Posted on 07/23/2007 6:17:52 AM PDT by Daffynition
The U.S. House of Representatives recently passed legislation instituting penalties of up to $150 million for companies and up to $2 million and 10 years' imprisonment for individuals found guilty of gasoline "price gouging."
But the real gouger driving up gasoline prices is not the private sector – it is our government.
To "gouge" means to extort, to take by force – something that oil companies and gas stations have no power to do. Unlike a government, which can forcibly take away its citizens' money and dictate their behavior, an oil company can only make us an offer to buy its products, which we are free to reject.
Because sellers must gain the voluntary consent of buyers, and because the market allows freedom of competition, oil and gasoline prices are set, not by the whim of companies, but by economic factors such as supply and demand.
If oil companies could set prices at will, surely they would have charged higher prices in the 1990s, when gasoline was under one dollar a gallon.
Because oil companies and gas stations cannot set their prices arbitrarily, they must make their profits by earning them – by efficiently producing something that we value and are eager to buy. In so doing, they assume great risks and expend enormous effort.
Over the decades, oil companies have created a huge infrastructure to produce and distribute gasoline by investing hundreds of billions of dollars in prospecting, drilling, transporting, stocking and refining oil.
In the absence of political factors like the 1973 OPEC oil embargo or the Gulf wars, the net effect of oil companies' pursuit of profit has been to drive the price of oil and gasoline, not up, but down.
The price of a gallon of gasoline (in 2006 dollars) fell from $3 in the early 1920s to $2.50 in the 1940s to $2 in the 1960s to under $1.50 in the 1990s.
This downward trend is all the more impressive because it required the discovery and exploration of previously inaccessible sources of oil and because it persisted despite massive taxation and increased government regulation of the oil industry.
When we see the price of gasoline today, we should not accuse oil companies of gouging but rather thank them that prices are not much higher.
The true culprit that we should condemn for driving up prices is the government, which has engaged – with popular support – in the gouging of both the producers and consumers of gasoline.
Federal and state governments have long viewed gasoline taxes as a cash cow. In 2003, for instance, when the average retail price for a gallon of gasoline was $1.56, federal and state taxes averaged about 40 cents a gallon – which amounts to a far higher tax rate, 34 percent, than we pay for almost any other product.
(Contrary to popular belief, gasoline taxes do not just pay for the roads we drive on; less than 60 percent of the gas tax-funded "Highway Trust Fund" goes toward highways.)
Along with high taxes, environmental regulations – justified in the name of protecting nature from human activity – have dramatically increased the production costs, and thus the price, of oil and gasoline.
The government, for example, has closed huge areas to oil drilling, including the uninhabited wilderness of ANWR and the out-of-sight waters over the Atlantic and Pacific continental shelves. This, of, course significantly reduces the domestic supply of oil.
The government also has passed onerous environmental regulations that make it uneconomical for many old refineries to keep producing (50 out of 194 refineries were shut down from 1990 to 2004) and discourage new refineries from being built (no major refinery has been built in the last 30 years).
Regulations such as these push the surviving refineries to operate at almost full capacity, creating a situation where any significant reduction in the production of some refineries (e.g., from a hurricane) cannot be compensated by increased production in others.
Exorbitant spikes in prices, which many attribute to oil companies' "gouging," are actually caused by government constraints.
If we want to stop the irrational forces that have been driving up the price of gasoline and our cost of living, we must demand that our elected officials eliminate the regulations and excessive taxes that restrict the producers of oil and gas.
It's past time to stop gouging oil companies – and ourselves.
Note that the prices in the warm nation are taxed FAR less than in the cold land to your North.
Incidentally, that "base" price includes: exploration, transportation, dividends, more taxes not listed, operations, expansions, and myriad expenses too numerous to list.
Yeah, the folks reaping "windfall profits" at 3.5 cents on the dollar (before paying their expenses)duh(which is the gross number published by the press to incite ignorant posts like yours) are FAR more culpable than the GOVVIE which yanks over TWENTY PERCENT (in the USofA) into its coffers.
You want lower fuel prices? REDUCE FUEL TAXES, FRiend.
Exxon-Mobil...
or Coca-Cola.
Look it as a percentage of return on investment.
Why?
Because though the numbers seem huge, so is the investment.
By the time the well I am working is completed, there will be well over 6 million dollars wrapped up in bringing this one well on line.
Just a land rig, nothing really exhorbitant going on here.
I can't give you a guess at estimated production, or the rate, but it would take the daily output from thousands of these wells to supply the East coast alone.
Those costs are just for drilling and putting the well on line, not for transport or refining the product, or transport again to retail facillities.
There are no guarantees any given well will produce, either, and there are definitely multiwell exploration projects where the last well is drilled first.
As for oil companies, they provide outstanding opportunity for employment, directly and indirectly, for persons of all educational levels, from roustabouts to Heads of Exploration and CEOs. So I'm not buying how they are doing anything at "the expense of the working people". THey are paying quite a few of "the working people" for their labors.
As for the next administration starting regulating again, They (assuming you mean the government) have never stopped regulating in my lifetime, and I'm a great-grandpa. They have only found new ways to regulate, or "justify" regulations and taxes, and frankly, this tax the oil companies and consumers and blame the oil companies gambit is getting tired and thin.
Please educate yourself about the industry, the hours we work (CEOs are few and far between, many of us get our hands dirty), the places we work, and conditions we work under before you assume someone is getting screwed.
We buy gasoline, diesel, and other petroleum products, too.
As for the politicians drilling anywhere, the only place they drill is into our paychecks.
It is sad they do not have the stones to do so without blaming others.
If the Government changes regulations so often that retrofits are not implemented before they boecome obsolete and then threatens fines of six figures or more a day, you shut down.
We used to have a small refinery near where I live. It was dismantled and shipped to someplace in Africa decades ago, not because it was incapable of producing fuels, but because the upgrades, new environmental compliances, and other regulations involved would cost more than the projected output for the life of the refinery.
About half of American refineries have met similar fates in the last three decades, all at the hands of Government regulation, NIMBYs, and the dirt worshipper lobby.
Nope. The Government is not doing the industry any favors, at least as far as permitting any refinery construction goes, and while that may seem like a good deal for the oil companies, it sticks them with maintaining and upgrading existing facillities and losing revenue during the downtime.
The traditional means of growing involves capturing market share, and the ability to out produce your competition can put you on that growth curve.
Waiting until public outcry "gets loud enough", in the current political climate, would be more likely to lead to government takeover. If you think fuel is expensive now, wait until you have to get it from scalpers on the black market.
Supply and demand.
You got some place to store a few million barrels of oil? It takes roughly 1 million barrels of oil to supply the East Coast for a day, iirc. So just how much (vlolatile, flammable) inventory were you going to stack up where?
Your answer is a thing of beauty!
There's stations all over the country shuttering up because of the lack of gas. (/s) They're so broke Murphy Oil in Arkansas is paying college tuition ($50 mil) for everyone graduating high school in one town. Me and my 75 kids are packing up and moving south! Blackbird.
That paltry 8-10% margin you refer to translates into RECORD QURATERLY PROFITS to the tune of 10's of BILIIONS of dollars, quarter after quarter. In case you don't know what a PROFIT is, that's what's left after they pay all their bills, even their fatcat salaries.
... then jewelry retailers should drawn and quartered over their 2000 to 5000% markups.
You have a vehicle that runs on gold/silver and diamonds? (I guess ya'll got tired of using milk and water prices now on to jewelery?) Man, what are you waiting for, there's zillions to be made?! Of course the analogy is a non-analogy considering our entire way of life, you know chasing that last dollar, depends on oil, and if there was never another piece of jewelry made, BFD. Blackbird.
No you can't. There isn't a one cent difference in the price of gas at any station in Billings, MT. One goes up, they all go up. One goes down, they all go down, keeping the same price bar none. I can throw a rock from downtown and hit any one of three "competing" refinery's. Many if not all States have a minimum price that any station can charge at the pump, nice FRee Enterprise system you're touting there. Blackbird.
Thank you for providing that link.
You haven't clearly shown anything other than the ability to make things up. Try posting some of the data. Start with www.eia.doe.gov if you need a data source.
All I know is I’m sick of having a sore ass every time I fill up my gas tank.
Percentage of revenues to profit doesn't mean anything to you? Why is keep 10¢ on the dollar out of line? If they were broken up into many smaller companies so that each one's total was little, but the same amount of money was kept, would that be better to you?
I’ve long believed that the oil companies and gas stations should post the price of a gallon of gas on the pumps AND post the taxes on every gallon separately...
“OK, that’ll be $2 per gallon. Plus $1.10 in taxes PER GALLON, of course. Don’t like that 30% tax? Sorry, talk to your representative. Your total is $75, please pull ahead.”
The price of gas in Billings, MT ranges from $2.95 to $3.09.
If profit margin by U.S. oil refiners has shot up 158% since 1999 (the year Exxon and Mobil merged). The consumer’s price has also gone up by a huge amount. Are you suggesting they not related?
I would like to see those numbers supported. I suspect you don't mean profit margin but actual dollars. Comparing to 1999 is cherry-picking the data to a year when oil companies we capping wells they couldn't afford to produce when oil was below $10 a barrel and many sold off assets just trying to stay alive.
Again, is keeping 10¢ on the dollar out of line?
Since George Bush became President in 2001, the top five oil companies in the United States have recorded profits of $464 billion through the first quarter of 2007:
ExxonMobil: $158.5 billion
Shell: $108.5 billion
BP: $89.2 billion
ChevronTexaco: $60.9 billion
ConocoPhillips: $46.9 billion
Many industry analysts claim that rising demand in China and India are the big reasons why the price of oil exceeds $60 a barrel. However, they neglect to mention the role U.S. demand plays in setting global crude oil prices. Americans consume 25% of the world’s oil every day (see chart comparing global oil consumption). China, the next biggest consumer, uses less than 7% of the world’s oil each day. America’s huge appetite for oil combined with the fact that the United States is the world’s third largest producer of it (only Saudi Arabia and Russia produce more than we do) creates a strong argument that the United States holds a lot of sway over world oil prices.
The energy bill that President Bush signed in 2005 does nothing to address the U.S. factors that are driving oil and gas prices to record highs. Congress and the White House explicitly rejected efforts to improve fuel economy standards for our cars and trucks (which account for 60% of our oil consumption) or adequately fund fossil fuel alternatives.
The oil companies don’t mind. Since Bush became President, the largest five oil companies operating in the US - ExxonMobil, ChevronTexaco, ConocoPhillips, BP and Shell - have enjoyed profits of $464 billion, with ExxonMobil leading the way with profits of $158.5 billion.
Meanwhile, gas prices continue to go up up up - and no oil company is reinvesting their profits into the things that will benefit motorists. For example, in 2006 ExxonMobil spent $37.2 buying back its stock and paying dividends - at the same time, the company spent only $3.3 billion on capital investment in the U.S. So there is a direct correlation between record prices paid by consumers and record profits enjoyed by oil companies. As Americans shell out more dollars at the pump, the profit margin by U.S. oil refiners has shot up 158% since 1999 (the year Exxon and Mobil merged).
http://www.citizen.org/cmep/energy_enviro_nuclear/articles.cfm?ID=13912
And yes their total dollar profits are up. So are their expenses up. And the taxes they pay. And the dividends they pay their shareholders up. And the amount of investment they are pouring into exploration and capital investment have shot up the prices for material equipment and labor. Some drilling rig rates have tripled in less than 10 years. The demand for people in the industry hasn’t been seen for more than two decades. The oil industry is paying a lot of money to people willing to turn to this risky business.
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