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Friday, June 1, 2007

Fun and Fungability

"Lets not buy gas next Thursday or, alternately, from Exxon." It may make you feel good, but it won't make any difference in the price of gasoline. This will also explain why those fuel tankers you see driving down the freeways no longer have brand names on their stainless steel flanks.

The reason this sort of mass boycott not only won't but can't work is the concept of commodity fungibility. There is a given demand for a product, in this case gasoline, at a given price. The more critical the product is the more inflexible the demand is at increasing prices. There is some industry speculation that the actual point where most Americans will choke is in the range of $5.40. Surveys say a bout a buck less, but people lie to pollsters.

Think of all petroleum products as coming from one big tank. Refiners, in order to run their plants at maximum efficiency, the "Majors" will produce petroleum fractions (gas, lube oil, diesel) for their supposed competitors. The majors have their supplies of imported crude set by contract with producing nations or companies.

If 90% of drivers were to boycott Exxon or any other "brand" all the Exxon gas would simply be sold to the other Majors and pumped at their stations. There is a little paperwork, but that cost is passed on to the consumer. A teacup of additive in a tanker truck turns Shell with "Zippiton" into Chevron with "Techron".

Everybody knows how to save gas, but we are willing to pay for the convenience that mobility provides. Car pooling and mass transit are inconvenient and inflexible. No amount of advertising will change that. High fuel costs will be the only thing that drives commuters into public transport, and ultimately drives gas usage down. That is the simplest economics there is.

We live in the bed we have made. If we want to do anything to change it I figure five years of buying more efficient cars, high federal CAFE standards, building new mass transportation and bloody big taxes on gasoline will begin to turn things around. Slap $20 a barrel tax on imported crude or distillate would be about right. No new private car, pickup, SUV or anything licensed to operate on public roads should get anything less than thirty MPG.

I can say this stuff because I'm not running for public office.

1 comment:

Charly said...

Julia Child had it right all along - everything in moderation. That includes cars but perhaps not sex.

But then again the sun has been able to supply life with energy since THE BEGINNING. Makes more sense to use it directly than from crude brought about by our star's energy used by the dead bodies of little buggies 3 billion years ago. Like you said, people want the convenience of individual transport and different energy sources will replace oil when it become too costly. I think our human race has passed any problems with finding energy. The only problem is finding which one makes us least all least sick.

Go! MikaMelson and his happy Shoreline solar village!