Monday, May 26, 2008
Oil: The New Luxury Good
With oil at $130+, people are bracing themselves for a rough time for the remainder of the year. With the summer approaching, a large travel season, people will most likely be opting for fun nearer to home. Big box retailers as well as mom and pop shops are already feeling the heat, and its not from the sun. With rising costs of raw materials and less consumer spending, producers are being pinched on both ends. How can you, the consumer, survive with this "new" luxury good on the market?
For one, you can treat it as a luxury good and consume less of it. In tough times, people often reduce or stop altogether their consumption of luxury goods, and with oil at such unconscionable levels, we could almost consider it a luxury good. Although oil or gas demand is relatively inelastic, which means its demand is stable through changes in price, you can make a choice to set your cut-off point. When will you make decisions to use less gas or find alternative ways to get energy? When gas is $4.50/gal, $5, $10? There are numerous ways from simple changes to drastic measures that you can take to lessen consumption.
Another thing we can do is to be aware that we are consumers. The large and mighty corporation, with all their power, to a large degree are swayed and make decisions based on individual consumers as a whole. The price of oil will continue to rise as world demands grows. This will lead companies to finding cheaper methods of doing business. If we realize our power and support companies that comply with our beliefs, we can alter the marketplace from the bottom up. We can support companies that choose to make the hard decisions now, as opposed to later or never. This is our privilege, or some might even say our responsibility, as consumers.
Hard decisions would imply finding viable sources of energy to support their business now. It is something that I feel is inevitable anyhow, so they may as well start ASAP, and we may as well support them. In the short run, they can free themselves from the rise in oil price. In the long run, they will be the companies that win, and in turn so shall we. By supporting these companies I mean purchasing their competitive products. When there is a choice, choose their stuff, as opposed to another brand.
For example, Patagonia is an outdoor performance wear company. They are very conscious about their business practices. They try to keep their production line, as "clean" as possible. They are very concerned with supporting the environment and take many steps to be socially responsible.
To take it even further, support could mean purchasing stock or advocating for the particular company. Innovest is a firm that does market research on companies that are environmentally as well as financially sound.