It is a vital part to our lives. It is as vital as electricity and phone service which are both regulated.
We NEED GASOLINE and will pay almost any price to have it. Without GASOLINE most of America can not go to work. Major companies/airlines would fail.
There are very few companies which drill pump and refine gasoline due to the high costs of this process. Most of the world's oil are in the hands of a very few nations Known as OPEC who does not use the supply/demand economic model but will set production at a certain price target and will reduce supply i.e. output to get this price this in classic economic theory is called price fixing. Price fixing only can work when there is no competition to speak of.
Thus you have a product which has almost unlimited demand. Which people will pay almost all their expandable money to get and at the some time you have OPEC and the oil companies creating bottlenecks and artificial supply reductions to keep the price stable. It is no wonder that when you add an unforeseen event to this calculation the whole system fails.
There is no reason why the US has not built a refinery in 30 years. The oil companies blame the environmentalists but they have NO incentive to build a new refinery this would increase supply and drop the price. The OIL companies should be regulated just like the electric companies. The electric companies make a profit, they repair and upkeep their lines they pay dividends and they have to request price increase which most are approved. This cause the electricity to be stable in price. Exxon made 32% more earnings in the last 3 months year over year. You can not have a company that is vital to you Country's survival under the control of stockholders who only can about the next 3 months profit. This does not promote redundancy pipelines new refinery production, nor as we have seen increase in exploration nor does it create an incentive for new technologies This creates a very low risk environment One final not if gas station must charge more for the product then they bought it for to be able to buy the next batch why do they not sell for less then they bought it for if the next batch is going to be cheaper. the price rises with the market true but it never falls with the market. It falls very slowly if ever. Oil companies will charge higher prices until an economic impact is felt then the will lower prices.
The gas shortages and rising prices are due to over regulation and government interference.
More regulation and interference is only going to make it worse.
Exxon is a publically traded company. Go buy some of their stock if you think they are charging too much and you can share in their windfall too.
An investment group is trying to build a new refinery in AZ. Thev've just about completed the permit process, although their may be a couple of lawsuits pending. The initial investment group ran out of money, and they started with something like 30 million dollars. This is just to get through the planning and permit stage.
So, care to continue to talk about economic viability of building refineries?
Yeah, regulating the electric companies worked so well in CA. This state regulated them right into bankruptcy and power shortages.
So what? Exxon will take a portion of that profit and explore more more oil (but not in the United States because of government regulation). Another portion will go toward maximizing the efficiency of current operations.
Of course some will go into the bank accounts of those in charge, which evokes the predictable (and ultimately irrational) emotional response.