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
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. I 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 sells 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, etc. 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.
grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a
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.
farms that he didn't have any room for eggs and 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
the price they were getting for their eggs but, them chickens just kept
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."
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 them chickens kept on laying.
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.
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 dealers 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 Middle East.
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 half 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 them any
more of your hard earned money than what you spend on gas, until the prices