The Triangle

Issue date: 5/16/08 Section: News

A Facebook group, "How to get GAS back down to $1.30 per gallon," claims to have the solution to high gas prices by creating a "price war" between gas stations.

The directions in the group's description instruct members to avoid purchasing gas at either Exxon or Mobil stations. If Exxon and Mobil are not selling gas at their current prices, the group suggests that Exxon and Mobil stations will be forced to lower their prices, which will cause their competitors to do the same.

However, Paul Jensen, a Drexel economics professor, said the group's ideas are not economically sound.

"The basic thing that people have to realize is that gas prices are determined by supply and demand," Jensen said. "Since there are a number of firms selling gas in the U.S., if we stop buying from one that implies that we're going to buy more from another firm."

According to Jensen, if students stop buying gas from Exxon or Mobil, it fundamentally won't change supply and demand: it will just change who we buy from, which in the end won't affect the market price.

Jensen said consumers can have an impact on gas prices, but not by boycotting a particular gas station.

"If people really want to have an impact, then don't worry about who you buy from, just buy less," Jensen said. "If people cut down on how much gas they use, gas prices would fall. There's no magic solution here."

The Facebook group which has over 390,000 members, many of them college students.

According to the American Automobile Association's web site, in the past year the price of gas has increased 22 percent to a national average of $3.70. Commuter students are particularly affected by the rising gas prices.

"Right now gas is ridiculously high [priced]," Sean Luessenhop, a junior majoring in mechanical engineering, said.

Recent numbers released by AAA Mid-Atlantic show an average increase in the price of gas in the Philadelphia region by 10 cents per gallon.

Since the price of gas is determined in the market where supply meets demand, fundamental economics shows that a reduction in demand will cause a lower price.

"I ended up selling my car to get something that was more gas efficient, but even now it's not efficient enough," Luessenhop said.

He recently switched from a Ford Explorer SUV that he estimates went 12 or 13 miles per gallon to a Subaru Impreza, which gets about 25 miles per gallon.

"It's definitely making me take my paycheck a little further," Luessenhop added.

Rather than reduce consumption, many people look to oil companies for relief.

"It's unnecessary since companies are making more profit now than they've ever had," Vince Campanaro, a sophomore majoring in business administration, said.

Campanaro pointed to Exxon-Mobil Corporation's February 2008 posting of a $40.6 billion annual profit - the largest annual profit by a U.S. company in history.

"A company's goal is to make profit. Their goal shouldn't be lower prices. ... We haven't had companies making huge investments in new refineries, but as prices rise and they stay high, we will likely see companies make these investments," Jensen said.

Economically, the solution to lowering gas prices does not lie in the Facebook group, Jensen said.

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