Boycott Watch  
June 7, 2010
BP Boycotts Inherently Fail
Summary: Americans are upset, but boycotts don't work in this case.
    The off-shore oil platform disaster has resulted in several boycott calls against BP by people who are upset at both the environmental disaster and the how long it has taken to cap the well. There is only one problem with the boycotts - they cannot possibly work because of the way the oil market works. Not matter how many people may boycott BP gas stations; BP will simply not be affected. Let's examine the US domestic oil market to understand why.
    There are two main segments to the gas and oil market: oil supply and retail. The supply lines to the U.S. are more or less fixed. We get our oil from domestic production and imports, and the levels of each do not change much. Domestic production does, however, negate the need for imports, or at least the percentage of consumed oil which needs to be imported. U.S. imports oil mainly come from Venezuela via the Gulf of Mexico, and about 10% of our imports come from the Persian Gulf, entering the U.S. via the east coast. We do not get much oil from the Persian Gulf because it takes 21 days for those tankers to make the round trip and only 7 days from Venezuela. Oil is still sold as a single world commodity and that is why Persian Gulf oil mainly goes to Europe since it is closer to the source.

    While North Sea oil supplies the North Eastern U.S, the West Coast gets its oil from Alaska, and part of that oil is shipped to Japan. So, while the U.S. imports oil, we also export it which partially offsets the import percentage of our national consumption. We export oil because it is cheaper and easier than moving crude oil across the nation in pipelines.

    The overall quantity of domestic and imported oil remains relatively stable. When retail demand shifts, the excess gasoline does not sit around, not is oil stuck on ships or in wells. Instead, if one company needs oil and one has extra, they sell it to each other. This stabilizes the overall demand volume regardless of which company imports what. Refineries pump the finished gas product into pipelines to terminals nationally, and no matter which company refined it, the gas is pumped into storage silos for local distribution. Actual branding occurs in the final formulation as tanker trucks are being loaded to deliver gasoline to the local gas stations. In other words, the gas you buy at any gas station in a city comes in the same underground pipes to your city. Other than detergent additives, it is all the same.

    On the retail side, gas stations are franchises owned by local operators, not the oil companies. So, no matter what you buy, it is the same gasoline. Oil is fungible and no matter which refinery separates the oil components, you get the same final product. A boycott of a particular gas brand, therefore, will only hurt the local franchise owner and the people working behind the counter, not the brand name you see on the sign posts. If a local operator thinks a boycott will result in less work for his clerks, you will see less people working at your favorite store.

    Oil companies, therefore, do not really care about brand boycotts. They still sell the same overall amount of their oil. Meanwhile, gasoline retailers make very little per gallon of gas sold, which is why they are more interested in selling you colas and candy bars. In fact, many gas station operators see the gas as just a way to get people into their convenient stores, which explains why so many small gas stations have been torn down over the years, and the ones which remain or are built all have strong retail food operations. A boycott of a gas brand will hurt the people who work at the local store and nobody else. It is also why you do not see many service stations selling gasoline as gas is an insufficient draw to the automobile service business. Gasoline-only stores are for the most part gone.

    That is why the boycott of BP gasoline is a failure. The oil companies franchised out the retail side because they did not want to be in the convenient store business. This boycott, therefore, cannot possibly hurt BP. This also explains why BP has not specifically addressed the gas boycott. They are concerned about their overall business and their retail name, but they also know their overall sales will remain steady even with a boycott. In the mean time, the retailers are more worried about selling snacks and coffee and snacks, as that is where their profit is. Even people who are not buying the gas are buying snacks from their favorite stores, so the retail operations are still profitable. The BP gas boycott is therefore a total failure.

    None the less, Boycott Watch spoke to Mr. Robert Wine, a BP spokesman and asked for their response to the boycott calls. Mr. Wine stated "We can understand people's frustration with the pace of progress in the Gulf of Mexico. Motorists are of course free to choose where they purchase their fuel, but we would hope that they recognize the commitment we have made to the biggest ever response effort, and that we will remain until the task is completed." In his statement, Mr. Wine proves our point. He is worried about the BP name, yet is not overly concerned with the retail side since the convenient store operations will not be affected.

    Even still, gasoline is only part of BP's petroleum revenue. Among other products, the oil refining process produces are Liquid petroleum gas, diesel fuel, kerosene, lubricating oils and asphalt. Many of these products are used in various manufacturing processes or sold to other companies, thus are never seen by consumers under the BP name, once again because oil is fungible. Gasoline boycotts are in general useless; unless that is you move to into the woods, but then again that tent it made from petroleum products too.

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