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”.
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.
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.
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.
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.
As long as people are doing things like going on vacation, or going out to eat, or buying presents, or other activities that are optional spending, gas isn’t high enough to fuel and fuel-related companies. They will keep raising prices until people really squeal and sacrifice things because they have a product that people need, not just want, and capitalism allows them to charge the moon and stars for needs. These series of events are pretty reasonable.
Don't you just love this kind of "reporting".
“In recent months, refiners have cut back their production to match drops in consumer demand and prevent retail prices from dropping.”
Actually, producers of goods often reduce their production when demand falls.
The fact is that the cost of gasoline didn’t rise as fast as the cost of oil. Refiners’ margins have been squeezed, and reducing production is the logical step in such an environment.
Can someone help me out here regarding speculation. I am assuming that they are talking about commodities trading which I thought actually had the effect of stabilizing the market. Plus commodities is a zero net sum game, so for every 60% winner there is a 60% loser. I do not see how this actually drives the price of the market it just smoothes it. Right?
Steps up to do what? Beyond opening up drilling and allowing nuke plants there is nothing they can do to make things better. See my #5 if you don't understand the industry.
Another “nonpartisan” opinion. Sure, and if you believe that, you may also think that oil companies don’t have to compete for customers. Look, demand is still relatively high, and high-priced inventory has yet to be cleared from the refineries. The price has not dropped all that much yet, but will come down this summer, in spite of the alarmists’ claims. The spot market price for crude as of two minutes ago was $127.09/bbl.
Assuming this article is correct (and I have serious doubts about this “Consumer Watchdog” group) what other industry would be expected to respond to reduced demand by increasing supply?
Gas price normally lags oil price....refiners margins are tight now...when oil goes down...gas won’t come down as fast as oil..as least for a while....