By DAVID MOON, Moon Capital
August 27, 2006
The boycott plan sort of sounds
promising, about like those 'Whip Inflation Now' buttons from the 1970s. It goes
about like this, in case you've missed the emails:
The solution to high oil prices is simple, if consumers will work
together. Let's show the oil companies who has the power by boycotting the gas
stations affiliated with a specific oil company each month. Preferably, let's
pick one that gets most its oil from the Middle
East. Why should we keep sending our money to a bunch of people who
are trying to kill us? See what happens when these overpaid oil company
executives realize that we don't have to stop at the most convenient convenient
store and that we can demand that gasoline prices be lowered. We have the power.
The customer is always right.
And there's an old obese guy in a red suit who manages to shove himself
down, then back up, every chimney in the world on a single winter night each
When you buy gasoline
from an unbranded convenience store (think Pilot), you have no idea what oil
company provided the gas you buy that day. So if your goal is to boycott all
Exxon gasoline for a month, you are going to fail, because you will almost
certainly inadvertently buy Exxon's products.
Imagine for a moment
that consumers could temporarily avoid all retailers selling Exxon gasoline.
Exxon has about four percent of the world oil production market. The oil market
is already threatened by underproduction. Refining capacity already struggles to
meet retail demand. Removing four percent of the gasoline from the world market
would swing the pendulum clearly to the side of demand. The result of this
month-long boycott would be higher prices, not lower
The law of unintended
consequences strikes again.
Whoever conjured up the 'oil company of the month boycott plan' shouldn't
be terribly embarrassed. Our elected officials have a track record of coming up
with even dumber ideas.
In April a
Republican plan in the U.S. Senate aimed to ease the burden of higher gas prices
on American families. The bill would have provided a one-time $100 gas-rebate
check for families earning up to $150,000 a year. Yep: one hundred big ones. Two
or three more tanks of gas. Or two pairs of tennis shoes. Or one college
textbook. Fortunately the plan died a quick and natural
Democrats aren't immune to faulty gaseous thinking, either. A Tennessee congressman
running for the Senate, lamenting the effects of our country's dependence on
fossil fuels, proposed a unique solution: institute a 30-day elimination of the
federal gas tax. Consider additional gas tax holidays, based on the success of
the initial trial.
Somebody missed the first day of econ class. If you want to lessen our
dependence on something, you don't cut its price.
you want to address real ' not childishly theoretical ' issues, you need an
adult understanding of supply and demand.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).