I’m a big believer in renewable and alternative energies. My secret hope is that one day we wake up and never have to use gas for anything ever again. The pragmatic realist in me, however, knows it takes a long time to build the infrastructure needed to replace a huge commodity like gasoline. Hell, coal has been obsolete for 70 years, and we’re still burning it for energy. That doesn’t stop the fact that every couple of years some jack ass gets it in his head that gas prices are too high, and we need to stick it to the oil man. Do they try to guilt 4.8 million people on facebook into donating to alternative energy research? Do they try to create a campaign for increased oil regulations with that same 4.8 million people? Do they dedicate themselves to brokering peace in the oil heavy, warn torn, revolutionary countries in the Middle East?
No, the keep trying to get us to stop buying gas.
On the surface, this seems like a perfectly reasonable request and a genius idea. If none of us bought gas, then gas prices would go down. That would seem likely, as supply and demand rule most markets. However, the idiots that bring us “No Gas Days” don’t understand basic economics as much as they think they do. Supply and Demand market pricing isn’t a day by day basis, it’s ruled by trends. In order to get the price of gas to go down through demand reduction, we’d have to all not buy gas for months. A wonderful idea in my crazy, fantasy dream world where we all ride on pegasi that fart rainbows, but not something that is going to happen in the United States for a few more years, we’re still working the kinks out of the rainbow farts.
The Gas Price Fallacy
I’m not sure if it’s because of how dependent on gas our culture is, or if it’s because gas prices tend to rise quickly in short bursts than slowly over long periods of time, but for whatever reason, we’ve developed the false idea that gasoline has increased in cost more than it should. In reality, gasoline has not suffered as bad from inflation as some other items, and it’s pretty unfair for us to pick on oil companies just because they’re evil and our addiction to their product is slowing killing off all life on our planet. It’s not like they’re big tobacco or anything.
In the last 30 years, our average income has risen by 180.8%. It stands to reason, then, that it would be fair market inflation for any item to raise it’s average cost by 180%. In the same amount of time, though, the average price of gasoline has only gone up 109%. If anything, Oil companies have been fighting inflation. By comparison, despite a sudden and catastrophic crash in the housing market, the average cost to own a home has risen 254% in the same time period!
Oil Prices aren’t High Because of Profit Margins
I’m not going to come out and say that oil companies don’t make a killing on gasoline. They do, but not from individual profit margins. Crude oil is priced right now at $100 per barrel (~$3.22 per gallon). By the time you process that and add in the crazy per gallon taxes, you can’t possibly be making money with a national average of 3.54 per gallon. The truth is, gas stations don’t make money on gas, and oil companies don’t make a huge profit margin on oil. We just use so much of it, that they still turn a $1.2 billion annual profit, even if that is only 3-4%. Oil is a bulk industry. You only need to make 1-2 cents per gallon when you sell a trillion gallons of gas a year.
Gas stations make their money off of the things they sell inside. You want a 44oz fountain drink for $1.06? That’s about $0.15 for the cup and about $0.06 for the soda. That would be a 404.7% mark up, for the record.
How we know that Oil Tycoon’s aren’t particularly vindictive
If I owned a giant oil conglomerate, and I had happened to surf across a “No Gas Day” page on my facebook and saw that 4.8 million people were involved, I’d grin to myself and dance a jig. You see, not only would I make giant amounts of money because of it, but I’d get to do so by hoisting the masses with their own petards.
I would start by raising the gas prices the week before by 10-20%, then on the day of no gas, I’d drop the gas price back down 5-10%. You see, everyone who is participating will buy their gas a couple of days before the event, so I’d gouge the crap out of their pricing, while giving a teaser gift to the people who didn’t even know what was going on. Then, I’d jack the prices way back up at Midnight that night, probably an extra 20% above where they were before. Hit all the little bastards on their way to the pumps the day after. Then, to encourage them and get to do it all over again, I’d spend 3 days lowering the prices back down to where they were when this all began.
You see, at that point, people would be dancing and singing the praises of no gas day because it forced the big oil companies to lower the price of gas by 20-30 cents per gallon. Six months from now, they’ll do it again, and I’ll be able to gouge them again. At no point would I have lost anything doing it.
We know that oil companies are less of a dick than I am because that hasn’t happened… yet.
Lower Gas Prices, Don’t buy Corn
That might seem like a crazy thing to say, but it’ll make sense here in a second. Oil guys like being in control of our transportation and energy needs. It gets their rocks off and makes them rich. The last thing they want to have happen is to let us think that they aren’t the cheapest, best, and most convenient option to fuel our cars. We already know that they aren’t the best option, because lets face it, bicycles have it beat there, but they aren’t very convenient for us lazy types. Ethanol and Bio-diesel are pretty convenient, I can get them at the pump, and they don’t slowly kill us all by poisoning our atmosphere, so they’re better, but Gas is still cheaper, and its because people insist on eating corn as a food.
Actually, Ethanol will never replace gasoline as a fuel source. As much as it sucks, OPEC watches the price for corn and soy and uses that to determine the cost of ethanol and bio-diesel. Once they know how much the cost is there, they just have to keep the price of crude oil below that. It’s pretty easy for them because they have no problem with working people to death for slave wages, so they don’t have the costs of bribes that we have in the US to be able to do that. Now that we know that, though, we know that if we stop eating the parasite masquerading as a vegetable, we could lower the cost of ethanol, which forces them to lower the cost of oil with it. It’s brilliant!