Supply Side Economics in Action (The Quest for LPG in the City)
Tuesday
Jan 13, 2009
The wife and I are fond of watching the early evening news, and one of the issues these days is the apparent lack of supply of LPG (or propane to some of you folks), which is used for cooking and nowadays also for fuelling LPG-equipped cars.
According to news sources, we do have enough supply, but it’s in the distribution chains that the supply is being limited. And so there is an apparent shortage.
We got worried since it was more than two months since we last bought LPG, and we were due to buy a new (refilled) tank soon. So it happened that this morning, we did run out, and when it was noontime, I loaded the empty Gasul tank into the car’s trunk, and we planned to visit nearby Gasul resellers and even Petron service stations (Gasul is a Petron brand).
Llamas Gas Kalayaan Ave. was closed. And so was Llamas Gas along Kamias Ave. (we usually phone these folks for delivery, but with today’s busy schedules, one cannot sit at home and wait forever). Petron V. Luna was out of Gasul. So was the Kalayaan corner Kamias Petron.
The other Petron stations were not as close by, so we had to plan our trip if we wanted to get lunch any time soon. It was almost 2:00 p.m.
And so we planned to pass Xavierville avenue on the way to the new Petron Katipunan station. But along the way, there was this small LPG distributor with a tank-full delivery truck parked in front. I didn’t waste any time calling the attendant’s attention and ordering my tank.
And so there you have it folks. Supply side economics. I got to wonder why the 11 Kg LPG’s price was at PhP 408, when our last purchase a few months back was at PhP 650 plus. Sure, LPG is now cheap, but it seems suppliers are not so happy with the low price.
What do they do? I would only speculate. But from what you would learn in any economics class, lower supply or higher demand (or both!) would increase the price of a commodity.
There is usually a natural point where supply and demand meet, and this is usually at the optimal price and quantity levels. X units of LPG will be bought and sold at Y pesos. And everyone is happy.
But if sellers think that the price is too low (for instance, they might have had stocked old supplies, which cost them more to import than the current prices), they could create an artificial shortage. This would lessen supply, and therefore sellers would place a premium on their products.
Buyers, meanwhile, sensing that the product may not be readily available, are willing to pay more for the same commodity.
In effect, this jacks up prices.
But for now, LPG price is still stable. Government vows to get to the bottom of this, but every day that the people involved don’t get to solve this problem contributes to the increasing headaches of regular folks like us. Fleets of LPG-powered taxi cabs are being put on standby. People are starting to look into other means to power their cooking ware, such as electric stoves and even coal.
They say the biggest problem facing the incoming Administration in the US will be energy. I think a looming energy crisis is everyone’s problem these days, in one way or another.
J. Angelo Racoma is a technology journalist and blogger. See more of his blog posts here at racoma.com.ph, commentaries at racoma.net, and Twitter feed at @jangelo.
Comments
Mark Gamis
January 13th, 2009 at 3:47 am
Color me jaded, but whatever “global problem” that the world faces, we Pinoys experience it in a multipled effect because of corruption. Case in point – the Government will probably try to get the bottom of this LPG shortage, but something tells me that somewhere along this getting-to-the-bottom of it thing, bribes will be exchanged, some businesses doing this supply constriction will have free pass, the everybody involved will be happy. Except of course for the rest of the filipino people
edelweiza
January 27th, 2009 at 4:59 pm
nice lecture on the law of supply and demand, sir. it’s a good thing we only get to use our LPG sparely since my siblings and i only cook in the house during dinnertime.
aldrin
January 29th, 2009 at 3:54 pm
Did experience the same last weekend in Cavite. I look around the town and nothing’s available. I saw a roaming LPG dealer but they also have no available LPG. He offered he would look at some place for me, but of course it’s for additional charge. I said go ahead and get me that gas… Damage: Php 580.