Any insight from the business folks at FBN would be truly valued.

thanks,
RC Lightning

It is an embarrassment but Congress has higher priorities right now like apologizing for slavery.

Despite the ineptitude of Congress, I believe there are ways that the private sector could adapt to the current challenges and make improvements that would benefit a struggling industry and consumers. It’s Time for Oil & Automotives to work together.

Oil companies are spending large amounts of money advertising on television, radio and billboards. They are trying to win brand loyalty by extolling the virtues of their gasoline’s cleansing properties! It’s GASOLINE, give me a freaking break! At $4.00 per gal, people are looking for the cheapest price down to the penny.

SOLUTION: Big Oil, eliminate that small fortune in advertising that is wasted. We know you are there because we see you on every street corner. We don’t care about your octane at this juncture.

Consumers know how much gas they consume every week as they fill their tanks. It’s a simple equation. They can calculate that average and extrapolate their annual average gas consumption per family or household.

You want them to loyally buy gas from you? Issue annual contracts in which consumers commit to buy a specific monthly or annual amount of gas from say Exxon, Shell or Chevron stations or stations supplied by your companies. This would be like a cellular phone service contract.

How would you motivate consumers to commit to such a contract? That begs the age old question that every consumer needs answered – “WHAT”S IN IT FOR ME?”

What is in it for the consumer with wireless phone contracts? Usually it involves a competitive rate and a very low price on a high quality phone. Sometimes they give the phone for free if the contract is long enough or large enough.

So instead of “Big Oil” spending a fortune on useless commercials and billboards, they can procure multi-year contracts with consumers by partnering up with GM. GM would sell the gasoline contracts to car buyers with the motivator being a DEEPLY discounted price on the car. This would be especially effective with the gas guzzling inventory.

GM would be paid by the oil company for each contract. This would be a win-win. The consumer would not be committing to specific price – but rather a specific MARGIN. It would guarantee the oil producer/refiner a specific margin like an adjustable loan does to a lender, for example Prime + (whatever %) over cost. It also guarantees the producer/refiner a loyal customer for a period of a year or more. (The longer the contract, the lower the car price)

It also guarantees the consumer that they won’t be stuck paying a higher gas price than everyone else if oil were to fall dramatically during the contract. Their price would fall as well. They would just be committed to buy a particular brand at a specified percentage over cost.

The technology is here. They issue a credit card that keeps track of their spending as they swipe it at the pumps as most people already do. The consumer doesn’t need to go around looking for the station with the lowest price because if one day they happen to be in an area where prices are higher, they will pay their contract price, not the price on the station’s marquis. The stations will benefit from increased traffic and sell more products at their convenience stores, which is how gas retailers make their profits anyway.

This is a strategic alliance that would make sense for oil companies and automotive companies because their products are quite correlated.

It could work even more efficiently if Big Oil were to acquire the troubled automotives. As one company they would have more flexibility with prices.

For more on that subject read my column “A Big Oil Bailout of the Big 3”
at http://tableofwisdom.com/Big_Oil_Bailout_-_Big_3.html

This is basic economic fact that is continually misreported.