Do gas boycotts really work?

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May 1 2006 6:18 PM

Power to the Pumpers

Do gas boycotts really work?

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The governing board of Bee County, Texas, has called for a boycott of ExxonMobil gas stations starting Monday. According to a poll conducted by the Beeville Bee-Picayune, 72 percent of county residents will participate; they hope to force pump prices down to $1.30 a gallon. Can a consumer boycott really affect gas prices?

Not in America. The e-mail that appears to have inspired the Bee County board claims that a widespread consumer boycott would push Exxon to lower its gas prices. This would in turn break the price-fixing monopoly and yield price decreases across the board. Economists point out that this isn't likely to happen for several reasons.

Daniel Engber Daniel Engber

Daniel Engber is a columnist for Slate

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First of all, you might expect prices to go up if everyone began to shun Exxon filling stations. That's because the remaining companies would enjoy a greater demand for their product. (They'd split Exxon's share of the consumer gas market.) Exxon could respond by temporarily lowering its prices a small amount, which would almost certainly break the boycott.

Even if the people held true in their allegiance to Captain Boycott, they still wouldn't achieve their goals. As the other oil companies struggled to meet the rising demand, they'd be forced to buy wholesale gasoline from their competitors. (Their refineries are already operating at maximum capacity, so there's no way they'd be able to meet that demand by themselves.) Guess which competitor would step in to sell them that gasoline? Exxon.

A large-scale boycott of a single oil company wouldn't do much to affect gas prices or help the average motorist. But Exxon might still feel the pinch, especially if its brand and reputation took a hit. A well-orchestrated boycott can generate enough bad publicity to turn off investors and sink share prices.

Royal/Dutch Shell has gotten tagged by international gasoline boycotts several times. In 1995, Greenpeace helped organize a widespread protest against Shell after the company threatened to sink the defunct Brent Spar oil rig into the Atlantic Ocean. Enough German motorists turned away that local sales fell 30 percent. After four months of pressure (from Greenpeace, the boycotters, and European governments), Shell changed its mind about the oil rig.

Last March, the president of Argentina urged a national boycott of Shell and Exxon after both companies raised gas prices by several percent. Militant protesters called piqueteros took up the call and shut down more than 30 gas stations. Argentines stayed away from the others, and sales dropped precipitously. The gas companies lowered their prices a few weeks later. (President Kirchner's recent effort to organize a beef boycott has proved far less successful.)

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Explainer thanks Tim Haab of Ohio State University.*

*Correction, May 2, 2006: In the original version of this piece, Tim Haab's name was misspelled.