Do Consumers Have the Power to Cause Gas Prices to Drop?

By consent of the Internet community, this May 15th has been declared "National GasOut Day." In the last few days, if you have an email address, you have probably received the memo. One version reads like this:

NO GAS...On May 15th 2007
Don't pump gas on may 15th
In April 1997, there was a "gas out" conducted nationwide in protest of gas prices. Gasoline prices dropped 30 cents a gallon overnight. On May 15th 2007, all Internet users are to not go to a gas station in protest of high gas prices. Gas is now over $3.00 a gallon in most places.

There are 73,000,000+ American members currently on the Internet network, and the average car takes about 30 to 50 dollars to fill up. If all users did not go to the pump on the 15th, it would take $2,292,000,000.00 (that's almost 3 BILLION) out of the oil company's pockets for just one day, so please do not go to the gas station on May 15th and lets try to put a dent in the Middle Eastern oil industry for at least one day. If you agree (which I can't see why you wouldn't) resend this to your entire contact list. With it saying, ''Don't pump gas on May 15th"

Boycotts are a proven effective tool for consumers to vote with their dollars. The American people have proven the ability in past years to use the big stick that they possess to show the producers that the consumer still is king. Such an action would immediately send shock waves to the commodity markets, where speculators have been bidding up the price of gasoline due to the threat of war, natural disaster, or currency fluctuations.

These speculators, actually sell short, or sell product that they do not own at a high price, in hopes of providing the product to the purchaser later with the same commodity that they have purchased at a low price. I promise to sell you a Lexus for 40,000 dollars, and you agree, I then go an buy that Lexus for 35,000 dollars and fulfill the contract with you, you get that car. I have made an easy 5,000 dollars. But what if I could not buy the Lexus for less? What if, in order to fulfill the contract, I must by the Lexus for 50,000 dollars. Then, I have lost 5,000 dollars. In the same way, when sellers are counting on the price of gasoline to continue to rise, it becomes a self fulfilling prophecy. Until that day when the price falls because of an unexpected drop in demand. There is too much gasoline laying around and the producers have to move it by reducing the price. The speculators who have counted on being able to purchase gasoline that they do not presently own, to fulfill a contract coming due will be caught in a "long Squeeze," the opposite of the "short squeeze." The purchaser who had agreed to buy from you at a higher price replaces the contract with the cheaper underlying product, instead of giving you the money.

In the Lexus example, you have agreed to buy the Lexus on May 15 for 40,000 dollars. But you will not honor the contract if you can buy the same Lexus on that day for 35,000 dollars.

This type of wild speculation got tripped up when the Internet Bubble burst in March 2000. This same process is at work in stabilizing real estate prices now. This is the power of the market to stabilize prices, by catching speculators in the game.