Sunday, May 20, 2007

Egg Industry vs the Gas Industry

I've heard all sorts of arguements on how to get the gas prices down to a managbel level. This is about the best way that I have heard.

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 dozen 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".

This store buys 100 dozen eggs a day. I 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 sells 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 buy 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. They liked the price they were getting for their eggs but, them 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 them 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 dealers 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 Middle East.

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 half 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..


Anonymous said...

Good blog James! It cost me $50 to fill up the truck the other day. I was going on a long trip and didn't want to pay Interstate prices for fuel - $3.02 here - $3.21 on the highway. It all adds up. Ya just can't win any more ...milk's gone up 1$ a gallon.
You think the farmer's will see any of that?!
I think this time around, we've (our government)really got our asses into a sling.

Wild Bill said...

Its still the same, unless you use less, you are still keepin it at the level..

Lets say that the guy started eatin cereal 2 times a week and elimated 4 eggs from his demand, then the eggs would start backin up.. But if he still eats 2 eggs a day, he is not stoppin any of the demand, he just has to make more trips to the store which takes more gas !!

If the guy eats those eggs at a restaurant tho, if he eats cereal at home 2 times a week and saves the gas for the drive to the restaurant, then the gas will start backin up !!

My Daddy was the world's worst about drivin his big Abraham Lincoln Town Car 35 miles, one-way, to save 50 cents a pound on steaks, and gettin less quality doin it rather than buy em at the store 2 blocks away.. So, he saved about $5 bucks on the steaks, but burned about $5 bucks or more of gas..

But if he had just eat hamburgers instead, he would have saved maybe $25 bucks(not countin gas) !!

I used to have a neighbot that drove a big SUV.. She would come out in the mornins with a cup of steamin coffee and get in and crank it up and turn on the A/C and drink her cup of coffee and talk on her cell phone and do her make-up.. She would sit there with the motor runnin and her mouth runnin till she finished the coffee, then she would leave the motor runnin and go BACK IN and get another cup of coffee and come back out and leave for work.. Her husband just couldnt understand how she could charge "THAT MUCH &*(^^%$# GAS" on her credit card !! Evidently, she was sittin and talkin on her cell phone and runnin the motor and A/C at work on breaks and lunch too.. He couldnt understand how come the damn SUV got such bad MPG.. He had it checked at the dealership twice and they couldnt find anythang wrong..

As Bill Engval would say "here's your sign" !!

And did you hear that gas consumption is goin down ?? Yep, and guess what else ?? That means that there are less gallons of gas bein sold, and that means that the Gubmint aint gettin as much tax revenue from us, and that means that now they wanna UP THE GAS TAX !!

(bend over, here it comes again)

Cheryl said...

$3.02 a gallon? Damn. I'm paying $3.64 here in California! Believe you me, I've curtailed the pleasure driving. Think the prices will come down here? Oh, hell no. Between the government and the damn environmental do-gooders here in my state, they'll have us walking in their friggin Birkenstocks before long.

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