Earlier in the month I wrote about how I thought the idea of May 15th’s gasoline boycott would be completely futile and useless. May 15 came and went, gas prices continued to increase, and most of the American public became painfully aware that this tactic was bound to fail.
Apparently, the message didn’t get through to all of us – including our friendly neighbors to the north.
It seems that there has been another email floating around, this time asking us to boycott a particular brand of gasoline for an entire month, with the hopes that the boycotted company would have to drop their prices and, in turn, everyone else would have to do so as well.
Here’s the basic text of the email:
“Starting June 1 of 2007 DON’T purchase ANY gasoline from the biggest company in Canada, Petro Canada! If they are not selling any gas, they will be very quickly inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit. Think about this – Petro Canada has 1500 retail locations and the entire country consumes 68 million gallons a day. Yes per day. And Petro Canada is Canada’s largest gasoline retailer, then doesn’t it make sense that the consumer can bring this giant to its knees and force them to lower their prices?”
Again, in theory this might be a good idea, and it probably makes you feel better to forward along to everyone in your contact list, however, it’s just not going to work, and more than likely would drive gas prices higher!
By boycotting one station for an entire month, theoretically their gasoline inventories would skyrocket and should cause gas prices to fall. However, I’d be willing to bet the farm that this wouldn’t happen.
The reason being, again, there isn’t a decrease in DEMAND! By simply shifting demand to these non-boycotted stations, their inventory and supply of gasoline would fall, driving their prices higher. Remember, a decrease in supply coupled with an increase in demand almost always equals higher prices.
In turn, the huge oil company that’s being boycotted would also raise their prices in order to keep up with the market.
This brings us back to the moral of the story – the only way that we will ever cause gasoline prices to fall (aside from their natural cycle) is to reduce our demand for it. It’s not going to be some gimmick, just some good, old fashioned sacrifice.
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While it is true that the market demand would not change, the demand for gas from Petro Canada would, and the change would be rather dramatic. The desired effect, I guess, would be to alter the market share of each company, thereby changing any incentive each of them may have for tacit collusion. In particular, it should provide Petro Canada with enough incentive to start lowering prices, even for just a while. Yes, in the long run, gas prices would always move in the direction dictated by the laws of supply and demand. But as Keynes would say, in the long run we would all be dead.