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The demand that EM actually see is not at the station level, it is at the distribution level. So if you shift demand from one station to another station, then they can simply distribute their product to the other station. If you don't change over all demand, then all you are doing is changing the supply route. Shifting demand to other stations will increase the demand on their suppliers. Yes, the suppliers can probably keep up with demand. If they can, then they will be able to increase price since demand has gone up and supply has not. This is not to say that the supply is diminished or in danger, but simply that is has not also increased. So you get the other stations charging more, the other companies making increased profit. If the other suppliers cannot meet demand themselves, then the stations or even the suppliers will be looking to purchase additional gas--and Exxon will be all too willing to sell. Assuming that this shift is significant enough to affect demand at other stations while being insignificant enough so as not to change the major distribution channels. By this point the local franchises will have been hurt badly--if people aren't buying gas, they probably aren't coming in to the convenience store to buy overpriced junkfood either. So the local stations shut down because they can't make enough profit to cover overhead. This reduces the number of franchise stations that EM sells gas to. In the meantime though, independent stations have seen increased demand, but also been squeezed by increased prices from other suppliers, so they will buy less from the other suppliers and more from Exxon, who hasn't raised its supply price. So while the major supply chain hasn't changed, the minor supply chain has. And keep in mind that if Exxon does drop price--or even just keep it the same--and the local franchises are able to do likewise, then it's going to attract people who don't want to pay the "outrageous" prices for gas from other stations/companies. It's going to balance out, one way or another. If you want to lower the price of gas, you have to lower the demand across the board. If you go after one single distribution channel, then might get that channel to lower prices, but the other channels will increase price, and if everyone then switches back to the first channel, they can raise their prices again. Hell, we still get gas cheaper than most other countries, and part of that is because we haven't leveled off to the actual point where the maximum price for current demand has been met. The refineries and suppliers can continue raising prices and we will still pay it, because we "need" it. Until we decide that we aren't willing to pay that much for gas, the price will continue to go up. That's how supply and demand works with price. If the companies would start raising the price less incrementally and gradually, you'd definitely start seeing a backlash, and people would begin to re-evaluate their demand. And to some extent we are seeing that now as the companies have been raising prices by larger jumps and with more frequency. But as it stands right now, we (as a nation) are still willing to pay ~$3 a gallon for 87 octane, so why would the companies lower their price and sacrifice their profits? Sure, we are pissed about paying this much, but as long as we are still willing to do it, then why should they care? I understand that part of the idea behind this boycott is to break up the "teamwork" of the oil industry by pitting company against company, but they know all too well that we are willing to pay (even if grudgingly). If one company voluntarily lowered the prices it charges, then it could artificially increase its demand, and you can bet that they would be selling higher volume. By making less profit per unit but selling more units, their profits could remain stable or even increase. However, if they start selling more units than they can produce, they will have to increase their supply of raw materials. Right now, their supply of raw materials is dictated by a virtual monopoly (OPEC). So this doesn't really suit their needs. Besides, why lower profit-per-unit when they can still make the same gross profits by doing less work and selling less of their supply if they keep the price high?
"The two seater is being joined in a few weeks by a larger two-plus-two model with a rear seat for munchkins." ~Jim Mateja, Chicago Tribune, in regards to the Z32.
Andrew Janeshek // jnshk@aol.com // 1992 NA 2+2 [Stage 2-ish]
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