🚀 go-pugleaf

Matthew T. Russotto (russotto@wanda.phl.pond.com) wrote:
: In article <4l3e60$nuc@netnews.upenn.edu>,
: Sanjay Sinha <sanjay@ssc.sas.upenn.edu> wrote:
: }
: }e.g. a gasoline pump owner at your corner has a 12,000 gallon storage
: }tank and this serves them fine as their weekly sales are 10,000
: }gallons and they recive a shipment every week. however, on labor
: }day weekend the demand goes to 15,000 gallons a week. do yuo really
: }expect the pump owner to install extra storage tanks to meet
: }one week's peak demand and still stay in business?

: Actually, they increase shipments during times of high demand.  Though
: at the one I worked at, it went from once a day to twice a day (and
: occasionally ran the tanks dry when a shipment too late). 

exactly my point!!!

but when the demand for tankers double, what do you think happens?

say you own a tanker company with 15 trucks and 25 drivers,
and have a clientele of 150 gas stations. all your trucks 
operate on average for 12 hours a day and make 150 deliveries 
a day.

now, suddenly i need to make 300 deliveries a day ( i assume the all 
my customers are like your gas station)

how do i - as a tanker company meet the demand? 
i can run my trucks 24 hours a day and barely make the deliveries.
where do i get the drivers? over time is expensive, and gets even 
more expensive with a longer day. some drivers really don't want
to work over time. it's summer, they want to go the beach or to the
sisters house for barbeque. 

can i get extra drivers? not all big rig drivers are comfortable 
driving all day in city traffic. also driving 20 tons of liquids need
special handling  skills. 

even if i find drivers willing to work short term, the wage rate has 
to be high.

all these are extra costs... if my customers want a second delivery
in a day it's gonna cost xx% more.

as a truck company, i will not invest 80,000$ each in my 16th and 17th 
truck that earns revenue only three months a year. 15 trucks is good
enough for round the year business.

this is just an example, the main point i'm trying to make is that
under peak demand conditions prices will rise, when the supply
infrastructure (be it trucks, refining capacity or what ever) is   
designed for a lesser than peak volume. 

ofcourse there are exceptions to the rule.

your local power utility for example. they have capacity to meet
not only increased late afternoon demand, but to meet it on the 
hottest day in the year. on the rare occassion when it's the hottest 
day of the decade, their installed capacity will be insuffecient to
meet demand. 

the question is - how come an electric utility has all this capacity?
that's because we pay them to! the agency that regulates our electricity
tariffs allows the utility to make a decent return on capacity that is
used only 3-4 months a year. (some utilities will make  a deal with
larger industrial customers. in exchange for the right to cut off 
part of the power supply, they get a discount in prices.
the interuptable power prices are lower, with higher discounts
given to those on 30 mins notice, than those on 12 hour notice.

if you want gasoline prices to remain steady all year around, a possible
solution is to have a regulated industry, where all investments 
needed for higher demand in summer is in place and we pay
regulated gasoline prices(same allyaear around) which allow the 
owners to get fair return on thier investment. or better yet,
let the government own everything. 



one can also apply demand/supply/prices to rock concerts. 

demand is number of people wanting to buy  ticket.
supply is amount of seats available ( and can be increased 
my moving to a larger stdium, but there is a upper limit to it)

why do the prices of these tickets increase? 
(in the secondary market, not the face value)


sanjay









planning and investing for a peak deamand or load is very expensive 
because



: -- 
: Matthew T. Russotto      russotto@pond.com     russotto@his.com
: "Extremism in defense of liberty is no vice, and moderation in pursuit
: of justice is no virtue." 

--
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Sanjay Sinha            Resident of Washington D.C.
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