Posted on 05/28/2008 5:52:17 AM PDT by MichaelP
Santa Monica, CA - U.S. gasoline prices rose more than 33 cents a gallon to $3.937 in the last month despite driving cutbacks that have steadily reduced demand, said Consumer Watchdog. Oil prices sagged today along with U.S. economic indicators; yet even if they continue to fall, motorists are unlikely to see much relief at the pump -- or at the grocery story, with diesel breaking the $5.00 mark.
"Producers who have been making their record profits from drilling and selling oil are now trying to do the same on the refining end by keeping fuel supplies short in the summer driving months," said Judy Dugan, research director of the nonprofit, nonpartisan Consumer Watchdog. "High oil prices, combined with a drive to increase refinery profits, will be a double whammy on consumers this summer."
In recent months, refiners have cut back their production to match drops in consumer demand and prevent retail prices from dropping. This May, U.S. refineries have operated at an average of 86.5% of their maximum, while the modern average for May, especially before last year, was about 95%. (see weekly refinery utilization averages since 1990 at http://tonto.eia.doe.gov/dnav/pet/hist/wpuleus3w.htm and historic monthly averages at http://tonto.eia.doe.gov/dnav/pet/hist/mopueus2m.htm ) National gasoline prices hit $3.937 on average yesterday, according to both AAA and the federal Energy Information Administration's weekly gasoline report. Diesel was about 40 cents a gallon higher than gasoline, and in high-priced California now averages $5.124. Some stations in the state are selling diesel for $5.50 a gallon and up, impacting the cost of almost all goods and food.
"The speculative frenzy in oil prices may be cooling slightly, but consumers are unlikely to benefit," said Dugan. "Congress is talking about getting speculation under control but should not ignore the role of refineries in price spikes just because pump prices have recently been driven by crude oil prices. Unless government also oversees refineries and the national supply of gasoline and diesel, consumers and the economy won't see the benefit if crude oil prices decline." Consumer Watchdog noted that major oil companies reaped record yearly profits from their refining businesses in 2006 and 2007, at some points likely profiting by $1.00 or more a gallon just on refining. This drove pump prices to then-records at a time when oil cost half what it does now. "Refineries want to boost their profits in the summer," said Dugan. "With drivers cutting back and truckers going bankrupt it's still business as usual for oil companies, even if it means wrecking the economy."
Mike
9% profit margin is gouging?
So supply and demand doesn't work. Cut back on demand, and the oil companies cut back on supply.
I paid $4.07/gallon last night.
$130 barrel / 42 gallons = $3.09
$3.09 Cost of raw material
$ .18 Federal Tax
$ .12 State Tax (may very)
$3.39 Total
$4.00 Price at pump
$ .61 Funds available to pay for distillation, shipment, wholesale and retail overhead, and get a profit.
I don’t see the gouging coming from American oil companies.
Well, if you could get a new refinery permitted maybe they wouldn’t have to run at 95% constantly just to meet demand. They do have to go offline occassionally for necessary maintenance. We haven’t built a new refinery in the US in 25 years, and it’s not because investors aren’t ready to commit capital.
The same people who scream about “Big Oil” and “oilmen in the Whitehouse” are the same ones restricting domestic drilling and permitting. Many many industries such as banking, drugs, investment banking, semiconductors are earning a much greater ROI and have higher profit margins than “Big Oil”.
Don’t forget
Extraction, Pipeline, Storage, and distribution. Also you can only make so much gasoline out of a gallon of crude.
These people are semi-retarded.
It isn’t gouging. They have to sell the stock they bought previously at higher prices. It takes a little while for pump prices to reflect changes in crude prices.
America was TOLD this would happen - I was there, I heard it, and I SAID it. America CHOSE high oil and gas prices, because America was unhappy with lower ones. Such is the democratic process when one is ruled by the liberal elite. Now, if drilling off the Pacific coast, off the Atlantic cosat, off the Florida Gulf coast, in ANWR, and in the Western US were drecriminalized, AND if nuclear power plants were permitted, then in 10 years, we MIGHT have some relief. Meanwhile, NO crocodile tears are permitted.
See my #5. The world demand for oil has not dropped. You are mixing apples and oranges. We could cut our gasoline demand in half, but if world oil demand does not drop or world oil supply increase, our gasoline prices will remain not change. They are based primarily on the price of oil. A gasoline refining shortage can drive up prices for gasoline, but having a glut of gasoline will not decrease the cost because it is not a perishable item and has high raw material and production costs to recoup.
Another "expert" doesn't get it. Because tree huggers have pushed for low-emission fuels, the EPA now allows for 38 blends of gasoline where 3 would probably do it. As a result, refineries have downtimes for setup changes. Also, another part of the reason for the low May output is a protracted cold spring that kept the demand for heating oil up longer than usual, slowing down the setup process to convert from heating oil to gasoline.
I can't believe this idiot thinks Congress can be the solution when they are, in fact, the problem. Ruling out drilling in ANWR and offshore, they have played right into the hands of OPEC. Now, if Congress could find the stones to reverse its no-drilling policies, then we could ease the pump prices.
Indeed, I'll bet that if Congress passed a bill opening ANWR and offshore drilling, speculators couldn't get out of the market fast enough and you'd see price relief before the ink dried on the bill.
Good post...
The real reason we have an oil crisis:
Read this and I think you will agree the oil industry has already been Nationalized in the US;
It was common in those days, as it is in ours, to identify the Communists as leftist and the Nazis as rightists, as if they stood on opposite ends of the ideological spectrum. But Mises knew differently. They both sported the same ideological pedigree of socialism. “The German and Russian systems of socialism have in common the fact that the government has full control of the means of production. It decides what shall be produced and how. It allots to each individual a share of consumer’s goods for his consumption.”
The difference between the systems, wrote Mises, is that the German pattern “maintains private ownership of the means of production and keeps the appearance of ordinary prices, wages, and markets.” But in fact the government directs production decisions, curbs entrepreneurship and the labor market, and determines wages and interest rates by central authority. “Market exchange,” says Mises, “is only a sham.”
Mises’s account is confirmed by a remarkable book that appeared in 1939, published by Vanguard Press in New York City (and unfortunately out of print today). It is The Vampire Economy: Doing Business Under Fascism by Guenter Reimann, then a 35-year old German writer. Through contacts with German business owners, Reimann documented how the “monster machine” of the Nazis crushed the autonomy of the private sector through onerous regulations, harsh inspections, and the threat of confiscatory fines for petty offenses.
“Industrialists were visited by state auditors who had strict orders to examine the balance sheets and all bookkeeping entries of the company or individual businessman for the preceding two, three or more years until some error or false entry was found,” explains Reimann. “The slightest formal mistake was punished with tremendous penalties. A fine of millions of marks was imposed for a single bookkeeping error.”
Reimann quotes from a businessman’s letter: “You have no idea how far state control goes and how much power the Nazi representatives have over our work. The worst of it is that they are so ignorant. These Nazi radicals think of nothing except ‘distributing the wealth.’ Some businessmen have even started studying Marxist theories, so that they will have a better understanding of the present economic system.
“While state representatives are busily engaged in investigating and interfering, our agents and salesmen are handicapped because they never know whether or not a sale at a higher price will mean denunciation as a ‘profiteer’ or ‘saboteur,’ followed by a prison sentence. You cannot imagine how taxation has increased. Yet everyone is afraid to complain. Everywhere there is a growing undercurrent of bitterness. Everyone has his doubts about the system, unless he is very young, very stupid, or is bound to it by the privileges he enjoys.
“There are terrible times coming. If only I had succeeded in smuggling out $10,000 or even $5,000, I would leave Germany with my family. Business friends of mine are convinced that it will be the turn of the ‘white Jews’ (which means us, Aryan businessmen) after the Jews have been expropriated. The difference between this and the Russian system is much less than you think, despite the fact that we are still independent businessmen.”
As Mises says, “independent” only in a decorous sense. Under fascism, explains this businessman, the capitalist “must be servile to the representatives of the state” and “must not insist on rights, and must not behave as if his private property rights were still sacred.” It’s the businessman, characteristically independent, who is “most likely to get into trouble with the Gestapo for having grumbled incautiously.”
“Of all businessmen, the small shopkeeper is the one most under control and most at the mercy of the party,” recounts Reimann. “The party man, whose good will he must have, does not live in faraway Berlin; he lives right next door or right around the corner. This local Hitler gets a report every day on what is discussed in Herr Schultz’s bakery and Herr Schmidt’s butcher shop. He would regard these men as ‘enemies of the state’ if they complained too much. That would mean, at the very least, the cutting of their quota of scarce and hence highly desirable goods, and it might mean the loss of their business licenses. Small shopkeepers and artisans are not to grumble.”
“Officials, trained only to obey orders, have neither the desire, the equipment, nor the vision to modify rules to suit individual situations,” Reimann explains. “The state bureaucrats, therefore, apply these laws rigidly and mechanically, without regard for the vital interests of essential parts of the national economy. Their only incentive to modify the letter of the law is in bribes from businessmen, who for their part use bribery as their only means of obtaining relief from a rigidity which they find crippling.”
Says another businessman: “Each business move has become very complicated and is full of legal traps which the average businessman cannot determine because there are so many new decrees. All of us in business are constantly in fear of being penalized for the violation of some decree or law.”
Business owners, explains another entrepreneur, cannot exist without a “collaborator,” i.e., a “lawyer” with good contacts in the Nazi bureaucracy, one who “knows exactly how far you can circumvent the law.” Nazi officials, explains Reimann, “obtain money for themselves by merely taking it from capitalists who have funds available with which to purchase influence and protection,” paying for their protection “as did the helpless peasants of feudal days.”
“It has gotten to the point where I cannot talk even in my own factory,” laments a factory owner. “Accidentally, one of the workers overheard me grumbling about some new bureaucratic regulation and he immediately denounced me to the party and the Labor Front office.”
Reports another factory owner: “The greater part of the week I don’t see my factory at all. All this time I spend in visiting dozens of government commissions and offices in order to get raw materials I need. Then there are various tax problems to settle and I must have continual conferences and negotiations with the Price Commission. It sometimes seems as if I do nothing but that, and everywhere I go there are more leaders, party secretaries, and commissars to see.”
In this totalitarian paradigm, a businessman, declares a Nazi decree, “practices his functions primarily as a representative of the State, only secondarily for his own sake.” Complain, warns a Nazi directive, and “we shall take away the freedom still left you.”
In 1933, six years before Reimann’s book, Victor Klemperer, a Jewish academic in Dresden, made the following entry in his diary on February 21: “It is a disgrace that gets worse with every day that passes. And there’s not a sound from anyone. Everyone’s keeping his head down.”
It is impossible to escape the parallels between Guenter Reimann’s account of doing business under the Nazis and the “compassionate,” “responsible,” and regulated “capitalism” of today’s U.S. economy today. At least the German government was frank enough to give the right name to its system of economic control.
Here is the link for this article:
The pump price doesn’t respond instantly to changes in the price of oil. If it did, we’d be in a whole bunch more doodoo than we are. The price of oil has increased to approximately 6 times its year 2000 level, but the price of gas has only gone up to about 3 times its year 2000 level.
The refinery output could be lower because demand is down.
The price being charged is what the market will bear, and is based mostly on how much the refineries pay for oil (which if the author hadn’t noticed, is near it’s record high).
If a major refinery could sell more product at a profit by lowering their price, they would do so.
Maybe they are still selling the gas made from the more expensive oil?
From the (liberal) article:
“Unless government also oversees refineries and the national supply of gasoline and diesel, consumers and the economy won’t see the benefit if crude oil prices decline.”
Just another Marxist/Maxine Waters type that wants to nationalize the oil industry!!
Non-partisan group, my arse!!
These socialist clowns want the goobermint to take over the oil industry. And they are also idjiots, because they apparently think the goobermint running the business will bring prices down.
How can anyone who still has neurons firing think for one minute that the gov't can manage anything better than the private sector? Oh...perhaps I just answered my own question...they're the product of public education.
It's worse than that ... 32 years, actually.
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