From Penang
Thursday, November 03, 2005
PULLING PETROL PRICES
For the last 2 hours I've been trying to reduce the amount of e-mail in my Hotmail inbox (c.f. Oct 22nd posting) to no avail and this little e-mail came up and it had so many respondents that it felt wrong deleting it. So I shall preserve it in blog notoriety via this post and the subsequent postings (which if nothing else makes it look like I have lots of readers...hmm should really get down and do some proper stuff really).
For the last 2 hours I've been trying to reduce the amount of e-mail in my Hotmail inbox (c.f. Oct 22nd posting) to no avail and this little e-mail came up and it had so many respondents that it felt wrong deleting it. So I shall preserve it in blog notoriety via this post and the subsequent postings (which if nothing else makes it look like I have lots of readers...hmm should really get down and do some proper stuff really).
This is a rather lengthy story but if the concept is applied toClick below to read on (for those of you who are interested). It'd be nice if I got Jason's view on this matter but I won't be holding my breath...
the petroleum industry en masse, it just may work.
A man eats two eggs each morning for breakfast. When he goes to
the grocery 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".
Comments:
(story continues)
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
the 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 $1.00 a dozen.
Again he asked the grocery owner why and was told, "Cakes and baking for
the holiday". The huge egg farmers know there will be a lot of baking going on and more eggs will be used. Hence, the price of eggs goes up. Expect the same thing at Christmas and other times when family cooking,
baking, etc. happen.
This pattern continues until the price of eggs is 2.00 a dozen. The man says, " There must be something we can do about the price of eggs".
He starts talking to all the people in his town and they decide to stop buying eggs. This didn't work because everyone needed eggs.
Finally, the man suggested only buying what you need. He ate 2 eggs a day. On the way home from work he would stop at the grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a day.
The grocery store owner began complaining that he had too many eggs in his
cooler. He told the distributor that he didn't need any eggs. Maybe
wouldn't need any all week.
The distributor had eggs piling up at his warehouse. He told the huge egg farms that he didn't have any room for eggs would not need any for at least two weeks.
At the egg farm, the chickens just kept on laying eggs. To relieve the
pressure, the huge egg farm told the distributor that they could buy the
eggs at a lower price.
The distributor said, " I don't have the room for the %$&^*&% eggs even if
they were free". The 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..."
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
the 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 $1.00 a dozen.
Again he asked the grocery owner why and was told, "Cakes and baking for
the holiday". The huge egg farmers know there will be a lot of baking going on and more eggs will be used. Hence, the price of eggs goes up. Expect the same thing at Christmas and other times when family cooking,
baking, etc. happen.
This pattern continues until the price of eggs is 2.00 a dozen. The man says, " There must be something we can do about the price of eggs".
He starts talking to all the people in his town and they decide to stop buying eggs. This didn't work because everyone needed eggs.
Finally, the man suggested only buying what you need. He ate 2 eggs a day. On the way home from work he would stop at the grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a day.
The grocery store owner began complaining that he had too many eggs in his
cooler. He told the distributor that he didn't need any eggs. Maybe
wouldn't need any all week.
The distributor had eggs piling up at his warehouse. He told the huge egg farms that he didn't have any room for eggs would not need any for at least two weeks.
At the egg farm, the chickens just kept on laying eggs. To relieve the
pressure, the huge egg farm told the distributor that they could buy the
eggs at a lower price.
The distributor said, " I don't have the room for the %$&^*&% eggs even if
they were free". The 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..."
# posted by 
: 3:37 am
: 3:37 am
From what I gather,it won't work here 'cos
1.the price of the petrol is subsidied by the M'sia
Govt,it doesn't flatuate like in US
2.petrol is an
exhaustable item while eggs are not
3.unless EVERYONE
do that,it won't make a difference!!
1.the price of the petrol is subsidied by the M'sia
Govt,it doesn't flatuate like in US
2.petrol is an
exhaustable item while eggs are not
3.unless EVERYONE
do that,it won't make a difference!!
# posted by : 3:38 am
: 3:38 am
I think this concept only works in the countries where the price of petrol isn't controlled or government subsidized.
# posted by : 3:39 am
: 3:39 am
Unfortunately, price of petrol is regulated by the M'sian goverment and they
subsidised it. But if the whole earthlings did this, overall price of gasoline
and oil will drop. Because of the subsidy, S'poreans and Thais will negate any
efforts put in by Malaysians and fuel is full price in their countries. M'sian
goverement will be happy if u do it because it is less burden to subsidized
fuel, but they will not lower them even if the price of oil drops. If want it
to drop, then we need to worsen the side effects of higher fuel price, like
transportation cost, the hawker price increase, etc... overall increases and
wait for election time. Then the goverment will do something about it to make
them look like the good guys.
In short, politics determines fuel price, not economics 101 in Malaysia....as it
is with most things.
subsidised it. But if the whole earthlings did this, overall price of gasoline
and oil will drop. Because of the subsidy, S'poreans and Thais will negate any
efforts put in by Malaysians and fuel is full price in their countries. M'sian
goverement will be happy if u do it because it is less burden to subsidized
fuel, but they will not lower them even if the price of oil drops. If want it
to drop, then we need to worsen the side effects of higher fuel price, like
transportation cost, the hawker price increase, etc... overall increases and
wait for election time. Then the goverment will do something about it to make
them look like the good guys.
In short, politics determines fuel price, not economics 101 in Malaysia....as it
is with most things.
# posted by : 3:39 am
: 3:39 am
It doesn't make sense! You will still use the same amount of petrol over a fixed length of time, so you will just need to go to the petrol station more often. They may only make RM10 per customer, but they will have more frequent customers. At the end of the day, they still get the same amount of business!
I can't believe it took such a long eamil to explain this concept...
I can't believe it took such a long eamil to explain this concept...
# posted by : 3:40 am
: 3:40 am
As much as we'd like to do something about the price hike but this is really a global issue. so, why should we do this if it's not going to make any difference after all. Leslie's right, it's a political thing rather than economical. Our petrol usage every month is more or less fixed, so that means we'll have to make more trips to the station ie consume more $$$, at the end of the day, we still lose out because the petrol stations still make their profits at the end of the month. Hence price will stay the same.
The only solution would be if there's an alternative to petrol in running the vehicles. I actually heard from my customer that they're coming out with a palm-oil based fuel which is environmentally friendly which costs lower than petrol. Of course this will take a few more years before it's marketable.
The only solution would be if there's an alternative to petrol in running the vehicles. I actually heard from my customer that they're coming out with a palm-oil based fuel which is environmentally friendly which costs lower than petrol. Of course this will take a few more years before it's marketable.
# posted by : 3:41 am
: 3:41 am
After recieving the reply from Leslie (together with one from Grace & Helen), it seems that my one man quest to drive down the price of petrol is doomed to failure because of government control (unless I decide to blow up every Petronas Petrol Station - making myself sound like a terrorist - oops!).
Whilst it was interesting to read the advice and drive round with a car with only 1/3 of a full tank (making it prone to 'the Grace effect'), it seems that I must direct my anger at the failure to the person who polluted my mind by sending me the e-mail...
So a big :P
to Lilian!
Whilst it was interesting to read the advice and drive round with a car with only 1/3 of a full tank (making it prone to 'the Grace effect'), it seems that I must direct my anger at the failure to the person who polluted my mind by sending me the e-mail...
So a big :P
to Lilian!
# posted by : 3:48 am
: 3:48 am
LOL!
I would give a big :P to the Penang Brigde Consessionair for suggesting a 8.50
toll.
Penang bridge has exceeded its capacity by 30,000 cars, the wait times to pay
toll, and the jam time at the brige, and all the issues are never solved but
they have the guts to suggest a price hike because they have the "right" to do
so. From the profits they are getting, it is worth a review on the toll price,
which should be less than 7.00.
The only justification for the additional 1.50 of increment would be that we
have to park it out on the bridge due to the jam. So, here's the breakdown of
the 8.50 increment suggestion:-
1. RM7.00 --> Bridge Toll Access
2. RM1.50 --> Potential Parking the car on the bridge during jam times (Parking
Fee)
Grand Total: RM8.50
I would give a big :P to the Penang Brigde Consessionair for suggesting a 8.50
toll.
Penang bridge has exceeded its capacity by 30,000 cars, the wait times to pay
toll, and the jam time at the brige, and all the issues are never solved but
they have the guts to suggest a price hike because they have the "right" to do
so. From the profits they are getting, it is worth a review on the toll price,
which should be less than 7.00.
The only justification for the additional 1.50 of increment would be that we
have to park it out on the bridge due to the jam. So, here's the breakdown of
the 8.50 increment suggestion:-
1. RM7.00 --> Bridge Toll Access
2. RM1.50 --> Potential Parking the car on the bridge during jam times (Parking
Fee)
Grand Total: RM8.50
# posted by : 3:49 am
: 3:49 am
I say we should vote Leslie to replace Samy Vellu! At least he's got the basic
principles of economics correct :)
Post a Comment
principles of economics correct :)
# posted by : 3:49 am
: 3:49 am