How to reduce petrol and gas price.. Egg logic

[David Yong]

Came across this article and thought of sharing it with you guys:A man eats two eggs each morning for breakfast. When he goes to the grocery store he pays 60 cents 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 72 cents. The next time he buys groceries, eggs are 76 cents 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 Thanksgiving the price of eggs shot up to $1.00 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 happen.This pattern continues until the price of eggs is 2.00 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 cents. 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 $10.00 worth of gas 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 tank farms. The tank farms wouldn't have room for the gas 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 $10.00 each time you buy gas. Don't fill it up. You may have to stop for gas twice a week but, the price should come down. Think about it.As an added note...When I buy $10.00 worth of gas that leaves my tank a little under quarter full. The way prices are jumping around, you can buy gas for $2.65 a gallon and then the next morning it can be $2.15. If you have your tank full of $2.65 gas you don't have room for the $2.15 gas.You might not understand the economics of only buying two eggs at a time but, you can't buy cheaper gas if your tank is full of the high priced stuff. Also, don't buy anything else at the gas station; don't give the many more of your hard earned money than what you spend on gas, until the prices comedown.' Just think of this concept for a while. Hmm.... interesting yeah ?

 

[jarance]

Brilliant idea..

Supply vs Demand vs Supply

 

[redbaron]

Good one david. Only problem RM10 fuel not enough la bro.

 

[syahruln]

Should say buy 10L a day instead

 

[Hellraiser]

nice supply vs demand story. lets make it more interesting.

don't buy eggs. don't eat anything at all cos everything has gone up as well.

don't use petrol/diesel. use drive. don't work. go on strike due to the unfair price hike like what the truckers unions in europe are doing. bring malaysia's economy to a standstill !

the gomen will surely listen to us by then...

(this is not a gomen bashing response)

 

[David Yong]

nice supply vs demand story. lets make it more interesting.

don't buy eggs. don't eat anything at all cos everything has gone up as well.

don't use petrol/diesel. use drive. don't work. go on strike due to the unfair price hike like what the truckers unions in europe are doing. bring malaysia's economy to a standstill !

the gomen will surely listen to us by then...

(this is not a gomen bashing response)

Well, it may not be the best strategy as they have tried it as mentioned in it but is not working: "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."

So how can we do it when we need to survive. Don't eat, don't drive, go on strike, etc will end of the day make ourselves more suffer. But we can still survive by buying lesser, using lesser, etc.

Just my opinion :wink:

 

[chaiks]

Won't work here in our case. All these are controlled items where price are regulated by the govt.

 

[Hellraiser]

hi david, my example can be very extreme which in my opinion, the best example...sometimes.

but coming back to what you've just shared.ie.to buy lesser. i really don't think this will necessarily equal to lower prices due to lower demand

i'm of the opinion that this is not possible cos there are certain basic necessities we cannot do without, example, rice, cooking oil, flour, etc. the price of rice has gone up and are we eating less rice? or do we use lesser cooking oil? now everything has gone up, so what do we do?

previously, the price of sugar would go up $0.10 per kilo but the mamak restaurants would immediately raise the prices of teh tarik $0.10 per glass. I really don't remember using 1 kilo of sugar in my cuppa but they continue to raise prices as they like. similar to the price of flour and the roti canai's.

another example, every time the government announces additional monies to government servants, the first thing to go up are food prices at the local markets and it has never gone down....

we can cut cinema trips from 4 to 2 per month and even buy the pirated DVD's but for certain basic needs this is not possible. to cut down on accessories and entertainment, this is possible.

end of the day, our consumer rights are very weak and we get screwed left, right and centre by those who are supposed to protect them. just my opinion, bro.

 

[gracetcp]

That's an interesting article David. Yes, we should just buy what we need, don't give into extras or luxuries. When demand drops, prices will soften.

I feel like eating eggs now......

 

[astroboy]

I had enough eggs during my school days exams..

Nothing changed if that fella continue to eat 2 eggs a day because he still needs 14 eggs a week. Thus weekly demand unchanged. The person who thought of the story need to re-check his/her facts.

Yes, he need to cut down egg consumption... park our fuel guzzler at home and take a smaller car out... like what I'm doing now.. I am on 1.3L during weekdays..

 

[anakin]

... park our fuel guzzler at home and take a smaller car out... like what I'm doing now.. I am on 1.3L during weekdays..

Me too...now people said I'm insane going to KL from Bentong riding a Nouvo instead of an E34 525....:wink:

 

[udm68]

Down graded 2 a satria now 4 everyday use. save appx RM700 @ mth on fuel.

 

[zank]

It is natural that everyone is concerned about the petrol price, everyone is trying to reduce, slow down, and that is good, the highway toll collection already dropping, and imagine everyone in the whole word is doing what we all try to do, yes, the demand will drop, the biggest consumption country like China already increased the price by 20 % last 2 month, that will also likely to slow down the demand, so hopefully it will all pile up to the impact of supply and demand, but unfortunately the problem of today fuel price increase is not exactly caused by the supply/demand equation, even with worldwide recession coming in big time, the price continue to rise, it is more about geopolitical issues plus commodity speculation, with so much uncertainty on US/Israel attacking Iran (4th largest oil producing country), and Iran/Venezuela (Anti-US) alignment, Nigeria (Another major producer) internal conflict, it is hard to see how the price will come down anytime soon. Until then what we can do it continue with all the initiatives of "saving" in our way of life..

 

[ALBundy]

Wednesday July 16, 2008

People need to know where Petronas’ contribution to Govt has gone

News analysis by Jagdev Singh Sidhu


IT was not a surprise when Petroliam Nasional Bhd (Petronas) announced a record profit for its financial year ended March 31 (FY08). Also expected was the bumper dividend that followed to the Government.
But the eye-opener was just how much the Government had received from Petronas in dividends over the past few years and a worry now whether the Government has developed an addiction to petrodollars.
Petronas has done such a fine job managing the nation’s hydrocarbon resources that it is today ranked eighth most profitable company in the Fortune Global 500 list. It is the most profitable company in Asia, according to the publication.
The company has also carefully nurtured its petrochemical manufacturing base and, today, its downstream manufacturing activity accounts for 30% of the country’s manufacturing sector.

In making so much money, Petronas’ contribution to the Government’s revenue from FY04 to FY07 was RM140bil. Including the latest financial year's payment of RM62.8bil, the total would be 202bil. That was slightly more than half of the total RM403bil it had paid the Government since its inception in 1974.
From the holding company – the company that started in 1974 – the payment to the Government for FY08 was 91% of the company’s entire profit.

And based on Petronas’ own calculations, that total payment of RM403bil represents more than 50% of the Government’s development expenditure spanning the Third Malaysia Plan to the Ninth Malaysia Plan.
Based on the latest payment of RM62.8bil , Petronas said its contribution to the Government’s revenue was 44%. If the taxes of all the other oil and gas companies were added, then the oil and gas sector would account for slightly more than half of total government revenue.

“It is dangerously high to be dependent on one entity,” said Petronas president and CEO Tan Sri Mohd Hassan Marican when he met with the media yesterday after announcing the group’s financial results.
“What if the prices drop?” he asked. “To sustain payments will be a real challenge.”
Thankfully, Hassan said Petronas only needed 30% to 35% of its annual profit for reinvestment compared with 52% for oil majors and 77% for other national oil companies.
That was in part to the mature acreages of the country’s oil fields and also the prudent steps Petronas has taken on building the country’s oil and gas infrastructure.
The dependence on petrodollars is a crucial concern as the Government over the past few years, even with the literal windfall of higher petroleum money, has been chalking up budget deficit after deficit and is estimated to post another amounting to 3.1% of gross domestic product for 2008.

The danger is that if the petrodollars were to dry up, or should the price of crude oil drop, that will have serious repercussions on the economy.
Citigroup vice-president for Asia Pacific economic and market analysis Kit Wei Zheng had earlier this month estimated, based on historical numbers, that if petrodollars were to be stripped from the Government’s revenue the deficit would be 10.8%.
Part of the deficit’s persistence can be traced to the higher subsidy bill but there are others who speculate if the Government is overspending.
They also wonder: How wisely has the windfall over the past few years been actually spent?

 

[astroboy]

I suspect the claim on Petronas oil to dry up soon is questionable.. but they say we listen lor...

If they have more oil than Iraq u think they will announce meh? I hope they don't.. just to protect the Malaysia soil from being the 2nd Iraq..

 

[ALBundy]

There is more exploration going on, but mainly in deeper waters off the East Coast and also East Malaysia.

And they are rejuvenating the older platforms left idle sometime ago, as with current prices have made it feasible to be operated again.

Whatever it is, it is worrying for the country to be so heavily dependent on oil revenues!!! :stupid:

 

[David Yong]

Here is another one that I received from email on 'subsidy' analogy. How true....

The story about 'subsidy'…

A man called Maha owns a farm which can produce 10 apples every day.
He has 5 workers to operate the farm.
Each of them eats 1 apple daily and it is enough to keep them operating the farm normally.
The remaining 4 apples, the landlord sells them at RM10 each and he earns RM40.
He uses the RM25 to improve the farm operation and facilities.
He gives RM2.00 to each of his workers and he keeps the remaining RM5.00 as profit.
Day by day, the farm is well developed and all of the 5 workers are happy with the money they can save.

When Maha passed away and there is a new landlord, Abdul comes to continue the farm operation.
He says to the workers:' We need to improve the farm quality and redefin e our way of thinking.
>From now on all of you only need to pay RM1.00 for each apple you eat.
It is very cheap as the price is RM10 each outside the farm.'
The workers have no choice but to pay RM1.00 for the apple they eat daily.
Their earning decrease from RM2.00 to RM1.00 per person.
As usual, Abdul sells the 4 apples and he gets RM40.
He uses RM25 for farm improvement and pays RM10 to his 5 workers.
He gets RM5.00 as profit. On top of that, he gets another RM5.00 from the apples that he sells to his workers.
In total, he gets RM10 as profit every day.

Soon, the apple price increases to RM20 each.
The new landlord gets a higher profit as he gets RM80 for the 4 apples he sells daily.
Then, he decides to give the farming improvement contract to one of his close friend, Samy.
Samy says:'Apple cost naik, improvement cost also misti naik.'
So, the farm improvement cost increases from RM25 to RM50.
In actual, the improvement onl y cost RM30.
The remaining RM20, Abdul and Samy share evenly among themselves.

Let's calculate how much Abdul gets daily:

RM10 (from farm improvement cost)
RM20 (Net profit by selling 4 apples: [Gross profit, RM80] - [Improvement cost, RM50] - [Wages RM10] = RM20)
RM5 (from selling apples to his workers)

In total, Abdul gets RM35 daily compare to RM10 initially when he takes over the farm from Maha.
His profit increases RM25 and the workers are still getting RM1.00 daily per person.
The greedy Abdul does not want to stop there.
One day, he says to his fellow workers:' You see ah, the current market price for one apple is RM20 and you are only paying RM1.
See how lucky you are! I have to SUBSIDY RM19.00 for each of the apple you buy and total I need to SUBSIDY RM95.00.
This will greatly burden the farm and we might get bankrupt if we continue like this.
In order to avoid bankruptcy, I need to increase the apple price that you bu y from RM1.00 to RM1.50 and I will bear the remaining RM18.50 per apple as my subsidy to you all. '
So, greedy Abdul adds RM2.50 to his current profit and the number becomes RM37.50.

After you have read the story, I am sure you have already understood the meaning of 'SUBSIDY' given by the government.

The RM95 subsidy never existed in the first place and so was the RM52 billion fuel subsidy generously 'given' by the government

Cutting fuel subsidy is actually just a reason to steal money from your pocket.