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Oil is No Longer an Excuse | 35grove.com | Where Ideas Grow

Oil is No Longer an Excuse

[Photo by trec_lit]

There’s something that’s been bugging me for the past several years: NYC taxi prices. I’m going to sound like an old fart, but, “I remember the day when,” a trip downtown cost $5. Yet, prices have come up over the years, more than two times. It didn’t happen in one fell swoop, but instead, incrementally. And different excuses have been given each time.

Usually, however, the excuse had to do with oil. In the beginning, the cost of oil drove the price of gas so high that the taxi services couldn’t afford to drive around anymore. So they increased prices. Fine, I’ll buy that.

But then it happened again. And again.

Each time, prices increased, because otherwise the taxi services would go belly up.

Then came the in-seat TV screen, that was billed as a GPS-wonder-tool/backseat-tv, but in reality only served as a new way to pipe ads to unsuspecting passengers (drivers didn’t even have access to the GPS). Ironically, the costs of installing these revenue-generating systems was passed onto the customer in the form of increased prices, which of course was also partially a result of increasing oil.

Then we entered a recession. Not just a national recession, but a global one. And while I won’t get into the dynamics, gas prices dropped. All the way down from $145 to $60 (and they’re still going lower). But have cab prices dropped? Of course not.

And therein lies the rub. Prior to the dramatic price increases, I never thought twice about taking a cab. But after the increases hit, I turned to the subway, nine times out of ten. All the while, I was annoyed, but understood why prices had to increase. Now though? While oil has dropped, prices haven’t. And what’s the excuse now?

Oil can’t be an excuse for taxi companies and it shouldn’t be an excuse for any other business where oil is an input or major cost. Yet, will they keep their prices up? Even in a recession when people are pinching pennies?

I don’t have a crystal ball, but I do know that this begs a pricing exercise. Perhaps if these companies whose inputs relied on oil (and thus increased prices over the years), now begin to slowly decrease prices (which they can afford to do since their inputs aren’t as costly anymore), they’ll actually see an increase in revenues. For example, whenever I considered taking a cab, I’ll usually opted for the subway. But if prices dropped just enough so that the decision between choosing to cab it or subway it wasn’t so clear cut, then maybe half the time I’d actually opt for a cab. In that case, my aggregate cab spending would probably even increase (e.g., I’d spend $5 five times out of ten versus the old me spending $10 one time out of ten).

On the other hand, instead of decreasing prices, what if they use the recession to justify an increase in prices? Since less people are taking cabs, then their logic would state that they’d have to charge those riders more in order to maintain revenue.

Who knows what will happen, but I can be sure of one thing: rising prices isn’t always the way to raise revenues. Sometimes you have to drop prices to make more money. At the very least, in this recession, consider it.

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