Tuesday, May 08, 2007

Boycott Season

A friend recently forwarded an email that invited him to participate in a May 15 national protest of high gasoline prices. It urged him to forgo filling up that day, in order to send a signal to the oil companies to reduce their prices. The organizers claimed that a previous boycott in 1997 forced gas prices down "30 cents a gallon overnight." We seem to get this sort of thing every year at about this time, linked, no doubt, to the demonstrated seasonality of gasoline prices. Snopes, the urban legends website, does a nice job of poking holes in the organizers' logic, and MSNBC has researched the non-existent 1997 price drop. Rather than piling on, as I normally would, it occurred to me to ponder whether some other action might have a similar effect to what people expect from this boycott, aside from the obvious step of driving less.

While Snopes and MSNBC are correct that a one-day protest does nothing to change demand, they forget that the demand that oil companies see isn't the consumption of individual cars, but the restocking requests they receive from their retailers and distributors. Although a one-day change in refueling habits wouldn't alter those, a persistent shift would. The 243 million cars on the road in the US have a combined fuel capacity of about 87 million barrels, assuming 15 gallon tanks, on average. That's a sizable fraction of the 200 million or so barrels of gasoline in industry inventories at any point in time. In fact, the recent price increase correlates nicely with a gasoline inventory draw of 30 million barrels since February.

If we all reduced our personal gasoline inventory by just 1 gallon, which could be done by waiting until the gas gauge was closer to empty to refuel, we could put 5 million barrels back into commercial inventories. The restored inventory cushion would help cool off the market and dampen speculation. That should translate into lower pump prices within a few weeks.

There is no mystery to any of this: gasoline prices respond to changes in supply and demand. Consumers can't affect the former, but we are the latter. Anything we can do to improve our fuel economy and reduce our consumption will help, incrementally. If a family has two cars, and if they haven't already shifted as much of their driving as possible to the more economical vehicle, they can cut their bills and put another dent in demand. Inflating tires properly and driving closer to the posted speed limit also cuts demand. There's less spleen-venting satisfaction in these steps, of course, but they will save money twice. They are also a lot more appropriate than taking out our frustration on the local gas station, which is generally a small business, not a multi-national corporation.

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