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The North Wind

The North Wind

The North Wind

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Molly Birch
Molly Birch

My name is Molly, and I am in my second year at NMU. I come from Midland, MI, probably one of the most boring places on earth. However, we do have the only Tridge in the world, so that’s pretty nifty...

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The North Wind is an independent student publication serving the Northern Michigan University community. It is partially funded by the Student Activity Fee. The North Wind digital paper is published daily during the fall and winter semesters except on university holidays and during exam weeks. The North Wind Board of Directors is composed of representatives of the student body, faculty, administration and area media.

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‘Gas out’ lowering the price of gasoline a myth “

We’ve all gotten the emails, seen the Facebook posts or heard about it via word of mouth.

“Don’t buy gas on April 15. Drive down the gas prices. Boycott the gas stations.”

It happens year after year. Only the dates change, but the bulk of the message remains the same. It includes the same made-up statistics and categorically false anecdotal evidence of its effectiveness.

Along with “Kony 2012,” the “gas out” emails highlight a disturbing trend toward “protests” and “activism,” which cause participants no hardship, no real commitment and minimal effort, if any.

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The claims are made based upon a barely rudimentary understanding of economics. The basic idea sounds like it should make sense. Don’t buy gas, demand drops, supply rises, equilibrium price adjusts.

The major problem occurs when we realize that not buying gas on April 15 on no uncertain terms does exactly nothing to change the demand of gasoline.

Simply changing the date of a purchase doesn’t change demand in any way. It doesn’t call upon people to actually purchase less gas, but to simply purchase it at a different time.

Gasoline is an inelastic product, meaning that there are no appropriate substitutes that can absorb a shift in demand. The simple truth is that a majority of Americans not only need gasoline, but have a set amount per week, month and year that they need.

It is that long term demand and inelasticity that affects gasoline prices at the pump.

The most curious part of the expectation of a shift in gas prices from a “gas out” is that they seem to occur during times in which gas prices are at a sort of peak. At these times, people are already using absolute minimal gasoline and could scarcely use less if they choose to.

Frankly, I can’t even figure out how something like this is supposed to affect gas prices in the eyes of those who are sending these emails out. Wouldn’t it stand to reason that, given a product such as gasoline, if people willingly and temporarily cut themselves off from a product for which there is an absolute need and no substitute, eventually those who normally buy gasoline on the 16th would now be joined by those who would normally have bought gasoline on the 15th?

If that were the case, this would actually mean an increase in demand, which would “raise” the equilibrium price, and actually raise gas prices, which, if we’ll recall, is the exact opposite of what this movement is trying to accomplish.

The emails speak of “choking on stockpiles,” and “4.6 billion dollar losses.” This is simply not true. The only companies that are affected by day-to-day gasoline sales are those right at the very end of the chain. The small, family-owned and operated gas stations, and other small companies that can do entirely nothing to affect gas prices.

Gasoline prices are based upon oil prices, which are not actually affected by the laws of supply and demand. Oil and gasoline are what’s known as an artificial market. Despite U.S. oil reserves being at an all time high, and demand being largely unshifted, prices have steadily climbed.

Artificial markets like oil can change in a moment without notice, and can ruin economies.

Oil prices are actually decided in large parts by speculators and futures contracts. In the most basic sense, oil speculation means that speculators bet on a future price when writing contracts, which affects the market in very real ways.

Oil speculators could bet on a price to grow steadily, as they have. This can cause a number of ripple effects to occur. Namely, oil holders will often horde their supplies in hopes that they can make more money off of it in the future, when the market meets the speculated prices.

When this occurs, there is less oil available on the market, affecting the supply in the economic sense, but not the real sense.

This is what creates the artificial market that causes gas prices to change totally out of sync with what basic free market economics should cause.

There have been multiple attempts to cease oil speculation, largely championed by U.S. Senator Carl Levin (D-Mich.).

It was estimated when gasoline was traded at $150 per barrel that $60 of that price was due to oil speculation.

While people may get a small sense of satisfaction by not buying gas one day out of the year, the problem of high gas prices goes so much further and so much deeper than simple economics. Even if the “gas-out” lasted the several months, it would have to in order to produce any sort of change, the actual effects are still up in the air.

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