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By Robert Rapier on May 7, 2007 with no responses

Gas Boycotts and Gas Prices

Gas Boycotts

You have probably gotten the e-mails. “Don’t buy gas on Wednesday of next week and force the oil companies to lower prices.” Or, “Boycott Shell this week, ExxonMobil next week, etc.” Sometimes I explain to people why these schemes won’t work, but most of the time I just delete them. But MSNBC took time out today to address the issue:

Why one-day gasoline ‘boycott’ won’t work

But suppose that, through some magical force of nature, you managed to shut down every gasoline-powered vehicle and device for one day. Let’s look at how much money would be involved and what would happen to it:

Based on current demand of about 386 million gallons a day, at $3 a gallon, the total value of gasoline sold daily in the U.S. comes to almost $1.2 billion. But that’s the total retail value — the pot of money that’s divvied up along a chain of oil producers, pipeline operators, refiners, wholesalers, truckers and retailers. Let’s follow the chain and see who gets to keep what.

It’s a pretty good read, and goes into the details of where the money ends up along the supply chain (which should demonstrate quite clearly that you aren’t being gouged). Now, if you really want prices to come down, make your boycott permanent. If everyone can reduce their actual consumption by 10%, and not just for 1 day, that would bring about downward pressure on prices.

Gas Prices Set Record

I have been beating this drum for weeks. In fact, I would have to check, but I may have been warning about this for months. If you have been watching the gasoline inventory data, which I discuss every week when the EIA releases the numbers, you could see this coming: Record low gasoline inventories are going to drive record high gas prices. And according to another MSNBC story, we have reached that point:

Average pump price hits record $3.07 a gallon

CAMARILLO, Calif. – Gasoline prices have surged to a record nationwide average of $3.07 per gallon, nearly 20 cents higher than two weeks earlier, oil industry analyst Trilby Lundberg said Sunday.

The previous record was $3.03 per gallon on Aug. 11, 2006.

Rising prices have reduced demand, but it is still running ahead of last year’s numbers. Where are we headed from here? Depends on inventories. But you knew I would say that. I haven’t seen any predictions yet for this week, and I am not going to make any (though with prices still going up, I have to believe demand is going to taper off below last year’s numbers). Anyway, we will know in 48 hours.