Friday, July 18, 2008

Worth A Thought...

This is something which I came across when I saw a forwarded mail from a colleague...

Will this control Inflation???

Nice Logic - It May Work !!

A man eats two eggs each morning for breakfast. When he goes to the Kirana store he pays Rs. 12 a dozen. Since a dozen eggs won't last a week he normally buys two dozens at a time. One day while buying eggs he notices that the price has risen to Rs. 16. The next time he buys groceries, eggs are Rs. 22 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. He 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 sell 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 Diwali the price of eggs shot up to Rs. 40 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 Rs. 60 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 buying 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 but the egg farmers liked the price they were getting for their eggs but, those chickens just kept on laying. Finally, the egg farmers lowered the price of their eggs. But only a few paisa.

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 those 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 Rs 200.00 worth of Petrol each time they pulled to the pump? The dealer's tanks would stay semi full all the time. The dealers wouldn't have room for the gas coming from the huge tanks. The tank farms wouldn't have room for the petrol 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 oil fiends.

Just Rs 200.00 each time you buy gas. Don't fill up the tank of your car. You may have to stop for gas twice a week, but the price should come down.

Think about it.

Also, don't buy anything else at the fuel station; don't give them any more of your hard earned money than what you spend on gas, until the prices come down..."

...just think of this concept for a while.

..................please pass this concept around....reaching out to the masses ...the world .....

This is my re-joinder :

Quite an Interesting concept...

I don't know about the Car owners and their habits regarding tank-filling, but I can say this for the Bike Owners who need Gasoline as much if not more, compared to the four-wheelers.

Almost every two-wheeler owner buys petrol worth Rs. 50/- or Rs.100/- at a time and then refills his/her tank as and when further need arises.
So, the Petrol Pump Owners have nothing to fear from this community, seeing as the number of two-wheelers on Pune roads far outnumber the 4-wheeler percentage.
And they are used to this pattern for years on now.

The analogy presented over here may look good at a first glance especially since it pertains to a localized issue with a distribution chain involving mainly local players.
Whereas in the case of Petrol, the same cannot be applied as is.

The Distribution Chain in case of Petrol involves players with huge (and by huge i mean really HUGE) cash reserves and the logistics involved is mind-boggling!
Add to that the essential nature of Petrol in case of our day-to-day lives, it leaves us with little choice but to shell out whatever price set out by the Petro-cos.
Indian citizens are still a bit sheltered compared to some other countries(though its not much of a difference these days!).

The OPEC countries are to blame over here (similar to the huge egg farms in below analogy). These Oil-Producing countries hold the monopoly over Crude oil manufacturing as well as its pricing mechanism.
Mostly people don't know this, but the petrol we use in our vehicles(in India that is) comes from a different grade of crude oil as compared to the one whose prices has been shooting astronomically in the last few years. This should not have caused a sudden jump in the petrol prices for us. But the government has decided to pass on to the citizens the cost it has been bearing for decades during the administered price mechanism.

Basically, we are shelling out some extra money to balance out the imbalance in the govt's order books and are indirectly subsidizing Industrial & Aviation Use Petrol.
What ever be the reasons behind this increase in price, one thing is clear - the public can only take measures that offer very little solace to their inflation-added woes!
Pooling by four wheelers and two wheelers has been touted as a way to save energy and money since we were kids! But nobody ever took it seriously.
Now it seems like a 'Too Little Too Late' situation!

Petrol Pumps which used to operate 24*7 until a few weeks ago, are closing early now-a-days due to paucity of fuel!
Gasoline is not a commodity that is being produced in bulk...Its purposely kept in short supply by the OPEC community.
The consumers (in this case, its the non-oil producing nations) have no option, but to keep buying the crude oil they need at artificial prices and simultaneously explore non-conservative sources to meet their energy needs

Ergo, the 'eggs situation' would never be applicable in case of gasoline!

What we need as of now, is not the means to save gas costs!
The time for that is long past...With a scarce commodity like oil, be it genuine or artificial, what we instead need today is a major breakthrough in the technology for usage of non-conservative fuels which will propel us into a world of almost nil dependency on crude oil, thus breaking free of the stranglehold of the Oil-Cartel on our world. A technology which will be not only technologically viable, but also economically feasible and sensible for the masses.

Until then, all we can do is wait...

1 comment:

Sumit Gangwani said...

Boss, I want to know what do you mean by saying that we don't use the same crude oil in India.....