BreakTheChain.org

Gas 'Em Out

Date Added: June 13, 2004
Last Updated: Jun. 17, 2007

Most chain letters are cyclical. They never go away, but they see 'peaks and valleys' due to economic changes, societal factors, the news and other influences. Calls to consumers to 'stand up' against rising gas prices typically surface each spring, when prices are their most volatile. Ironically half-hearted boycotts like this one fall short of suggesting anything that might actually lower prices.

In April, 1999, a group of well-meaning American netizens organized the "Great Gas Out," an online campaign to get all Americans to refrain from buying gas on a given day in order to let the gas companies know that we won't stand for high prices. It gained a lot of media attention, but came and went without making a dent in oil companies' bank accounts. Recognizing that one day may not be enough, organizers expanded the Gas Out to three days in 2000. Again, little impact was made.

But, the interesting thing about e-mail chain letters is that, because they are so easy to propagate, it is also easy to ignore their relative ineffectiveness. This one pops up again every time gas prices peak - usually in late spring, when market factors typically cause gas prices at their highest. This chain perseveres, with well-meaning forwarders changing the date each year and with each market blip (i.e., Hurricane Katrina in 2005) to keep it current.

This and the myriad other grass-roots efforts to bring gas prices down typically build on a simplistic view of the Global fuel market. They envision suit- and turban-wearing fat cats sitting in a posh board room, arbitrarily setting gas prices as it suits their fancy. It is this naive world-view that ultimately leads to the failure of these armchair activist campaigns.

The gasoline industry is a commodity market, driven by the laws of supply and demand. In such an economy, lower prices can be only be effected by increasing supply, reducing demand, creating more competition or a combination of all three. Market fluctuations must be significant and prolonged to have a lasting effect on prices.

Further, the market is complex. There is no single entity or group of individuals that sets gas prices. Instead the price at the pump is influenced heavily by the supply chain:

• Producers drill and extract the oil, then sell it to refineries at a price that includes the fair market value (as determined by supply and demand), the costs to extract and transport the oil, and (of course) a profit margin.
• The refinery then processes the oil into gasoline (and other products) and sells it to distributors at a price that includes the fair market value, the cost of production, the refineries' costs for processing and transportation, and a profit margin.
• Distributors then transport and sell the refined gasoline to vendors (gas stations) at a price that includes fair market value, production costs, refinery costs, the distributors' costs for transporting and dispensing the product, and a profit margin.
• The vendors then sell the gasoline to consumers at a price that includes all the factors above, federal, state and local fees and taxes, local competition and demand, and a profit margin.

Even this is a simplified explanation of how the market works. But the point is that an increase of costs at any point in the chain (production, refinement, distribution or point-of-sale) - such as a slow-down in drilling, a fire at a refinery, a truck drivers' strike, even changes of seasons - can drive prices up. Similarly, reductions in costs can be passed down the chain as well. However, changes travel down the chain much more effectively than up, which is why a one-day reduction in consumption would likely not impact producers and refineries at all, though it would certainly hurt gas station owners and could possibly affect distributors.

Even if a one-day boycott of all fuel purchases would be effective in lowering prices, it would be nearly impossible to achieve. On any given day, only about 10-20 percent of Americans buy gas (a very conservative estimate). So at best, only one in five people could participate in this boycott, to begin with. If you wouldn't have bought gas on whatever date this one has on it by the time it reaches you, your absence at the pump won't be felt. Add to that the fact that only 63 percent of adults are online to hear about this campaign and that not everyone online drives, and you can see why a substantial nationwide boycott is a troublesome venture at best.

Chains like this one are popular because they offer hope in an easy-to-swallow package. The United States is among the world's top consumers of gasoline. Fuel-efficiency on America's highways has not improved significantly over the last 10 to 15 years and light trucks (including SUVs), which typically get the worst mileage, comprised nearly 55 percent of all new vehicles sold in 2003, and have accounted for more than half of all sales each year since at least 2000.

The bottom line: If we want to save money at the pump, we must use less gas - slow down on the freeway, plan outings to get everything in one trip, walk more, ride a bicycle and trade in that gas-guzzling SUV for an economical compact or hybrid car for starters. Unfortunately, this has proven to be a very unpopular approach to the problem - especially when chains like this offer a much easier "solution."

Chain letters like this one appeal to consumers where they feel it the most - the wallet. They provide a understandable and sensible-sounding plan in a format that makes it easy to share with others. Unfortunately, this one is propagating an old and faulty premise that ignores the larger picture. Break this chain.

References: Pew Internet & American Life Project, Detroit News

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