not be a quick fix to remedy the current high price right now).

Why boycotting won't work
Picture an intersection that has two gas stations. We've all agreed to buy no gas for a set period of time (a particular day, weekend, week, month...doesn't matter). Company A owns x% market share, and it was being boycotted, people started buying their gas elsewhere, and the other companies would have to adjust their supply to meet all the new demand.

Since they don't regularly stock their channels with enough supply for their share AND Company A's too, there would be a run on their supply. What would be their response? Of course, according to the laws of supply and demand, if demand goes up, so do the prices. Oops, that's no fun. But there's more...

If you are in the US you'll notice not a lot of Exxon gas stations, yet they are the biggest oil company. Coincidence? No, retail gasoline sales is not what drives their profits. Since we've mentioned the largest oil company on earth, let's go with them for a bit. In what market is ExxonMobil #1? Lubricants and Specialties such as motor oil and heavy industry greases and lubricants. Gasoline is almost a loss leader to get people in to buy candy and junk food and other high markup crap. Remember when a gas station had a mechanic's garage attached? Notice how that has all but disappeared from the big brands? It ain't about cars. This is part of why we're now seeing ExxonMobil up their management control of Imperial Oil, move head office from 111 St. Clair Ave West in Toronto out to Calgary, etc...Imperial Oil in Canada aggressively pursued market share in a market Exxon doesn't care about - retail shops, almost the exact opposite model from parent company ExxonMobil, who'd rather wholesale to shipping companies and airlines and heating suppliers and pop gas stations and Wal-Mart and Loblaws and...other brands.

So, if the gas station across the street has line ups around the corner and a short supply, where will they buy extra supply for the short term run? Who has gas to spare? Of course, Company A, and dumping it at the wholesale level suits them just fine.

Further, human nature is part of the problem for both this issue as well as my recommended solution. Let's go back to that corner. People are late for work, waiting in that long long line, and just across the street is this Company A station, virtually empty. It only takes that first car to cross the street, for the 2nd person to say "why should I inconvenience myself while some other guy gets to gas up and get on with his day?"

Demand for gasoline should be seen not from a market share perspective, but from a market perspective. If you need 50L to get back and forth to work each week, the oil companies really don't care where you get it. If you demand 50L, that's all they care about. Buy it from Company A, don't buy it from Company A, it doesn't really matter. Seriously. Let's test this.

Suppose we called for a boycott of every gas station EXCEPT Company A, but we didn't change our driving habits. How on earth would Company A supply 100% of the market? They'd sell their x% share as they normally do, and buy the rest from the other companies to make up the 100% supply that the demand requires.

So, what CAN we do?
Now that we are seeing things in the context of market supply, the solution becomes clearer. We, as a society, shouldn't think about reducing market share of any one company, but reduce our overall market demand for all of them. Period. We've gotta guzzle less. Buy a vehicle that only requires 40L per week. Or move closer to work and walk or ride a bike, or carpool and take the 40L tank of your neighbour out of the demand pool altogether, or work from home a couple of times per week to reduce your demand, or buy a diesel or hybrid vehicle...

Society, as a whole, must reduce the total demand for oil. And we're back to human nature. We still think, generally, that bigger is better. We still think we look cool in big gas-guzzling SUVs. But then, in some instances, bigger is better. Why make two trips when you can get the entire gang to the soccer game in one? Nothing wrong with that. We have to keep living, and hating cars certainly won't solve anything (for the record, I like cars, and am happy to tell you that all it takes is some visionary management to weave a social fabric that meshes cars into what else is happening in a synergistic way, but that's for another rant).

This issue runs deeper than simply what kind of car you drive. For 50 years now, oil companies and auto manufacturers and home builders have worked together - inadvertently or otherwise - to lure people out of urban living with isolated bedroom communities, shopping malls with lots of free parking and drive-thru fast food outlets that scream "car-friendly". The result has been an increased dependence on the car to get by. More cars, more road damage, more cost to maintain roads. More cars, less public transit ridership, less money to improve transit. Public transit less viable, more people in cars. More urban sprawl, less property tax revenues per capita usership. What that means is, even though people are moving out of an urban centre (and, I'm thinking particularly of Toronto), most of them still return to work in the urban centre, driving on the roads, polluting the air, but not putting money into the pot to maintain the roads upon which they drive because they don't live in the urban centre any longer.

The commute is longer, people are more stressed, quality of life is down, cost of life is up. Living close to where you work means more options. Use the viable urban public transit, or carpool, or ride a bike, or walk, or rollerblade (how about that, the added benefits of more exercise, less pollution, less traffic...urban living just keeps getting better and contributing more). Why get home after an hour-long commute when you could be home in 20 minutes? Ever notice how people walk a lot more when they live in the city? Ever notice how few drive-thrus there are downtown?

And, I'm not suggesting the oil companies are solely to blame. Ever notice that there's no subway system in Detroit? Why is that? Would it be a stretch to suggest that there are companies in that area with a vested interest in preventing a subway that would compete with auto sales?

And I hate hearing a car company complain that there isn't strong enough demand for alternatively powered vehicles. I'll give a concrete example. Back in 1986 there was only one car Honda offered with a multi-valve engine, the Prelude Special Edition. Within 10 years, every vehicle Honda sold came standard with a mult-valve engine. People bought them because that's all Honda made available. If all Honda built were diesel engines, or gas-electric hybrid engines, I doubt strongly that Honda would post no sales and go bankrupt. People would buy what they were selling if there was no choice.

Why aren't all car roofs outfitted with solar panels? Why isn't more power derived from wind? Yes, wind. At highway speeds, the wind blowing in the front grill is gale force, isn't it? Shouldn't every car have some kind of turbine in the air dam driven by the 100 km/h winds creating electrical energy to complement the solar panels? And, shouldn't all cars be diesel-electric hybrids getting 2000 km per fill up of a 50L tank?

From government to oil companies to car manufacturers, there's plenty of blame to go around. But, ultimately, we the consumer are still tugging on the supply with our demand. As long as we're going to do that, those companies and organizations will continue to feed off us. Think about it - Exxon has been in the top 3 highest revenue corporations for almost 40 years. They make billions in an industry that shares in a market worth many billions. For that to change, we've got to do a whole lot more than simply boycott a brand - we, as a generation, must change.

If we can't change, don't expect them to. If we do change, they won't have a choice but to follow suit.

So, tell me I'm crazy.

1 comment:

DGA said...

I should add that demand remains strong beneath the surface - plastic and rubber are made from oil.

So, again, reduce demand, buy less plastics and rubber whereever possible. If you regularly drink water, shucks, buy one glass bottle or thermos and fill up with boiled water from home.

Wherever you have choice between something made of plastic and something made from another material, go with the other material (assuming it isn't also oil-based).

Granted, if you need to replace your tires for safety, by all means, do so. But, if you can make choices to drive less, your tires should wear less.