Fuel Protests, 15°

What do you think should/will be the outcome of the fuel protests breaking out globally?

see: http://www.celsias.com/2008/06/12/fuel-protests...

13 replies

What SHOULD be the outcome is that price of stuff drops, not just fuel. Big Oil and governments will realize that they've been cught out, give everyone rebates and low energy costs. Then, realizing there is not much oil left, they finance the way for smaller, more efficient solar cells and efficient public transportation systems. What WILL happen is ... absolutely nothing. People are tired and would rather conform than fight. The only practical result will be that more cars, trucks and taxis will be run on vegeatble oil and turpentine mixtures -- until they become too expensive to use as fuel anymore.

Written in June 2008

Bill F.

Hi Alexandra,
Absolutely nothing but more global warming in the form of hot air! The U.S. is changing to greener energy every day. Look at all the wind farms going up in every state. The problem is we can't reduce our dependance on fossil fuels fast enough to make a difference in the price of oil.
As long as China, India, Korea and the other Asian countries continue to expand thier economies, the need for oil grows. Even plastic is a petroleum based product. One big issue is where these countries sell the products they make. In America all these products come over here on 24,000 registered cargo ships that move from 8 to 12 inches on a gallon of fuel. (backer fuel oil or diesel) So you won't have to calculate thats 2 million gallons per crossing. California unloads over 1,200 ships per day in it's ports. You can multiply that out ! As long as we continue to import so many products, including Asian vehicles, the price of oil and with it gasoline, will continue to increase. The Japanese vehicle manufacturers build about 35% of what they sell here. The Koreans only build about 12%. That means 65% Japanese and 88% Korean are shipped here. If just 15% of new Asian vehicle buyers (4 mil) bought American it would reduce fuel usage by 1 billion gallons in shipping fuels. That could cause a surplus and reduce the price.
Bill

Written in June 2008

Bill F.

Whoops, I made a mistake in the percentage of buyers that need to buy American. The number is 55% not 15%. But why would anyone in American want to buy something that does not pay taxes on it's profits in America. Those profits support our government, troops, education, healthcare and every aspect of our lives.

Written in June 2008

Charles M. 110°

Bill:
Even if you "buy American" you're often only buying the brand name and assembly. Much/Most of the components will still be imported.

As for taxes: these big corporations quite often get huge tax breaks (ie are being paid to be inefficient).

Written in July 2008

You know what would be a good fuel protest? We catch the Big Oil price gaugers and set them on fire. Then, when they're screaming for water, we tell them that, sorry, water costs $100 a squirt.

That's the American way. Free enterprise, you know. We got a right to our profits and you should be working harder in order to make money instead of having enough food to eat and a job you can be proud of and access to a doctor.

Until that day, I don't think any protests are going to be taken too seriously.

Written in July 2008

Judy T.

A Modern Parable.

A Japanese company (Toyota) and an American company (Ford Motors) decided to have a canoe race on the Missouri River. Both teams practiced long and hard to reach their peak performance before the race.

On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 7 people steering and 2 people rowing.

Feeling a deeper study was in order; American management hired a consulting company and paid them a large amount of money for a second opinion.

They advised, of course, that too many people were steering the boat, while not enough people were rowing.

Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 2 area steering superintendents and 1 assistant superintendent steering manager.

They also implemented a new performance system that would give the 2 people rowing the boat greater incentive to work harder. It was called the 'Rowing Team Quality First Program,' with meetings, dinners and free pens for the rowers. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses. The pension program was trimmed to 'equal the competition' and some of the resultant savings were channeled into morale boosting programs and teamwork posters.

The next year the Japanese won by two miles.

Humiliated, the American management laid-off one rower, halted development of a new canoe, sold all the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses.

The next year, try as he might, the lone designated rower was unable to even finish the race (having no paddles,) so he was laid off for unacceptable performance, all canoe equipment was sold and the next year's racing team was out-sourced to India.

Sadly, the End.

Here's something else to think about: Ford has spent the last thirty years moving all its factories out of the US , claiming they can't make money paying American wages.

TOYOTA has spent the last thirty years building more than a dozen plants inside the US . The last quarter's results:

TOYOTA makes 4 billion in profits while Ford racked up 9 billion in losses

Ford folks are still scratching their heads, and collecting bonuses...

IF THIS WEREN'T SO TRUE IT MIGHT BE FUN
check out freegaslady dot com

Written in July 2008

big oil doesn't answer to the consumer, they answer to the shareholder. Government answers to the consumer/voter. Hence, the government will be the only ones who could (should?) listen. Reduce the government taxes on fuel.
If you want to hurt big oil with your protest then:
Travel only under your own steam (bike/run/walk)
Wear natural fibres, or better still, make your own clothes/shoes
Eat organic
Run your household only on energy you have generated yourself.

Then they might start to notice.

Written in July 2008

Charles M. 110°

High oil prices are mainly a result of two factors:

1) Speculation. Buying futures. This tends to drive up costs and the people buying the oil are essentially dealing with a closed market can pass on any extra costs to the consumer. Speculators prey on fear and all the Iraq war making, brouhaha about peak oil etc etc only increase the fear and make speculation worse.

2) Clever accounting by the oil companies using global prices. For example, even though Shell, say, actually extracts most of its own oil, it "sells" this oil to itself at the global market rate. Thus, even though the actual cost to Shell (for the self-supplied oil anyway) does not go up, they end up making a huge profit. Since it can sell all the oil to itself, there is little reason to control pricing.

Speculation can be addressed by oversupply or breaking the fear. Oversupply seems to have been reached in the last few days. Nobody wants to be stuck with futures they can't sell at a profit.

The corporate fiddling can perhaps be achieved by doing a Bell Telephone-like break up on the oil companies so that a company does not "sell" oil to itself. That could introduce some competition in the oil trading industry.

Written in July 2008

I'm not sure that the second point is contributing much. If a company sells itself oil, one division is incurring an enormous loss having to pay the other division market prices.
These accounting practices do in fact exist, but they are to transfer profits from countries with inconvenient Tax, to ones with much more convenient Tax for the companies.

Written in July 2008

Charles M. 110°

Mickey D: When an oil company sells oil to itself it does not incur a loss because it passes those artificially stimulated costs on to the end user. As you would have noticed, you're paying more for gas.

Written in July 2008

Ok. I don't run oil companies, and there is probably a good reason for that, but if selling oil to yourself causes you artificially stimulate costs, and then you pass it on to the consumer, and they then sell their hummer to replace it with a bicycle, then haven't you just reduced your demand by raising prices?

Written in July 2008

Charles M. 110°

Mickey D: Yes, obviously any pricing policy that kills demand for your product is doomed to failure. However you need to consider something called price elasticity of demand (

Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price (ceteris paribus, i.e. holding constant all the other determinants of demand, such as income). It was devised by Alfred Marshall.


Price elasticities are almost always negative, although analysts tend to ignore the sign even though this can lead to ambiguity. Only goods which do not conform to the law of demand, such as Veblen and Giffen goods, have a positive PED. In general, the demand for a good is said to be inelastic (or relatively inelastic) when the PED is less than one (in absolute value): that is, changes in price have a relatively small effect on the quantity of the good demanded. The demand for a good is said to be elastic (or relatively elastic) when its PED is greater than one (in absolute value): that is, changes in price have a relatively large effect on the quantity of a good demanded.


Revenue is maximized when price is set so that the PED is exactly one. The PED of a good can also be used to predict the incidence (or "burden") of a tax on that good. Various research methods are used to determine price elasticity, including test markets, analysis of historical sales data and conjoint analysis.

.)

Depending where you are on the price elasticity graph, increasing price might not significantly impact the amount you sell.

Or in other words, the measure of how price changes affect buying behavior.

Consider if gas was 5c per gallon. You'd use a lot and would not moderate your consumption because of price. If the price went to 20c (ie x4) that would be unlikely to change your buying habits. However, quadrupling gas price from $2 per gallon to $8 per gallon would likely significantly change buying behaviour.

Gross revenue = price * amount sold

Therefore if you can double your price with only a 20% reduction in demand then you're improving revenue.

However if you double your price and have an 80% reduction in demand then your revenue will decrease.

So far (ie. up to current prices), there's been a huge increase in price, but only a relatively small decrease in demand. Sure a few people have switched to bikes, but only few. What is important is the consumption of the whole market.

Prices are probably now at the point where there is an inflection in the curve; the point where people start to modify their buying behaviour due to price.

Given that the world's commercial infrastructure runs on oil, they could probably keep driving up prices until a lot of people switch to bikes for their personal use because trucking and other activities would keep them going.

Written in July 2008

"So far (ie. up to current prices), there's been a huge increase in price, but only a relatively small decrease in demand"

I will respectfully disagree, citing the massive troubles that GM and Ford find themselves in due to the disappearance of the SUV market in the US. This would indicate a more than a relatively small decrease in demand.
Anecdotally, bus and train companies are facing massive problems scaling up fast enough to cater for the increase in passenger numbers.
I'll repeat that I don't know if oil companies sell themselves fuel, but if it has contributed to high prices, they have done massive damage to their demand. Long term damage that may linger into a period of lower prices
5 years ago, OPEC deemed that the sweet spot for long term profits from oil was $28 per barrel. A lower price would mean that supply could not meet demand, higer than that would mean that alternative energy would become more relevant. That figure may have risen, but not 5 fold.

Written in July 2008

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