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The Not-So-Great North American Gas Out

by Howard Fienberg and Iain Murray

April 10, 2000

You’ve probably received it. If not, it’s likely you will soon. It’s an e-mail encouraging every North American to give their automobiles a simultaneous three-day holiday from the gas pump -- the so-called “Great North American Gas Out.”

An e-mail forwarded to one of us ten times, with not one of the forwarders noticing that it leaked noxious fumes.

Don’t get us wrong, we hate the rise in gasoline prices, too, but this is not the way to handle it. The gas-out email reeks of bad economics, misrepresentation of history and petulance.

The email implores us not to buy gasoline during a three-day period in April. We can guzzle fuel before and after, but this organized holiday “will make a difference. Anytime we can stick it to them it’s a good day.” “Them,” of course, could refer to anyone from the leaders of OPEC to the Trilateral Commission.

Assuming enough people followed the email’s dictate, to what extent would the price of gas plummet? Nada, zip, zero. For better or for worse, we are a gas guzzling nation. And because we are so dependent on oil, the producer has the power, not the consumer. In economic parlance, oil prices are “inelastic”-- if the price goes up, demand does not fall (at least in the short term). The reverse would be true if we had alternative sources of power for our transportation, but until someone develops a viable electric car, we must dance along with the pricing games.

In fact, it is the very inelasticity of oil that leads to the enormous prices paid in other countries. Governments across the world have cottoned on to their people’s need to buy gas. So they feel free to tax it to the stars. Often, as in Britain, where four-fifths of the price of gas is excise duty, they justify this by claiming environmental benefits if people stop using their car as much. But in reality they know that a higher price has little effect on demand, and they proceed to rake in the tax proceeds.

A complex equation rules the price of gas, including supply, future projections, hidden taxation, cost of transportation, etc. It does not fluctuate based on when you use it so much as how much and how often. A mere three-day, one-off hiatus in gas buying will have no discernable effect on this pricing calculation (even if you assume that everyone’s not going to rush to the pump to gas up the day the gas-out ends).

Still, despite all the economic theory to the contrary, the email claims that last year’s gas-out “worked.” “We brought the price of oil down once before and we can do it again.” Oh really? Last year, the news media reported few, if any, supporters of the gas-out (i.e. people deliberately not filling up for that day) and there was no noticeable shift in the price of petroleum.

David Emery, an urban legends expert with About.com, asks an important question: if the first gas out was so effective, why do we need to do it again?

It is understandable that so many have fallen prey to the gas-out idea. Annoyance and anger make us do strange things. But, in relative terms, we don’t have much to complain about. The Japanese pay around $3.50 per gallon, the British as much as five dollars, and continental Europeans are gouged even more. People in these regions would kill for gas prices as low as $1.50, the seemingly unacceptable price we pay at our pumps.

America does not tax its gas to anything like the rate of those other countries. But the price at the pump still contains a significant element of federal, state and local taxes -- an average of 41c per gallon. Protests, begging before foreign leaders ... these activities offer nothing more than the feeling of motion on an issue. If anyone in America has any power to reduce gas prices, it’s the politicians who impose those taxes. The e-mails urging direct action would have a more direct impact on prices if they were properly targeted where they could make a difference.

- Howard Fienberg, a car owner, is Research Analyst and Iain Murray, a former adviser at the British Department of Transport, is Senior Analyst with the Statistical Assessment Service, a nonprofit nonpartisan organization dedicated to improving public understanding of scientific and social research.


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