A man eats two eggs each morning for breakfast. When he goes to the rocery store he pays 60 cents a dozen. Since a dozen eggs won't last a week he normally buys two dozens at a time. One day while buying eggs he notices that the price has risen to 72 cents. The next time he buys groceries, eggs are 76 cents a dozen.
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. He checked around for a better price and all the distributors have raised their prices. The distributors have begun to buy from the huge egg farms. The small egg farms have been driven out of business. The huge egg farms sell 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 t he 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 $1.00 a dozen. He again he asked the grocery owner why and was told, \"Cakes and baking for the holiday\". The huge egg farmers know there will be a lot of baking going on and more eggs will be used. Hence, the price of eggs goes up. Expect the same thing at Christmas and other times when family cooking, baking, etc. happen.
This pattern continues until the price of eggs is 2.00 a dozen. The man says, \" There must be something we can do about the price of eggs\". He starts talking to all the people in his town and they decide to stop buying eggs. This didn't work because everyone needed eggs. Finally, the man suggested only buying what you need. He ate 2 eggs a day. On the way home from work he would stop at the grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a day. The grocery store owner began complaining that he had too many eggs in his cooler. He told the distributor that he didn't need any eggs. Maybe wouldn't need any all week.
The distributor had eggs piling up at his warehouse. He told the huge egg farms that he didn't have any room for eggs would not need any for at least two weeks. At the egg farm, the chickens just kept on laying eggs. To relieve
the pressure, the huge egg farm told the distributor that they could buy the eggs at a lower price. The distributor said, \" I don't have the room for the %$&^*&% eggs even if they were free\". T he 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 buying 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 but the egg farmers liked the price they were getting for their eggs but, those 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 those 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 dealer's 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 oil fiends.
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 quarter 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...\"
just think of this concept for a while.
This analogy will not work for oil.
As far as eggs are concerned the global supply of eggs will always be able to meet the global demand of eggs.
But as far as oil is concerned the global supply of crude oil is 80 Million barells per day and the supply is the same.
Once TATA Nano comes on the market the global demand is going to increase but the supply will not catch up because there has been no discovery of new big oil fields in the past 10 years anywhere in the world.
The only solution is to develop a nuclear powered car so for like 1 gram of uranium you can run your car lifelong.
And i am sure new safe nuclear technologies will be developed soon.
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The consumers can hope to affect the price of gas only if they consume less and bring down overall demand of gas. The above chain mail like other emails in the category like stop buying from Shell and Petro Canada, stop buying gas on a specific day, etc., is flawed since total demand will not go down.
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Well! Well! Well! Unfortunately, there's no set and substantiated theory of oil prices' rise and fall. Various different economists have devised their own theory. I agree with the supply and demand's basic analogy. However, if you read the articles on internet or elsewhere, each one of them has a different theory about gas' soaring prices. All and none of them provide a clear picture, and each intellectual is a quasi-intellectual in his/her own. As much as I want to believe what one concludes at, another at a different publication devises completely opposite.
Here's what I was reading in Times of India couples of days ago. So, going by this article's logic, oil prices' will come down by the end of 2008. Looks unconvincing, eh? Read the article please. However, I watched CBC last week and they were discussing living with the gas' soaring prices in future as well.
http://timesofindia.indiatimes.com/Opinion/S_A_Aiyar_Oil_will_fall_below_100_a_barrel/articleshow/3152735.cms
So, my conclusion is. I am not going to believe media. Each one has their own logic. By the look of the things, it seems that even though gas touches $200 a barrel, people will still drive. Yes! VERY HARD habits die hard. Furthermore, lack of options would drive people to drive more. Unless there's an efficient public transit, people will keep driving, nevertheless the price of gas. Efficient here implies - more buses, less wait time, suburban penetration, low fare, excellent connectivity between suburbs, trains, etc.
The only vehicle that will vanish from the road is - Gas guzzler SUVs. Yes, people will still drive, unless they all move in proximity to their workplaces. This is impossible, considering all (or majority of) the businesses are concentrated in downtown core. Furthermore, real-estate wise it's not viable to move out of the suburb. This will require a massive lifestyle change. As for us Indians, who are accustom to live in a joint families. This option will require changes in lifestyle. Additionally, immigrants with limited incomes and endless struggle will have much difficulty in buying a space near downtown. Lastly, you can't bike 30 kms from your suburban home to your work each day, one way. So, govt.'s much publicized 'bike to work week' will always be limited to 'a week'.
Hence, I don't see any major effect of soaring gas prices in people's lives in any near future. Believe it or not!
Location: Mississauga/ Toronto, Can
Posted on: 15-07-08 00:30:05
Amusing stuff but what the write-up professes cannot be achieved - for the simple reason that the economics of eggs and fuel are different... very different.
One scenario - Who is to stop the oil producers from artificially supressing/ reducing the supply of oil to match demand, thereby keeping the prices at current levels?
Trinity
Trinity
I am in the oil field business for 20 years and what you are saying cannot be easily and practically done by the oil producers.
Preety much every field in the world has a known capacity and a known production rate so if any producer is reducing production it will be immediately known to the world.
You cannot over produce from a field because this can kill the producing capability of the field after a couple of years.
This is what happened to Bombay high when ONGC started over producing and killed the production rate.
Quote:
Originally posted by Trinity
Amusing stuff but what the write-up professes cannot be achieved - for the simple reason that the economics of eggs and fuel are different... very different.
One scenario - Who is to stop the oil producers from artificially supressing/ reducing the supply of oil to match demand, thereby keeping the prices at current levels?
Trinity
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You know you are a desi when ........ You spew forth the virtues of India, but don't want to live there...............You've never had a tanning salon membership
