The Naive American Public

"How We As Consumers Can Impact Dropping Gas Prices"

I received this chain letter today from my sister. The email claimed that the American public could lower gasoline prices to below $2.00 per gallon by boycotting Exxon and Mobil and forcing a price war. If every person sent the email to 10 other people each day, by the 8th day, the entire country could be informed of this coordinated action.

I love my sister, but this is nothing but BS.

Even if the chain letter succeeded in reaching the entire country, the coordinated action would not work. The American public has no clue what is driving gasoline prices. They are channeling their frustration in the wrong place.


It's A Matter Of Supply and Demand

Supply and demand form the basic foundation of free markets.

The problem is that the Exxon Mobil Corporation is a relatively small supplier on the world playing field.

The other problem is that the American public is a minority player in terms of demand, especially on the fringe.

The oil market is much larger than the American public buying gasoline from one company.

Sure, there could be some short-term implications for Exxon Mobil and maybe gasoline prices, but the impact would be small and short-lived. This reminds me of when a small town boycotts a new WalMart because of what it will do to the local mom-and-pop shop. They may make a big statement locally, but it really doesn't change anything in the grand scheme of things.


Worldwide Demand Driven By China and India


















---The 10/08/07 posting discussed the growing demand in China and India. Their demand for oil will follow the same pattern seen by other countries before them. The difference is that there are 2 billion people in these countries.

---The International Energy Agency predicts that sometime this year for the first time, the combined oil usage of China, India, Russia and the Middle East will exceed that of the United States.....and that doesn't comprehend the rest of the world.


Worldwide Supply Controlled By OPEC

---The 03/11/08 posting showed that "ExxonMobil is the the largest oil company in the world, but its $40 billion in 2007 profits doesn't even place it in the top 50% of OPEC earners."

---There is a growing debate on whether or not "peak oil" has been reached. Crude oil production peaked three years ago and there is concern about depleting oil fields in Mexico, Russia, Nigeria, Venezuela and possibly Saudi Arabia. Even if "peak oil" hasn't been hit yet, it probably is only a decade or two away. Implications are still the same.


And Making Matters Worse

---The 03/03/08 posting showed that crude oil prices have actually fallen in the last five years.....if measured in gold rather than the US dollar. This is just but one implication of our reckless fiscal behavior. The American public doesn't understand how things like deficits, lower interest rates, the sub-prime mortgage mess, bailouts, weak dollar and the Iraq war all contribute to higher gasoline prices at the pump.

---It is ironic that the US oil companies are so maligned when they are not allowed to drill for oil in the US and there have been no new refineries built since the 1970s.

---The "crack spread" between the price of crude oil and the price of gasoline is at record levels and suggests that pump prices will go up dramatically.

---Predictions: Gasoline prices will average over $4 a gallon this summer driving season. Prices may eventually correct, but this level will seem very cheap ten years from now.