Oil companies can manipulate their prices somewhat by controlling how much
gasoline they produce and where they sell it, but they can't alter the
basics of supply and demand: prices go down when people buy less of a good,
prices go up when people buy more of a good, and prices go way up when
demand outstrips available supply. The "gas out" schemes that propose to
alter the demand side of the equation by shunning one or two specific brands
of gasoline for a while won't work, however, because they're based on the
misconception that an oil company's only outlet for gasoline is its own
branded service stations. That isn't the case: gasoline is a fungible
commodity, so if one oil company's product isn't being bought up in one
particular market or outlet, it will simply sell its output to (or through)
Economics Prof. Pat Welch of St. Louis University says any boycott of "bad
guy" gasoline in favor of "good guy" brands would have some unintended (and
.. . . Welch says the law of supply and demand is set in stone. "To meet the
sudden demand," he says, "the good guys would have to buy gasoline wholesale
from the bad guys, who are suddenly stuck with unwanted gasoline."
So motorists would end up . . . paying more for it, because they'd be buying
it at fewer stations.
And yes, oil companies do buy and sell from one another. Mike Right of AAA
Missouri says, "If a company has a station that can be served more
economically by a competitor's refinery, they'll do it."
Right adds, "In some cases, gasoline retailers have no refinery at all. Some
convenience-store chains sell a lot of gasoline - and buy it all from
somebody else's refinery."
A boycott of a couple of brands of gasoline won't result in lower overall
prices. Prices at all the non-boycotted outlets would rise due to the
temporarily limited supply and increased demand, making the original prices
look cheap by comparison. The shunned outlets could then make a killing by
offering gasoline at its "normal" (i.e., pre-boycott) price or by selling
off their output to the non-boycotted companies, who will need the extra
supply to meet demand. The only person who really gets hurt in this proposed
scheme is the service station operator, who has almost no control over the
price of gasoline.
The only practical way of reducing gasoline prices is through the
straightforward means of buying less gasoline, not through a simple and
painless scheme of just shifting where we buy it. The inconvenience of
driving less is a hardship too many people apparently aren't willing to