A simple economic model for the gasoline industry. Read it carefully. And try to work this out for yourself.
A man eats 2 eggs each morning for breakfast. When he goes to the grocery store he pays $0.60 a dozen. Since a dozen eggs won;t last him all week he buys 2 dozen at a time.
One day while buying eggs he notices that the price has gone up to $0.72. The next time he goes in he notices they cost $0.76!
When asked to explain the price of eggs the store owner says "The price has gone up and I have to raise my price accordingly."
This store buys 100 dozen eggs a day. I checked around for a better price and all the distributors have raised their prices. The distributors have begun to buy eggs from the huge egg farms. All the small egg farms have gone out of business.
The huge egg farm 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.
As the man kept buying eggs he 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. He found they were selling 100,000 dozen eggs to he distributors each day. Nothing changed there either except the price of the eggs.
Then the week before Thanksgiving the price of eggs shot up to $1.02 a dozen. Again he asked why. He was told "cakes and baking for the holiday season!" The huge egg farmers knew there would be a lot of baking going on and more eggs would be used. hence the price of eggs goes up.Expect the same at Christmas and other holidays.
This pattern continues until the price of eggs goes up to $2.00 a dozen. The man says "There must be something we can do about the price of the eggs." He stats talking to all the people in town and they say that they should stop buying eggs. This didn't work because everyone NEEDED eggs.Finally the man suggested only buying what you need each day instead of stocking your fridge. He ate 2 eggs a day so on the way home each day from work he stopped at the grocery store and bought 2 eggs. Everyone in town started buying 2 or 3 eggs each day.
The 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 he wouldn't need any eggs at all the entire week. The distributor had eggs piling up at his storage facility. he told the huge egg farms that he did not have any room for eggs and would not need any for about 2 weeks.
At the egg farms... the chickens just kept on laying eggs.
To relieve the pressure, the huge egg farms told the distributors that they would sell eggs at a lower price. The distributor told the egg farms (We don;t have room for these eggs even if they were free!" The distributor told the grocery stores that they would lower the price of the eggs if the stores would start buying more. The store owners said "We don;t have room for these eggs even if they were free! The customers only buy 2 or 3 eggs at a time.If you would drop the eggs back down to a respectable price they may start buying by the dozen again."
The distributor sent the proposal to the egg farms They like the price they were getting for the eggs but the chickens just kept on laying. Finally... the egg farmers lowered the price of the eggs. But only a few cents. The customers still bought 2 or 3 a day. They said "When the price of eggs comes down to a fair market price we will start buying again by the dozen."
Slowly the price of eggs started dropping. The distributors had to slash their prices to make room for eggs coming in from the egg farmers. The farmers cut their prices because the distributors wouldn't buy at a higher price than they were selling eggs for. Besides.. they had full warehouses and they wouldn't need eggs for a while anyways.
And the chickens just kept on laying.
Eventually the egg farmers cut their prices because they were throwing out eggs they could not sell. The distributors started buying again because the eggs were priced to where the stores could afford to sell them at a lower price. And the customers started buying the eggs by the dozen again.
Now... transpose this analogy to gasoline. Because it's industry works in a similar fashion.
What if everyone bought only $10 of gas per day? the dealers tanks would stay semi-full... the dealers would not have room for the gas coming from the huge tank farms. The tank farms would not have room for gasoline coming from the refineries, And the refineries would not have room for the oil being brought in from the fields.
Just $5 or $10 each time. Obviously if you commute long distance you can;t do it. But for normal every day drivers this works. You may have to stop for gas 2 or 3 times a week. But gas prices will come down. The way prices jump right now you could buy gas for $1.06 per liter one day and the next it's at $0.93 per liter. With your tank full of $1.06 gas you won;t have room for the $0.93 gas.
You might not understand the economics of buying 2 eggs at a time but you can;t buy cheaper gas if your tank is full of expensive gas. This is a simple economic model of the industry explained in simple details. And it works.
And try not to buy other items at gas stations. Don't spend money on over marked items they sell. Especially the high test. they get the chemicals at a lesser cost than oil but you are paying more for a higher blend of octane.
Think it doesn't work? try it. because this model comes from the head of economics at a world leading university in the US.
Copy this... paste this.. and spread it around. There's no "SINGULAR MENTALITY" with people today.. but if some start... maybe others could follow.