Topic awaiting preservation: economics by email

apparently, these guys (whoever it is that generated this email) have solved the rising gas price problem - buy less gas more often. what do you think? are they on to something here?

quote:

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The huge egg farms sells 100,000 dozen eggs a day to distributors. With no competition, they can set the price as they see fit. The distributors then have to raise their prices to the grocery stores. And on and on and on. As the man kept buying eggs the price kept going up. He saw the big egg trucks delivering 100 dozen eggs each day. Nothing changed there.

He checked out the huge egg farms and found they were selling
100,000 dozen eggs to the distributors daily. Nothing had changed but the
price of eggs.

Then week before Thanksgiving the price of eggs shot up to $1.00 a dozen. Again he asked the grocery owner why and was told, "cakes and baking for the holiday". The huge egg farmers know there will be a lot of baking going on and more eggs will be used. Hence, the price of eggs goes up. Expect the same thing at Christmas and other times when family cooking and baking happens.

This pattern continues until the price of eggs is 2.00 a dozen. The man says, ?there must be something we can do about the price of eggs". He starts talking to all the people in his town and they decide to stop buying eggs. This didn't work because everyone needed eggs. Finally, the man suggested only buying what you need.

He ate 2 eggs a day. On the way home from work he would stop at the grocery
and buy two eggs. Everyone in town started buying 2 or 3 eggs a day.

The grocery store owner began complaining that he had too many eggs in his
cooler. He told the distributor that he didn't need any eggs. Maybe wouldn't need any all week.

The distributor had eggs piling up at his warehouse. He told the huge egg farms that he didn't have any room for eggs would not need any for at least two weeks.

At the egg farm, the chickens just kept on laying eggs.

To relieve the pressure, the huge egg farm told the distributor that they could buy the eggs at a lower price. The distributor said, " I don't have the room for the %$&^*&% eggs even if they were free".

The distributor told the grocery store owner that he would lower the price of the eggs if the store would start buying again. The grocery store owner said, "I don't have room for more eggs. The customers are only buy 2 or 3 eggs at a time". "Now if you were to drop the price of eggs back down to the original price, the customers would start buying by the dozen again".

The distributors sent that proposal to the huge egg farmers. They liked the price they were getting for their eggs but, them chickens just kept on laying.

Finally, the egg farmers lowered the price of their eggs. But only a few cents. The customers still bought 2 or 3 eggs at a time. They said, "when the price of eggs gets down to where it was before, we will start buying by the dozen."

Slowly the price of eggs started dropping. The distributors had to slash their prices to make room for the eggs coming from the egg farmers. The egg farmers cut their prices because the distributors wouldn't buy at a higher price than they were selling eggs for. Anyway, they had full warehouses and wouldn't need eggs for quite a while.

And them chickens kept on laying.

Eventually, the egg farmers cut their prices because they were throwing away eggs they couldn't sell. The distributors started buying again because the eggs were priced to where the stores could afford to sell them at the lower price. And the customers starting buying by the dozen again.

Now, transpose this analogy to the gasoline industry. What if everyone only bought $10.00 worth of gas each time they pulled to the pump. The dealers tanks would stay semi full all the time. The dealers wouldn't have room for the gas coming from the huge tank farms. The tank farms wouldn't have room for the gas coming from the refining plants. And the refining plants wouldn't have room for the oil being off loaded from the huge tankers coming from the Middle East.

Just $10.00 each time you buy gas. Don't fill it up. You may have to stop for gas twice a week but, the price should come down. Think about it.

As an added note...When I buy $10.00 worth of gas, that leaves my tank a little under half full. The way prices are jumping around, you can buy gas for $2.65 a gallon and then the next morning it can be $2.15. If you have your tank full of $2.65 gas you don't have room for the $2.15 gas. You might not understand the economics of only buying two eggs at a time but, you can't buy cheaper gas if your tank is full of the high priced stuff.

Also, don't buy anything else at the gas station, don't give them any more of your hard earned money than what you spend on gas, until the prices come
down..

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ow. my brain hurts...

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// i've got soul but i'm not a soldier //

A friend, now in his 80's refuses to fill his gas tank. He doesn't get into hard economics of it all he just says.. '... I don't care how much gas costs... even when it was 20 cents a gallon I never filled up.'

And why's that... I ask. '... I buy what I need but I sure as hell am not going store their gas for them.

heheheh, interesting concept.

it does make me wonder though.

Would this really have any effect?

if we look at 700 people, who all fill up their 70 litre tank once per week:

That means about 100 people fill up 70litres every day = 7000 litres/day.

if they all decided to fill up only their 10 litres, every day:

that means that 700 people fill up 10 litres every day = 7000 litres/day.

On the positive side, they are all carrying, say, 50 litres less of fuel every day, which may save them some money in fuel efficiency.
On the negative side, there are now seven times as many transactions, seven times as many customers at the petrol station, so chances are they will burn whatever fuel they may have saved while sitting in line.

This may be a little simplistic, but then so is the analogy.

I usually fill up, but mebbe twice every 10 day, when it runs to about $20 each time instead of the $45 it would cost if empty.

Never let your sense of morals get in the way of doing what's right.
Isaac Asimov
US science fiction novelist & scholar (1920 - 1992)

The bottom line is you'd still buy the same amount of gas. wouldn't make a difference to the gasoline companies.

The way I see it, I don't think this would have any significant effect at all. Imagine for simplicity's sake that you use a gallon a day and you have a 7 gallon tank. Normally you fill up once a week. But now instead you (and everyone else) only get 1 gallon each day because thats all you use. At the end of the week you still have bought the same amount of gas, you've spent roughly the same ammount of money (price always fluctuates) and the gas station has just as much space left for more gas. Durring the coarse of the week they may have more space filled, but gas isn't constantly coming in, so its no big deal. By the time the gas stations have to get resupplied you will already have emptied they're reserves of 1 gallon for each day since the last supply. The overall effect would only be marginal. If I'm wrong and they really have no "give room" at all in their supply lines, then they will just have to resupply the same ammount but less frequently. Say 2x number of gallons every 2 months instead of x number of gallons every month. This supposedly would put more strain on the distributors but they could simply increase they're storage capacity to accomodate an extra months worth of gas. Again this is probably a marginal cost and would not hurt the oil companies very much at all.