If U.S. drivers cut back by 30 Billion miles doesn't that mean about $5.25 Billion in lost revenues.?

Question

If you take 30,000,000,000 miles and divide by an average of 20 miles per gallon which comes to be 1,500,000,000 gallons. With gas at about $3.50/gal wouldn't that come to be $5,250,000,000?

Answer 1

Or you can think of it like this...they've saved 30 billion miles worth of gas that they can charge more at a later time when prices increase.

Should we buy 30 billion miles worth of gas at price X, or should we wait a year and then buy that 30 billion miles worth of gas at price X+Y, where Y is the price increase depending on how long you wait.

Sure, their economic report will be lower for the month, but their profits will increase in the long run.

$3.50/gallon is so cheap...you should buy it up now before your prices reach mine.

Now if we could only wean ourselves away from oil...I miss standing outside on a sunny day and not getting burned...a time when I could breathe in and not cough out.

Answer 2

The greater concern is how oil producers and refiners will maintain profit targets while drivers are reducing demand.  

Having crossed the golden threshold of $4 per gallon market forces can be manipulated to guarantee profit.  Big picture is that the profit targets are a greater priority than the personal wealth and well being of Mainstream America.

Answer 3

Yes , less sales = less revenue . The large oil companies earn 8 % of the gross .The local gas station owners would also have less revenue and of course the biggest losses would occur to the exporters such as Venezuela and Saudi Arabia .

Answer 4

The guy above me (who is also a David B, like myself), is on the right track. When market analysts predict a reduction in consumption and/or its continuation, firms will react by reducing the QUANTITY they supply.

The reason why they want to cut back is so they can reserve for future sale at a higher price. Business always prefer to sell goods at higher prices, just as you would always want to sell your physical or mental labor at a higher wage.

If they determine that people will be less responsive to high prices in the future, then they are better off waiting to sell it then at the higher, more profitable price. You should take a course on microeconomics. It will explain alot on the decisions that we individuals make and those of the businesses we work for and buy goods and services from.

Answer 5

Approximately--you got the math right.

However, the question is "lost to whom?  The oil companies would lose that revenue.  However, the money consumers didn't spend on gas would be spent on other things--increasing the revenues of other businesses.

And--probably--would do a lot more good.  On average, smaller businesses (and practically all firms are smaller than the oil companies) are more likely to create new jobs if their revenues increase--recirculating that $5.25 billion and increasing it's positive impact on the economy.

That doesn't happen with the oil companies. Despite the increases in revenues, they haven't created a single new job in the US in close to 20 years--and aren't likely to. In fact, their work force (collectively) hs shrunk.