Tag: Oil

MY HEART GOES OUT TO YOU, HUMMER OWNERS

Posted on | by Ed | 15 Comments on MY HEART GOES OUT TO YOU, HUMMER OWNERS

The thinly-veneered "lifestyle" journalism that masquerades as news these days has yielded another gem, courtesy the New York Times (At $100 for Tank of Gas, Some Choke on ‘Fill It’") The purpose of this slipshod amalgam of random quotes is unclear. Are we supposed to feel sorry for these dipshits or simply marvel at the fact that some people buy GMC Suburbans without realizing that they will have to put a lot of gas in them? To wit:

Bryan Carisone, a heating and air-conditioning contractor in Raritan, N.J., “absolutely loves” his new GMC Denali XL, an extra-large sport utility vehicle with televisions built into the leather seats. But in June, one week after he bought it, he pulled into a station on a near-empty tank and watched the total climb higher and higher — to $109. “It just about killed me,” Mr. Carisone said.

Apparently the size of the GMC Denali XL's fuel tank and the EPA mileage estimates are both classified information, as obtainable to Mr. Bryan Carisone as the launch codes for Soviet ICBMs. It is unfortunate that he was forced to buy this grotesque land yacht without that information.

It gets better.

For people who love their big vehicles, the pain is acute.

But the Avalanche also has a 31-gallon tank, which would cost $127 to fill at Saturday’s national average price. Even the truck’s most dedicated fans find that galling. David H. Obelcz, who founded the club in 2002 and is still a member of the board, sold his Avalanche because he could not afford gasoline for it.

At what point in one's journalistic career do the trials of being a brainless yuppie qualify as "pain" let alone "acute pain?" Hold on while I cry my fucking eyes out for the Fan Club devoted to the Chevy Avalanche, a vehicle whose turn signals are labeled "port" and "starboard." I hope Mr. Obelcz had the version with the 8.1L V8, which is by far the largest gasoline V8 in a passenger vehicle.

Families that were accustomed to the convenience of sport utility vehicles are having to cut back as well. Colleen Hammond of Chagrin Falls, Ohio, loves packing her three kids and all their soccer gear into her 2000 GMC Yukon XL. But she hates paying $160 to fill the 38.5-gallon tank. Last month, she parked the Yukon in her driveway and borrowed her friend’s Toyota Land Cruiser.

Again with the dramatic language. People who have to decide between food and medicine "cut back." People pissing and moaning about how much their SUV costs to own do not. And for the last time, no one owns an SUV because of "safety" or "convenience." Minivans are far safer, hold more people and cargo, and are more fuel-efficient. People buy SUVs because they think it looks cooler than driving a minivan. Period.

Steve Burtch bought a Dodge Ram truck last year, when gas cost $3.75, because he thought gas prices had peaked and would start coming down.

Steve Burtch, I have taken shits smarter than you.

“It’s a huge inconvenience,” said Dr. Walter Bahr, a chiropractor in Cape Coral, Fla., who drives a Dodge Ram 2500 pickup and pays $130 per tank.

WHAT IN THE HOLY HELL DOES A CHIRPRACTOR NEED A 3/4-TON PICKUP FOR? This is not a rhetorical question. I will give anyone who can answer it one million dollars. Ram 2500 pickups are made for construction work and building contractors – they're work trucks with 10,000-pound towing capacity. Apparently Dr. Bahr needs it to haul his tiny penis around rugged Cape Coral, Florida.

And here's the best part:

By late spring, owners of pickups and sport utility vehicles with 30-gallon tanks, like the Cadillac Escalade ESV and Chevrolet Suburban, started paying $100 or more to fill a near-empty tank. As gas prices continue to rise — the national average stood at about $4.10 a gallon Saturday — membership in the triple-digit club is growing. Now, even not-so-gargantuan Toyota Land Cruisers and GMC Yukons can cost $100 to fill up.

Way to pander to the yuppie readers, New York Times, by noting that high gas prices are also affecting the (implicitly "normal") vehicles that a quarter of your Sunday demographic drive.

The Toyota Land Cruiser is over sixteen feet long and six feet wide. It weighs 5,690 pounds empty. It has a 5.7L 381-hp V8 (larger and more powerful than a Gen-IV Corvette from 1996). It gets 13 mpg in traffic.

The GMC Yukon has a 26-gallon fuel tank at 14 mpg city. It too has a large V8 (5.3L) and weighs over 5,300 pounds.

According to the Times, these are reasonable "not-so-gargantuan" vehicles which should not be expected to require $100 fill-ups. It is unconscionable to think that these entirely justifiable, average vehicles should be so burdening the wallets of the Normal Americans who drive them.

From now on I intend to season all of my food with the sweet, sweet tears of SUV owners.

PRICE ELASTICITY OF DEMAND FOR CRACK

Posted on | by Ed | 14 Comments on PRICE ELASTICITY OF DEMAND FOR CRACK

When economists talk about elasticity and demand they are addressing a very fundamental question in a free-market system: how do changes in price affect demand? Finding the ideal point is an important component of profitability and growth for retailers and manufacturers. For example, Ford sells 100,000 pickup trucks at $25,000 (total revenue: $2.5 billion). If they increase the price to $28,000 and sell 5% fewer trucks that's a good move (total revenue: $2.66 billion) even though they sell only 95,000.** However, if the price increase reduced demand by 10 or 15 percent it would not be profitable.

This is not a revelation. You probably already know this, even if you are unaware of the fancy name. So here is a question I would like you to ponder: from the perspective of a crackhead, what is the price elasticity of demand for crack?

This is not a question that fits cleanly into the model. In a standard economic example (trucks, tennis shoes, tuition, fast food) there are a number of important assumptions being made. First, the items for sale are "wants." We can walk away. We don't really need the truck or the Big Mac. There is a price at which we will say "Screw this." Second, there is choice. If the Ford gets too pricey but we remain interested in a new truck, try the Chevy. Honda. Dodge. Whatever. In other words, the manufacturer and retailer must be wary of the strategies of other competitors in the market when developing their pricing strategy.

If the price of a Big Mac goes from $2.50 to $7.00, it is very likely that demand would fall precipitously. Consumers would choose Whoppers as an alternative or simply avoid eating out. But what happens if the price of crack goes from $25 to $50 per unit? Or $25 to $100? This is irrelevant to the demand among crackheads. If crack is $25, $50, $100, or $250, crackheads need, want, and will buy crack. They will either cut other expenses from their budget or steal more things to sell for crack. "Rational economic behavior" is not a phrase that springs to mind in the decision to purchase crack.

Why? Because crackheads are addicted to crack. Duh. The crackhead can't walk away like a car shopper or make a substitution. He or she needs crack. Not weed, not booze. Crack. So until crack gets so expensive that it is literally unaffordable (i.e., $10,000 per gram) the crackhead's demand is going to show remarkably little sensitivity to price. Sure, he or she may buy a little less, sacrificing something in the margins. But overall that person is still going to be buying crack, whether it's expensive or cheap.

Ending extended metaphor…..now.

The media and public have been harping on the same story for the last two years – what is the "breaking point" with gasoline prices? At what point will Americans stop using so much gas or snap and demand some sort of political/military/whatever resolution to the problem? First it was $3/gallon. My, when those prices hit $3.00 Americans would seriously change their driving habits. Then it was $4.00. We tolerated $3.00 but there's no way we'll maintain our lifestyles and relative calm at $4.00. Now it's $6.00. If it hits $6.00, everything's gonna change.

No, it isn't. We are completely, hopelessly addicted to oil. People who already use very little (preferring public transit, walking, or biking) will cut even deeper while most other consumers will dabble a little bit in the margins (trying to drive a little less and usually not succeeding). If you live in the suburbs, 30 traffic-clogged and train-free miles from your job, you're driving. Period. $6/gallon gas isn't going to get you to quit your job or sell your house. You're going to pay $6/gallon and compensate with sacrifices in other areas of your budget (or, in classic American style, by simply charging what you can't afford).

Everything about our way of life, including every step of the food chain, is hopelessly dependent on oil. There simply is no "magic price" that will make everything different and usher in sweeping changes. Crackheads pay whatever price is quoted for crack because they're physically addicted to it and have no alternative except quitting, which is as inconceivable as it is difficult. Americans, for all the bitching and resolutions to drive less and can't-someone-do-something-about-this water cooler talk, are ultimately going to pay whatever price is demanded for gasoline unless it simply becomes unaffordable under any reasonable circumstances (i.e., $25/gallon). So the next time you hear someone hypothesizing or making vows regarding the price of gas, remind them that our national addiction is going to preclude any response more substantive than bitching.

**This is logically assuming that it costs less than $0.16 billion, the difference in revenue, to build 5,000 extra trucks. Since most manufacturing costs are fixed (overhead, salaries/benefits, equipment) I feel safe assuming that it would not cost $160 million to build an additional 5,000 trucks.