Seems like the free market ain’t working so well.
New Gasoline Study Shows Profits, Not Crude Oil Prices Or Ethanol, Are Driving Pump Price Spike
The Foundation for Taxpayer and Consumer Rights released a new study today of rising gasoline prices in California that found corporate markups and profiteering are responsible for spring price spikes, not rising crude costs or the national switchover to higher-cost ethanol, as the oil industry claims.
Independent petroleum consultant Tim Hamilton analyzed gasoline price increases from January to April to find that:
* Increases in the “spot” market price of crude oil — which is the highest price a major oil company would pay for crude oil — accounted for only 12 cents per gallon. California’s percentage sales tax increased fuel prices by another four cents per gallon. More than 40 cents of the 60-cent increase in gasoline prices over 3 1/2 months is attributable to increased refinery and marketing profit margins for the oil companies;
* Neither the MTBE phaseout nor the substitution of ethanol is a serious part of the increase. If the MTBE phaseout or ethanol blending specifically increased costs for oil companies in California, other states in the West using conventional unblended gasoline should be much less affected. Yet Washington State, which uses only conventional gasoline and has similar refinery capacity and crude oil sources, mirrored California’s increase;
* The profit increase of 42 cents, on top of record profits last year, means California gasoline will cost consumers approximately $546 million more in April 2006 than in April of last year.
“While oil companies continue to blame crude oil prices and ethanol additives for the recent gasoline price spikes in California, the chief cause is increased profiteering by oil companies that have previously posted world record profits,” said Hamilton.
“Oil companies are opportunistically using the rising world price for crude oil as an excuse to excessively raise gasoline prices and pump up their profits, even though the spot market price for crude has gone up far more slowly than gasoline prices,” said FTCR President Jamie Court. “In addition, the spot price is higher than most oil companies pay, since they either harvest their own crude or pay more stable and often much lower contract prices.
“This study should be a wake-up call for California voters who will vote in November on a ballot initiative to tax windfall profits by oil companies so the state can develop alternatives to the petroleum economy.”
This is one of them damn lefty-commie-pinko conspiracies. Give meh a free markut, them erl companies know whats bestest for us Amerikans.
Greedy bastards……
Even a crook like Nixon responded to public anger by supporting windfall profits taxes on the Oil Patch Boys — during the oil shortages > inflated fuel prices starting in the late 60’s.
But, then, who ever says the thug in the White House is as “honest” as Nixon?
Just don’t buy. Not a stupid one-day boycott, give up your car for good. Ride a bike.
As long as demand keeps growing, and it is, and as long as Americans refuse to conserve (yeah, right), prices are going to continue to go up.
One of these days we might actually pay the same as what Canada and Europe have for decades…
Europe imposes a huge fee on the price to “discourage” use which is truly evil. The problem is that driving a personal vehicle is one of the most important activities in life.
On a whim, you toss in the camping gear and drive 500 miles to a random destination for a weekend camping trip, then drive home. If you can’t do that there’s no reason the human race to exist.
How to you expect the big oil companies to compansate their CEOs for such great work if they can’t screw the consumer.
http://abcnews.go.com/Business/wireStory?id=1847117
You tell me what this guy did to warrant such a golden parachute…
This is a weird senerio…
Iv heard it both ways..
That our oil is imported, or are we using the US oil..
If we are using US oil, its funny that we base our prices on Foriegn oil prices.. Oil that was capped in the 40’s at 0.05 per gallon, and HELD there on mineral claims at $20 per year…
Yes, its possible to file a mineral claim on ANY property, ANY…As you have no rights to them, unless you FILE for them. And its CHEAP to keep the claims.
And to THINK..
That OIL is broken down into other products…from CRUDE..
Propane, butane, Gas, plastics, wax…
http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/oil.html
In the end, they are VERY careful and can get about 100 times the the material FROM the crude, and make 100 times the price, esp, on Gases like LPG, butane, propane, and so forth.
Its been estimated that the MAIN owners are making OVER $100 per minute, PERSONALLY…..
Simple supply and demand. Prices will go up if the supply is tight, regardless of the cost of the raw materials (crude). How much do you think it costs to manufacture a shirt? But you don’t whine about paying 20x that to buy it. If environmental policies would allow more refineries supply would increase, prices decrease. Oil companies stopped campaigning for permission to build new refineries because they realized “No new refineries” = “Greater profit margins”. Now we have to live with it. Anyone want to start a new oil company? Good luck getting your new facilities approved through the beuracracy. Would you rather the oil companies kept prices low and threw the profits away? Then you would have to wait in line as the gasoline is rationed because demand (at the lower price) exceeded supply.
I’ve said for years (since at least the mos recent time gas was $1.00/gal) that we ought to step up taxes on gasoline one penny at a time (perhaps a cent per week) until it costs $5 or $6/gallon. The tax could go directly to improving public transit (miserable in most parts of the U.S.) which would further help to reduce gasoline consumption. Why not? Because the politicians would be voted out of office for taking the initiative to improve our country. People have told me it would crash the economy, but gasoline prices are nearly inelastic but we have various ways to conserve. Too bad the oil companies had the Katrina excuse to examine the (lack of) price elasticity to give them the data needed to gouge us.
And yes, I did ride my bicycle to work today.
I notice this article didn’t mention the billions the oil companie have to spend to for lower emissions and regulations.
Here’s a pre-Katrina article about a proposed refinery in Arizona and other items relating to this post.
http://www.corpwatch.org/article.php?id=12227
If I am correct the pipeline from Mexico for this refinery goes through a military firing range!
“Supply and demand”? What website-for-dummies told you that?
US oil inventories are at an 8 year high. What were you paying for gasoline at the pump 8 years ago?
If you live within bicycle range of work you live too close to work.
Public transit is for the third world, not civilization. It’s disgusting and ruins real quality of life.
The priorities of federal spending should be 1. military, 2 develping more fuel sources. Everything else is of secondary importance.
Moss:
And what is the demand today vs. 8 years ago? That is just as relevant, here.
The U.S. has approx. 3 wks of oil in its inventories. Given the change in demand for oil over the past 8 years, I wouldn’t be so quick to make a comparrison between inventory levels of today with those in 1998; as 350 million barrels would most certainly have lasted a lot longer then. Also, the price of gasoline is based on the cost to replace the product, not what the existing product cost.
Regardless of the amount of oil in your inventory, there is a finite amount of refining capacity, not to mention that there are almost as many formulas as there are states and not all grades of oil are suitable for making gasoline in the first place.
You also have psychological effects on the price of gas, like when there is a perception that gas prices will go up, people tend to do more hoarding and “topping off”, which increases the demand which feeds higher prices.
People also seem to want to demonize making a profit, as if the oil industry were any different from other industries, just because there is a need for the products they make. That profit is use for exploration and development of new products that will become available in the future.
U.S oil companies aren’t the only ones doing the screwing. In Canada 39% of our gas price at the pump is taxes! Canada is not dependant on foreign oil and yet when Katrina hit prices here jumped 60%. Profit of our oil companies nearly doubled in the quarter following Katrina.
And the Canadian gov’t has no incentive to stop the gouging… they get a nice cut of the action.
And now for a message from your friends in Alberta:
“Why don’t you really step on the gas – push it right down to the floorboards, just to see what she’ll do.”
“The priorities of federal spending should be 1. military, 2 developing more fuel sources. Everything else is of secondary importance.
Comment by Me”
I think those are important issues also Me, but 60% of your military tax dollars spent on soldiers goes to health care. That should tell you something about reasonable priorities in the overall Federal budget. The average American can’t handle that much of their income going to health care and the military should be all over fixing this one too, without being railroaded by politicians to pay whatever price is asked by large health care campaign contributors.
The 60% figure is just another example of out of control spending being accepted as OK and purchasing not being managed the way you should in any business. Reducing health services to the military shouldn’t be an option. Charging the VA $11.00 for a Tylenol should be a felony.
We could move energy concerns farther down the “crap that’s going to do us in” list if the Big Oily Energy Corps would prioritize in being just a little bit patriot also. I’m fed up with opening my suitcase at airports when oil companies don’t make any effort to get in the game and do their part. Let them charge $5.00 a gallon if they want, but tax the living s&^% out of profiteering and sink the money into research and new infrastructure. The Big Oilys know that coal is a proven fallback position for oil, but little is being done in that area to build clean infrastructure to make it happen. The coal option was on the record during the energy crunch in the 70s, and 30 years later we are still fiddling our diddle and bitching about gas prices.
Screw the price. The point is, who should be getting all the money? I’d much rather see an increase in gas taxes that could go towards energy R&D, than an increase in price just to pad the oil companies bottom line.
With oil over $70 per barrel, how is the price only going up 10 cents?
Why So many grades of fuel and why keep an atitive in fuel in Cali if it’s been showing up in ground water. Can the benifit be worth not being able to drink the water, but wait you are going to buy your water filtered in a bottle from the same people that spoiled the water in the first place.
Remeber the days of reg vs. unleaded, now you can’t regular. Why not phase out the blends that are no good and just keep the good ONE and make in the national fuel for american cars.
It seems all the oil companies R&D dollars are going into getting the most out of the system we already have.
The price needs to be kept low so we can all drive more.
Supply and demand???
they got it, we want FUEL to transport ourselves, they dont give us an alternative except to BUY what they have…
GIVe me a steam powered with hydrogen heat supply, and I WILL DRIVE IT..
You may not know this, but CHINA is still buying up metals, and wood, and WE are inflating the prices…BUT are WE’ getting the money?? NOPE… The OWNERS are getting the money.. I didnt see ANY wages increase with the price of Gold, silver, steel, wood or ANYTHING ELSE…
The profits are going into OWNERS, CEO, and UPPER pockets…
AND it WONT trickle down..
I would agree that having one blend of gasoline would be a wise policy. However, gas that is produced and sold within the same state is intrastate commerce (at least it should be considered that by honest people), and is not subject to regulation by the Congress. It’s a bit messy as far as lines of power in the Constitution are concerned.
The game that is usually played these days is that if an act of commerce between you and me could somehow, in some yet to be determined way, have an effect on commerce in another state at any time in the future; then that qualifies as interstate commerce and subject to the authority of Congress. A good example would be federal gun control laws — if we both reside in the same state and I sell you a gun, that is intrastate commerce; but maybe sometime down the road somebody else will come into possession of that gun and commit a crime involving commerce in another state; the powers that be have deemed it appropriate to classify it all as subject to federal regulation under the interstate commerce clause. My question would be: if that is the case, then any act of commerce can be linked into some grand interstate system if you try hard enough; but if that was the intent of the founders, why did they bother specifying that Congress only had the power to regulate interstate commerce in the first place?
Actually, a good number of our federal laws have been passed using this twisted logic of would should be a simple (in most cases) subject — acts of commerce across state lines. What’s even more scary is that courts have gone along with it because they agreed with the agenda behind those laws.
well, reading that makes me feel better about shelling out $38 this morning to fill up the tank… again… shit, it was $34 last week…
What makes this even funnier (in a suicidal sense along the lines of Pink Floyd – Brain Damage), is that it isn’t a free market because the oil industry is heavily subsidized. Laissez-faire my ass! After Brain Damage click back a few tracks and give Money a spin, cause that’s what the corporations are making as fast as we can burn the fuel.
“Seems like the free market ain’t working so well.”
You are 100% correct. The free market doesn’t work for oil because:
1. Oil prices are manipulated by OPEC.
2. Environmentalists place huge roadblocks in developing new oil fields.
3. Environmentalists and NIMBYs place huge roadblocks in building new refineries.
4. Big Oil just sits back and grins as the oil they pump for $5 a barrel gets sold to the refineries at $70 a barrel.
5. The refineries have effectively eliminated all competition through merger and plant shutdowns.
6. The refineries have manipulated production capacity to the point that they are running at 93% (2004). This leaves scant room for equipment maintenance or breakdowns (or hurricanes).
7. The Clean Air Act requires oxygenates be added to gasoline in areas that are non-attainment for the CO standard. (Never mind that said oxygenates, particularly alcohol, generates more ozone during the summer months.)
8. Each state gets to set its own special blend for oxygenated fuel, which further constricts the refining capacity.
9. New refineries are not built because there is no financial incentive for existing refiners to build any, and new players can’t afford to tie up a $2 billion investment for the five years it would take to walk through the regulatory minefield.
And then we get to sit back and watch Big Oil and the Sierra Club blame it all on the auto industry, which is the only industry in this whole fiasco that is actually answerable to the free market system.
Dont bring into this discussion what MTBE IS or DOES..
Took Cali 20 years to figure this out and BAN it…
Rather use alcohol…
These OPEC nations are also laughing all the way to bank. They know about the EPA and other government regulations here in the US and they love ’em. Gee, I wonder if they have gave any money to lobbyists or organizations to help put these restrictions in place?
22, Mike, A good post. Darn, don’t you know I hate agreeing with conservatives?
17, Don, very good point. The windfall profits should be used to finance alternate energy sources. I’m sure we could appreciate more efficient engines, safer nuclear, wind and solar uses, tidal energy, and even better uses of bio-mass.