Sunday, February 04, 2007

Useless "Terror Free" Gas Station

This is a good example of what happens when you don't understand economics. You embarrass yourself by starting a business which is based on a completely meaningless idea.

A group calling itself Terror Free Oil Initiative will open gas stations that only sell oil that comes from other parts of the world than the Middle East. This is based on the observation that Iran and certain Arab oil exporters sponsor jihadist terror groups.

But had they understood economics they would have realized that it completely meaningless to try to only sell non-Mid Eastern oil. The reason for that is that oil is fungible, priced at global financial markets. If they increase demand for oil produced in North America or Norway or Russia, this will only mean that other oil consumers, in say Europe, Japan, China and India will buy less from there and more from the Middle East.

The only way to hurt Iran and Saudi Arabia at the gas station is by buying nothing at all and so reduce global demand for oil.


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