James picks the weak link

Re our last item on a viral customer revolt against olil prioces, James Schloeffel send us this:

Hi Michael,

I've seen that email a few times over the past couple of years. It has failed to lower the price of petrol because it is based on flawed logic. Boycotting a major oil company and buying your petrol somewhere else simply shifts demand, it doesn't lower it. And if demand doesn't change, neither does the price.

To use an example, if everyone was to boycott Shell and buy their petrol from another Major or from independent outlets, the Shell stations would respond by dropping their price. But as soon as Shell prices dropped by just 1c below the average market price, bargain hunters would be attracted to Shell, buy petrol there and the prices would immediately go up again. All the other non-Shell stations, encouraged by the extra demand at their outlets would actually raise their prices (at least until Shell moved prices back to original levels). So while a few lucky bargain hunters may get a slightly lower price, the overall effect is nil.

The only real way consumers can affect the price of oil is to stop buying the stuff altogether.

Cheers,
James


James Schloeffel
Retail Marketing Manager
STA Travel