SeanDareOnline.com

As I was getting in the car this morning I heard my cell phone make the “new text message” chirp. After starting the engine I went fishing in my pocket for my trusty Nokia, no small feat for a guy my size. After writhing like a fish out of water in the front seat I finally pull the phone out and read the message. It was a forward about a gas strike proposed for today May 2nd. A gas strike is where you are urged, usually via email, not to purchase gas on a specific day in an effort to strike a blow to the oil companies. Now, in addition to email, the message is being sent via SMS messages on cell phones. It appears this myth knows no bounds.

First of all

Gas strikes don’t work. They can’t. Stop shaking your head and listen for a minute. Cars are symbols of freedom, power and prestige in our country. Everyone wants a car. Even our poor have cars. Cars are so ingrained in our culture that to not have one is considered absurd. In turn, if you have a car then you must buy gas. I know this statement sounds simple, but it doesn’t seem to be sinking in to popular thinking. I am amazed at how much rhetoric I hear about decreasing oil consumption while at the same time the number of cars purchased continues to rise year after year. More cars=more oil…it’s that simple

Oil companies know this. They pay high salaries to industry experts who tell them exactly how much oil they can expect to sell in any given time period. In business this is called forecasting. Business forecasts for consumption usually cover time periods as short as thirty minutes to as long as fiscal quarters or even fiscal years. But, like any forecast, there is a margin of error built in. The smaller the margin between the forecast and the actual the better.

So, wouldn’t a drop in gas purchases affect them, even if it was for just one day? Nope. You see businesses like oil companies also account for anomalies. If gas consumption is down from last years consumption on the same day, and the forecast didn’t predict this reduction, the first thing the analysts will do is look at the day before and the day after the consumption drop to see if there is an anomaly. In a gas strike situation this anomaly will be noticed immediately and accounted for, that is if you can get enough people to participate in the gas strike in the first place. Which brings me to my second point.

Second

There is no way, short of a multi-million dollar media blitz, that you will get enough people to participate in a gas strike for it to even show up on the oil industries radar. I don’t have any data on what percentage of the population becomes aware of a gas strike before it happens, but I wouldn’t be surprised if the number was somewhere around 1% of the population or less. 1% anomalies in gas consumption wouldn’t even make the bean counters at the oil companies pucker, much less raise a ruckus.

Third

How many of you purchased gas today? Of that number how many of you knew about the gas strike before you woke up today? Uh huh. I thought so. When I drove past the gas station this morning there wasn’t a noticeable drop in the number of people at the pumps. I would imagine that if the average consumer were low on gas they would buy some today even if they already knew about the strike. The issue is a matter of need vs. want. If gas was like say stuffed penguins, and the large powerful companies that sold stuffed penguins raised their prices to twice what they used to charge, then a penguin strike would gain more traction with the populace. Why? Because no one really needs a stuffed penguin, but everyone needs gasoline. (the recent Beanie Baby fad withstanding)

So the question remains, would a stuffed penguin strike lower the cost of stuffed penguins? I defer to my first point, the answer would still be no. The demand for stuffed penguins has not been altered significantly. The demand has just been shifted to either the day before or the day after the stuffed penguin strike. Only a long term drop in stuffed penguin consumption would lower prices. Basic law of supply and demand.

Gas strikes are a distraction. They make the consumer “feel” like they are doing something to change the culture around them without actually making any significant impact. If a gas strike participant gets into a discussion about fuel prices he can say, “Did you participate in the gas strike in May? Well you should have, we really struck a blow for the common man.” When in reality they did nothing except make me writhe around in my car seat while trying to get my phone out of my pocket.

What can you do that will make a difference?

That is the question I really want to explore. What makes gas prices so dang high and what can we the consumers do to lower them? The first thing, the most important thing, is vote. Vote and write your congressmen to have them remove the taxes they impose on gasoline.

Look at this graphic from How Stuff Works. In February of 2006 Gasoline was going for around $2.30 per gallon. (This graphic assumes the price is $2.28 per gallon.) At that time the taxes, on average, represented 20% of the price you pay at the pump. That comes out to $.46 per gallon. If our government stopped taxing gasoline we would have seen that price drop from $2.28 to $1.82 per gallon. Now, let’s look at how this information could impact us today. This morning on the way to work gas was $3.56 per gallon. If we assume we are still paying the same 20% tax rate on gasoline, and this tax rate was removed, we would see gas prices fall to $2.85 a gallon! Talk about a price cut! What would it take to get that immediate drop in gas prices? A government decision that’s all. No drilling or oil prospecting, no environmental impact, just our congressmen and women acting for the good of the average consumer. If legislation was passed that removed all taxes from gasoline sales we could reap an immediate financial reward.

What else can we do? Take a look at the percentage of the price taken up by crude oil. If we can decrease the amount we pay for crude then we could reduce the amount we pay at the pump. To reduce the amount we pay for crude we either have to reduce consumption or increase supply. Unless we all move closer to work, or start working from home, we won’t see consumption decrease. So that leaves supply. How do we increase supply? We could start exploring for oil and we could start utilizing known oil resources, e.g. ANWR. If we know there is oil available why aren’t we refining it into gasoline? The reason most cited is oil drilling damages the environment. I would humbly disagree with that argument. With the environmental controls we have in place today there would not be a significant environmental impact. The second reason I hear cited is that there isn’t enough oil to continue our current rate of consumption. No argument here, that is why we need to develop more oil resources. If oil is a finite resource then we need to find a replacement, but in the meantime we should continue to explore for oil in an effort to supplement our consumption until an alternative is found.

Lastly, we must look to alternative fuels. There are enough alternatives available now to start weening our society off of oil. One such alternative is ethanol. Ethanol has been proven economically viable in Brazil where 80% of the vehicles can run on ethanol. How would switching to ethanol work here in the USA? Here is one scenario. Our government subsidizes farmers by paying them not to plant crops in all of their fields. Why not remove all the taxes on gasoline and at the same time stop subsidizing farmers. In the mean time we could offer a tax incentive on cars that run on ethanol. Subsequently the farmer could plant corn, soy beans and sugar beets, the main sources of ethanol, and the land that was previously being subsidized would now turn a profit for the farmer. That sounds like a win/win scenario to me.

Are my idea’s crazy? Maybe, maybe not. At least I am trying to think of an effective solution. Gas strikers, on the other hand, are just continuing to use our current system while making believe they are making a difference.

Time to weigh in. Anyone else out there willing to tackle the growing energy crisis?

- Sean