Strangely, I had a same chat with someone today, I had with one of my mates a year ago.
Talk about Deja Vu.
That day it inspired me to post this.....
WE! can make a difference
Oil prices.Speculation is that it would be $2 per litre by the end of the year.
An epidemic of a situation, in biblical proportions?
Nostradumus foresaw this.
I was just thinking about this and it came to me, the hypothesis is rather long, but it explains itself. Lets look a typical everyday situation...
Lets say an average man, eats two eggs each morning for breakfast.
When he goes to the grocery store he pays $1.50 a dozen.
Since a dozen eggs won't last a week he would normally buy two dozens at a time.
One day while buying eggs the dude notices that the price has risen to $1.80 cents.
The next time he buys groceries, eggs are $1.85 cents a dozen.
When asked to explain the price of eggs the store owner says that
the price has gone up and he had to raise his price accordingly.
Now This store buys 100 dozen eggs a day. He also find out that 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 the grocery stores.
And on and on and on.
As the dude kept buying eggs the price kept going up.
Demand.
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.
During the school holiday period, the price of eggs shot up to $2.00 a dozen.
Again he asked the grocery owner why and was told,
"Cakes and baking for the holidays".
Demand.
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
This pattern continues until the price of eggs is $3.00 a dozen.
This dude, starts thingking and tell himseld that something has to be done.
He starts talking to all the people in his neighbourhood and they decide to stop buying eggs.
This didn't work because everyone needed eggs.
Finally, the dude 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.
Distributor now has a warehousing problem
The distributor tells the grocery store owner that
he would lower the price of the eggs if the store would start buying again.
The grocery store owner says,
"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.
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 Petroluem industry.
What if everyone only bought $20.00 worth of petrol 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 $20.00 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 $20.00 worth of petrol that leaves my tank a
little under quarter full. The way prices are jumping around, you can
buy petrol for $1.75 a litre and then the next morning it can be $1.55. If
you have your tank full of $1.75 petrol you don't have room for the $1.55 petrol.
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.
Basic Economics. Think about it people.
We can make the Difference.
