"As the giant oil slick creeps toward the Gulf coast, sales of boom are booming.
Companies that make and distribute boom—barriers laid in water to help protect the coast —are seeing huge increases in demand.
Sales have shot up, prices have risen and manufacturers are adding shifts as boom makers field demand from the oil companies involved in the spill, environmental cleanup contractors and government agencies.
The boom scenario played out as British oil major BP lowered a second, smaller containment box into the Gulf of Mexico Tuesday night to try to capture oil leaking from the well, according to the Associated Press....
"Demand's gone crazy," said Sean Geary, sales manager at American Boom & Barrier, a boom manufacturer located on Cape Canaveral, Fla. Boom sales have "easily tripled," he said.
Before the spill, the firm made about 1,500 feet of boom a day; now it makes about 5,000 feet a day and has a wait time on new orders of six to eight weeks. Prices have risen to $8.50 a foot from $7.35 since the spill.
"I had a guy call me yesterday, wants a million feet of boom," said Mr. Geary, adding that his customer was exaggerating for effect. The firm is running two 10-hour shifts instead of the usual one eight-hour shift, Mr. Geary said.
The firm has hired temporary help to bolster its work force, and is asking customers in northern Africa and Alaska, who have boom on reserve, if they can spare some boom now in exchange for new ones after the spill demand is met.
QUESTIONS:
1. Explain what is happening in terms of changes in supply, demand, price, quantity demanded, and quantity supplied.
2. Think about these producers who are aggressively taking steps to produce more. Do you think their primary motivation is to help protect the coast, or to make profit for their businesses?
3. Some people would say that, by raising prices, these producers are trying to take advantage of this bad situation in order to make more profit for themselves. If the government decided to "protect" the buyers of this product by keeping the price down at a low level, and told producers they should expand production, not to make more profit, but out of a desire to protect the coast and to help "society," what consequences would likely follow?
