Let’s see if we can figure out which one of these factors has somehow changed recently.
Posted on 04/25/2006 6:24:53 AM PDT by Tolik
I have a friend who is fond of the saying, “Analogy is the lowest form of reason.”
Perhaps -- but conspiracy theory is not far behind. There is something really emotionally satisfying about the idea that bad things are all part of a plot and you know who the plotters are. To start with it’s simple. There’s no need to study macroeconomics or history or anything else with a lot of math or footnotes involved. Your answer is as understandable as the last episode of “Survivor.”
And like “Survivor,” it’s excellent theater. Every good story has a bad guy, and fighting bad guys is what defines a good guy. That’s why Hollywood churns out conspiracy theory driven adventures by the dozen. There are, of course, some real conspiracies in our world. But nothing like the number that people believe.
The most popular conspiracy theories all involve a confluence of politics and money: the trilateral commission, the Jews, the freemasons, corporate evildoers. These are the motive forces of history to simple minds -- or to those wanting to manipulate such simple minds.
I’ll let you decide which category Bill O’Reilly falls into, but as his latest column demonstrates he is a big proponent of the idea that high gas prices -- which are a violation of your inalienable right to be insulated from market forces -- are the result of a “cabal” of “Big Oil” “fat cats.” I believe Hugo Chavez holds a similar belief.
Mr. O’Reilly rejects the notion that high gasoline prices are related to simple supply and demand, stating: “Gasoline supplies are at an eight year high, according to OPEC. There is plenty of gas selling on the open market, more than enough to meet the worldwide demand. So rising gas prices are not a supply and demand issue.”
That would be fabulous proof of a cabal, if only gasoline were a raw material -- as Mr. O’Reilly pretends to believe. But gasoline is not pumped from the ground or drained from maple trees. It is a manufactured product made out of crude oil and I believe that crude oil is somewhat more expensive than it used to be.
To understand 90% of everything one needs to know about gasoline prices, all one has to do is examine the following chart. Drawn from data secretly compiled by the Energy Information Administration, which I found on the Internet, it shows the price of the four major factors (not O’Reilly Factors, mind you) that actually determine the cost of gasoline: 1) crude oil, 2) taxes, 3) refining, and 4) distribution and marketing.
Let’s see if we can figure out which one of these factors has somehow changed recently.
Is it taxes? Nooooooo. Although they remain a huge part of the cost of gasoline, they have crept up only slowly in the last three years. Taxes cost you about $0.42 per gallon on average. So the next time you hear Sen. Chuck Schumer (D.-N.Y.) worrying about the price of gas having an impact on “working families,” such as those who I imagine work for him, just remember that the Federal government could lower the price of gas $0.184 per gallon overnight, if it simply suspended the excise tax it impacts upon those poor working families. State governments could reduce the cost by more than $0.22, if they really wished to.
Is it marketing and distribution making prices rise? Nooooooo. Although advertising on “The O’Reilly Factor” undoubtedly is expensive and delivering gas to every street corner in North America is quite a feat, these items are only a small part of gas costs: just $0.11 per gallon this last March. That’s pretty amazing when you consider the post office can’t get a lightweight and non-flammable letter to your neighborhood for less than $0.39.
Well then, maybe it is refining costs that have made gas so expensive. You’re getting warmer. Refining costs shot up noticeably after Hurricane Katrina, since several refineries were knocked out by the damage to the Gulf Coast. Most of our refineries are concentrated there because people on the East and West Coasts are too good to have to look at them. To ease the Katrina price crisis, the government suspended all sorts of very important and wise rules telling the petrochemical engineers that run the refineries how to best make gasoline. The price then dropped suddenly, proving that regulation does not affect cost much.
But now the rules are back in place. And the government added some new ones. Most fuel in the U.S. must now contain ethanol, which is expensive, cannot be transported in pipelines and is a pain in the barrel to work with. So costs have gone back up, and then up some more.
Well that just leaves crude oil costs. Have they gone up? Well, yes, apparently they have. In the three years in question they have gone from about $0.70 per gallon to $1.34 per gallon -- a 91% increase. Perhaps the rise in crude oil prices was an underreported story, and thus missed by Mr. O’Reilly? Together with the increased costs of refining by Congressional committee, the increase in crude oil prices totally explains the price of gasoline, without the need to examine if Exxon had a second shooter on the grassy knoll.
However, Mr. O’Reilly rejects the idea that the price of crude should affect the price of gasoline, because it is just a “paper price.” I’m not sure what other sort of price he thinks there is (a “street price,” perhaps?) but Mr. O’Reilly, a graduate of Harvard, thinks that the “paper price” is some sort of new-fangled hocus pocus created by speculators: “These speculators operate in the so-called commodities markets. They gamble on where the price of oil and other tangible assets will be months from now. These Vegas-type people sit in front of their computers and bid on ‘futures’ contracts.”
What are these fancy “commodities markets” of which he speaks? Are the Zionists involved?
Of course, these newfangled “futures” contracts that Mr. O’Reilly has uncovered aren’t just bets made by “Vegas-style” people removed from reality. They are binding contracts and the buyers of these contracts agree to buy oil at the high prices that we bemoan. They lose their butts if they just bid up the paper price for no reason. I would encourage Mr. O’Reilly to enter the futures market and bet against these crazy Vegas-type speculators with his amazing insights into cabals and paper and so-called markets.
But if you must have high crude oil prices explained by conspiracies, then here is a partial list:
There you have it. High gas prices are the result of conspiracies. I hate to break such bad news, but I’m just looking out for you, the folks. Somebody has to -- you’re never going to get the truth about “Big Oil” from “Big Talk.”
Mr. Johnson, a writer and medical researcher in Cambridge, MA., is a regular contributor to Human Events. His column generally appears on Mondays. Archives and additional material can be found at www.macjohnson.com.
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By: Robert B. Bluey
Posted 04/25/06 08:33 AM
Ian Schwartz at ExposeTheLeft.com has the video.
Mr. Bluey is editor of Human Events Online.
Related article: America's Energy Policy: Obstruct Supply, Marvel at Price
HUMAN EVENTS ^ | Jan 30, 2006 | Mac Johnson
Posted on 01/30/2006 12:07:06 PM EST by neverdem
Mac Johnson |
|
-Saying What Most Folks Have Enough Sense To Just Think Quietly- |
O'Reilly wouldn't understand business economics if you hit him in the face with a textbook.
“Gasoline supplies are at an eight year high, according to OPEC. There is plenty of gas selling on the open market, more than enough to meet the worldwide demand. So rising gas prices are not a supply and demand issue.”
Maybe according to OPEC, but it's not true. There is a difference between supply and inventories, as every first year economics student knows. There is also a difference between supply and quantity supplied.
They actually do not publish statistics on the supply. It's not something that is easily determined just by looking in the storage tanks since it depends on the willingness of sellers to sell at a given price, and you can't determine that by looking in a storage tank.
And even if it were true, so what? If supply is at an 8 year high, but demand is at a record high, then of course the price will go up.
Personally, I can't stand to watch O'Reilly (and I don't). He is in a fantastic time slot on the #1 news channel. ANYONE in that slot would have his ratings. On this fuel issue, he is no better than the politicians who promise "investigations" into profits (but never seem to investigate losses).
If gasoline costs too much: PRICE GOUGING!!
If gasoline costs too little: UNFAIR COMPETITION!!
If gasoline costs the same: COLLUSION!!
We shouldn't expect much from a guy who probably has never worked in a job that involved the production of a single product or commodity in his life.
Apparently you didn't take economics? Inventory is a record of the supply on hand.
Glossary
And just how does he think punishing the oil industry will lower prices at the pump?
Talk about illogical, his 'theory' is outright ignorant. No other word for it.
There may not be any price gouging going on but they sure are putting the shaft to us in that respect.
It also appeared lost on O'Really that most of the big oil companies are actually owned by foriegn governments that do not answer to Congress.
That's because the people that own the local stations are at the mercy of those who own the contracts.
Apparently you didn't take economics? Inventory is a record of the supply on hand
Actually I am more concerned with the production of light crude from which most gasoline is refined. It is in decline. While there still may be plenty of crude oil most of it is heavy oil that yields less gasoline and most refineries are not yet able to accept. SA is building new refineries for heavy oil because the percentage of their light oil is decreasing and the percentage of heavy oil is increasing.
No. Actually, I have a degree in economics. Inventory is not supply.
It might have some impact on supply, but not one that can easily be quantified because the people who maintain inventories do so in a way that does not necessarily depend on price, as such, at least not in the same way that supply does. In the case of supply, the amount of oil producers are willing to supply goes up when price does. It goes down when the price does.
But inventories depend more on expectations and the cost of storage than the actual price. If the price goes up, you might sell your stored inventory, but then you might not if you think the price is going to go up even more. If fact, if you thought that the price was going to go up even more, you might even increase your inventories.
And if you thought that the price of oil was going to remain exactly as it is, then you would have no incentive to maintain a significant inventory at all. All you'd accomplish by doing so is increase your storage cost. There would be no profit in holding unused oil in a storage tank since you could always buy more on the open market for the same price that you can do so now.
So inventories are really an indication more of expectations and fear of a disruption than they are of supply.
91%, obviously crude is the major reason for the higher cost of gasoline, etc.. Now the question is who supplies the crude and why does it cost them so much more now than just a few years ago to bring it to market? I believe O'Reiley's theory is on the money, but I also believe we should let prices rise. I believe some good may come of it.
I didn't mean to imply that it was the local proprietors that were raising, or lowering, the price so fast or slow.
I understand that most staions, anymore, are franchises.
My problem is the the price goes up before the contracts have hit and then doesn't go down when the price of crude goes down.
So according to you, unless you have worked on a production line, like making GM cars, or slopped hogs, (commodity) you're not allowed to question high oil prices? O'Reilly is on to something with his investigating team, and even the congress thinks that something smells. Whether it's the commodity traders wanting to drive up their own stocks, or an inventory problem with the oil companies, it deserves looking into, because too much of this process is being kept secret. Go O'Reilly!
Thanks...
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