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Gas pains

When I was learning to drive, I would often look for the cheapest gas prices in town. (This being a very small town, my options were pretty limited -- I think 3.) My father derided my attempts, telling me that "gas is the cheapest thing you'll ever put into your car."

I promptly scored no points with my father by immediately mentioning two exceptions: washer fluid, and the girl three houses down the street. That cost me my car privileges for a week.

But that particular bit of advice has stuck with me ever since, and I'm reminded of it every time I see gasoline prices take another jump. I remember when they soared above $1.50, closed in on $2.00, flirted around $2.40, shot up to $3.25, and dipped down to $2.70 recently. (I'm using the lowest I can recall from each cycle.)

I'm put in mind of a bit of economic analysis I saw a while ago: adjusted for inflation, during the recent gas price surge, gas barely brushed against the previous record high. And now it's dropped down again.

It's my belief that it isn't the price of gas that is the real problem, but the speed at which they shot up. It was a shock to our systems, a sudden assault on our wallets that none of us could anticipate. (For one, I might've considered repairing my little four-cylinder instead of moving up to a 4,000-lb. White Beauty with a big, powerful, multi-valve V-6.)

I also heard a guy who heads up the gas station owner's association in Massachusetts talking about gas prices. He said that he and his colleagues weren't making any money off it. Their contracts with their suppliers dictate their gas prices -- it's fixed at a certain amount above their costs, with an average of $0.10 statewide. So when gas prices went up, they didn't see a corresponding rise in their income.

Further, in some cases, they often made less. On credit card purchases, the credit card companies make a set percentage off the transactions. As the total gas sale increases, so does their cut -- but the gas stations' profit doesn't. In some cases, he said, some stations stopped making any money at all off gasoline.

So, where are the profits going? According to others, like Bill O'Reilly, it's the oil companies. I'll leave others to do that kind of digging; I don't have the resources or the knowledge of the petrochemical industry to do a proper job.

I just know that whoever's making scads of money, it ain't the guy on the corner. And the price of gas is coming back down, from BRUSHING with record highs. Speaking as someone who doesn't have a great deal of extra income, it's been painful for me.

But I just can't go beating up the guy at the gas station. I've never liked shooting the messenger.


Comments (22)

Hmmmmm,Let's not f... (Below threshold)

Hmmmmm,

Let's not forget our "friends" the Saudi Arabians. They aren't exactly taking it on the chin here.

I wouldn't shoot the messenger either, but at the place where I gas up ... the only language spoken internally is Arabic.

They always seem to be laughing when I leave too. Always wondered why?

I can remember driving down... (Below threshold)

I can remember driving downtown Sacramento in my 67 bug where two bucks worth of gas lasted me over a week. Most stations charged 32 to 37 cents a gallon. I had to do a double-take when I saw a new Cheveron Station right across from the capital with a price of 49.9 To that I exclemated that I would be damned if I would ever pay fifty cents a gallon for gas....... :)

Yep, the royalty owner is d... (Below threshold)
Sasquatch:

Yep, the royalty owner is doing quite well.

The Feds own most of the offshore. Alaska owns the North Slope. Other States also own a lot of producing land.

It ain't just the House of Saud.

Everyone complaining about ... (Below threshold)

Everyone complaining about the profits that oil companies are making should just STFU, brush up on their Econ 101 notes and buy stocks in those companies as a hedge.

A sizeable component of the price you pay at the pump is made up of taxes that go to things like the pork laden Highway Bill.

When gas prices were way down a few years ago (see graph around 2000 at Gasoline Prices Historical and Today) I didn't see a big outcry from the public to make sure that all the billions of dollars invested by those same companies in reserach, development and exploration were being properly compensated for with an adequate price per barrel of oil.

All the carping about high gas prices is just selective and convenient amnesia. Individuals like O'Reily calling for a give back of profits by oil companies are nothing but quasi-socialists.

Furthermore, I don't see pe... (Below threshold)

Furthermore, I don't see people carping that Hollywood makes too much money when a film that costs $20 million to make rakes in over $100 million. When is Congress going to do something about the immoral profits that Hollywood makes? ...not to mention the insane amount of $ per hour that top stars make...

If those damn enviro-wackos... (Below threshold)
minnie:

If those damn enviro-wackos who have the real power in this country hadn't such a stranglehold on new drilling and outrageous pollution control regulations none of this would have happened.

It's not Dear Leader's fault, so quit saying that. He can't be expected to take any responsibility for national energy policy decisions, these outrageous price spikes just happen and it's nobody's fault -- it's not like corporations have any control or influence over the instantaneious market supply or spot prices.

I hate you Liberal bush-hating moonbats who say that because his entire family and Vice Leader and the people he appointed all turned out to have personal financial incentives to keep the oil industry profits high that has anything to do with us paying out the ass for gas. He is a good man and only cares about the struggling Americans. You all know in your hearts it's all Hitlery Klintoon's fault and because of stuff that was out of his control like the Saudis and the Iraq War and the hurricane response and stuff like that.

Someday they will release the secret minutes of the secret energy policy meetings Dick held before the secret decision to fight the Noble War to Liberate Iraq's Oil that we NeoCons don't need to fight personally because brave people will do it for us, and you will all see how much Dear leader had our best interests at heart. Secretly.

If the prices for stations ... (Below threshold)
JimK:

If the prices for stations are fixed by distrbutor, why do three different Mobil stations withing ten miles of me, all serviced by the same distributor, all have different prices? They are almost ten cents a gallon apart from each other at the ends of the spectrum.

The Hess and 7-11's around here are ten cents lower than the lowest Mobil. Can their distributor really be charging that much less?

On top of that I worked the register at a station in the early 90's and the owner changed prices on his whim. I'm not convinced this price setting thing comes from any higher authority.

Porkopolis: Great enthusiasm, but come on man...cheerleading for oil company profits? They're not going broke. No need to attack them, but let's not waste our breath crying for thier bottom lines either. We're talking trillions and trillions just in our lifetimes.

Oh, lovely. Minnie's back. ... (Below threshold)
Jay Tea:

Oh, lovely. Minnie's back.

I dunno what I would do without Minnie around to back me up on every single point, making sure to cover every single stupid, paranoid point the left accuses the right of. Gee, if I didn't know better, I'd call minnie a "moby," a leftist who spouts right-wing rhetoric just to make the rightists look bad.

I know that's not what minnie does, because minnis is SMARTER than that. minnie's instead a truly brilliant and gifted satirist, making sure to always refer to Bush as "Dear Leader," the precise term used to describe the paranoid, psychopathic dwarf who tyrannizes North Korea.

In the ongoing competition between most irritating dipshit who comments here, though, minnie loses out to plover. At least minnie has a passing familiarity with SPELLING and GRAMMAR.

J.

Speaking of cars, has anyon... (Below threshold)
George:

Speaking of cars, has anyone ever looked at buying a
foreign car in the context of outsourcing America's jobs?
Everybody (myself included) is complaining about
outsourcing but it really infuriates me when I know
they drive a foreign car.

George - Can you tel... (Below threshold)
Mac Lorry:

George - Can you tell which brands are really domestic and which are not? Hint, you can't tell by the name plate. I've bought Dodge, Chevy, and Ford new and used, but now Dodge is DaimlerChrysler and both GM and Ford have major feeder plants outside the United States and even outside North America. On the other hand, brands like Toyota, Honda, and Subaru contain 80 plus percent North American content. For example, Honda builds their van, which is Consumer Reports top pick for 2005, in Alabama. Over 80% of Honda's van is made in North America including the engine. Honda also makes the engines for GM's Saturn VUE. The electronics that increasingly makes up more and more of modern vehicles are mostly of foreign manufacture regardless of brand. Auto manufacturing has become so globalized that there are no clear domestic brands anymore.

JimK said:"Porkopo... (Below threshold)

JimK said:

"Porkopolis: Great enthusiasm, but come on man...cheerleading for oil company profits? They're not going broke. No need to attack them, but let's not waste our breath crying for thier bottom lines either. We're talking trillions and trillions just in our lifetimes."

JimK:

Oil company profits are the stock and bond holders' profits!!!!. People like you and me that have investments, 401Ks, IRAs, pensions, Mutual Funds, etc. (And if you don't have investments, I question your sanity because Social Security sure won't be there for your retirement years.)

About half of American households own stock either directly or through a mutual fund.

Some are out looking for the 'ugly' profit motivated capitalist and that capitalist is US (pun intended). The very reason we have gas that is in many places still about the same price as a gallon of milk is because billions of dollars were invested; with a lot of associated risk.

Don't like the high gas prices?...As I suggested above, invest directly in energy companies as a hedge. Like the Chinese saying "wei jee jyi chuan jee", Crisis is Opportunity.

Those that advocate taking away the benefits (profits) that come with risk taking (like some Senators have proposed with a Windfall Profit Tax) and leaving stockholders to take all the risk will eventually create a situatoin where very little of the product (gasoline) everyone is complaining about is produced.

What company (collection of stock holders) is going to go out and drill in the artic or in thousands of feet of deep ocean water if there's no return on the investment? Then add to that the risk of working with a mercurial and politically unstable nation like Venezuela, Russia, Nigeria, etc.

And after they've taken that risk and the product they're producing is all of a sudden in high demand, you're suggesting that we limit their profits!?!? Profits that would go to the risk takers, stock holders, mutual fund holders, retirees...

Give me a fu*k*ng break!

Those same windfall, some say filthy, profits are put back into the economy by the stock holders and reinvested by the companies to repair hurricane damaged facilities, do new explorations, develop new chemical processes like coal transformation technology, etc. That's what capitalism is all about.

Some need to be very careful what they're asking for. You can't just go around f*ck*ng around with the laws of economics.

Here's an analogy I give to my children all the time to explain economics. You can sow a seed for a tree and have it start growing. If some time during the life of that tree you obstruct it's light source, it will use its built-in phototropism to try to get around the obstuction. This comes at a price.

If the tree has to work its way into a shape that is way of center, that tree is now susceptible to being knocked down by a strong storm. Trees with no obstruction generally grow straight, centered, strong and weather the storm.

We keep mucking with the natural economic order of things we're going to end up with weak companies or no companies at all.

"All the carping about high... (Below threshold)

"All the carping about high gas prices is just selective and convenient amnesia. Individuals like O'Reily calling for a give back of profits by oil companies are nothing but quasi-socialists."

A few things here, since the price of gas has almost doubled those % are now out of date with taxes making up only about 15%. Second, if people who are asking that the oil companies rebate some of their profits are quasi-socialists, then oil companies are the real deal, dyed-in-the-wool socialists as oil is one of the most heavily subsidized industries on the planet. I’m sure with all of those profits the oils companies would have no objection to actually participating in the free market now would they?

And since no one here seems to be asking the government to stop these giveaways to profitable privet enterprises I accuse you all of being real deal, dyed-in-the-wool socialists. [grin, gosh this "call everyone a socialist" game is fun!!!!]

Oh and BTW for anyone who c... (Below threshold)

Oh and BTW for anyone who cares to actually do the research, classic economic theory says that in times of high oil prices, oil companies invest more in exploration and development, but that has not been happening, most of the profits over the last three of four years have been used to bid on reserve inventories and futures, exploration and development have been declining for a number of years.

A good project for you all would be to figure out why.

Rick DeMent:Count ... (Below threshold)

Rick DeMent:

Count me in on the removal of any and all government subsidies.

And as for ' classic economic theory says that in times of high oil prices, oil companies invest more in exploration and development...'

Actually classic economic theory says that investors at all levels (stockholders, management, etc.) do an economic risk assessment and invest accordingly. You're complaining about independently made decisions...the very foundation of capitalism.

If you want to dictate that energy companies start doing more exploration with their profits (more than they're already doing) to satisfy you criterion, may I suggest that you buy stock in said companies and vote you shares in support of management that will take on some additional exploration risk.

Otherwise, leave the decisions to those that are putting their money where their mouth is.

Mr. Porkopolis,Fir... (Below threshold)

Mr. Porkopolis,

First of all good for you on no subsidies to oil companies, I guess you were four squares against the most recent energy bill passed by congress (with it’s 37 billion $$$ in subsides and untold billions in targeted tax reductions and sale of oil from federal lands at below market prices). I just wish the guys at Wizbang (and the GOP ingeneral) had your analytical capabilities.

As to my comment about classical economic theory, I never said anything about dictating to oil companies anything. I’m saying that as oil supplies get tighter, oil companies are bidding against each other for claims on existing reserves rather then investing in exploration and development. I understand completely that investors at all levels (stockholders, management, etc.) do an economic risk assessment and invest accordingly.

What I am trying to pout out is that “the market” seems to know something the Bush administration either doesn’t know (unlikely) or won’t tell us, specifically that we are not going to be able to drill our way to energy independence or even energy security.

In the ongoing competiti... (Below threshold)
mantis:

In the ongoing competition between most irritating dipshit who comments here, though, minnie loses out to plover. At least minnie has a passing familiarity with SPELLING and GRAMMAR.

I figured plover was the same person as skybird. They both tend to post short "i'm stuck in a straightjacket, typing with my nose" lunacies. And they don't seem to mind that they are almost universally ignored.

Rick Dement:I can ... (Below threshold)

Rick Dement:

I can find common ground with your conclusion.

Here's an excerpt from a post I wrote a few weeks back called Oil: Are we half empty or half full?

With gasoline prices heading to $3 a gallon, it takes quite a contrarian to make the argument that the Earth still has plenty of oil. But that is exactly what Peter Huber does in his new book 'THE BOTTOMLESS WELL: The Twilight Of Fuel, The Virtue Of Waste, And Why We Will Never Run Out Of Energy'.

On March 6, 2005, C-SPAN's Book TV aired a thought provoking presentation given by Mr. Huber.

Oil, Oil Everywhere..., from the January 27, 2005 Wall Street Journal, provides this summary of Mr. Huber's thesis:

...In sum, it costs under $5 per barrel to pump oil out from under the sand in Iraq, and about $15 to melt it out of the sand in Alberta. So why don't we just learn to love hockey and shop Canadian? Conventional Canadian wells already supply us with more oil than Saudi Arabia, and the Canadian tar is now delivering, too. The $5 billion (U.S.) Athabasca Oil Sands Project that Shell and ChevronTexaco opened in Alberta last year is now pumping 155,000 barrels per day. And to our south, Venezuela's Orinoco Belt yields 500,000 barrels daily.

But here's the catch: By simply opening up its spigots for a few years, Saudi Arabia could, in short order, force a complete write-off of the huge capital investments in Athabasca and Orinoco. Investing billions in tar-sand refineries is risky not because getting oil out of Alberta is especially difficult or expensive, but because getting oil out of Arabia is so easy and cheap. Oil prices gyrate and occasionally spike -- both up and down -- not because oil is scarce, but because it's so abundant in places where good government is scarce. Investing $5 billion dollars over five years to build a new tar-sand refinery in Alberta is indeed risky when a second cousin of Osama bin Laden can knock $20 off the price of oil with an idle wave of his hand on any given day in Riyadh.

Contrast this to geologist Kenneth Deffeyes' argument that the world's oil production has peaked. From the summarry describing the presentation given by Mr. Deffeyes on August 22, 2005, again on Book TV:

Beyond Oil: The View from Hubbert's Peak
from August 22, 2005

Geologist, author, and Princeton University professor Kenneth Deffeyes writes that world oil production is no longer increasing in his new book, "Beyond Oil: The View From Hubbert's Peak." The title of the book comes from petroleum geologist M. King Hubbert, who formulated that the world's oil production would reach its peak in 2000 and begin to decline rapidly until the global fossil fuel supplies went dry. Mr. Deffeyes believes that the world's oil production would peak at the close of 2005 and that the eventual absence of fossil fuels would have a devastating and potentially catastrophic effect on world economies. The book also lists the potential replacement fossil fuel energy sources and the ways in which they can be utilized effectively.

Oh and BTW for anyone wh... (Below threshold)

Oh and BTW for anyone who cares to actually do the research, classic economic theory says that in times of high oil prices, oil companies invest more in exploration and development, but that has not been happening...

Funny, there's a lot of formerly out-of-work oilfield people who'll be astonished to learn that exploration and development aren't happening. Maybe they should put their paychecks under their pillows and see if they're gone when they wake up?

Here's the other dirty litt... (Below threshold)
jd:

Here's the other dirty little secret of gasoline prices, and the prime reason why Guvmint will not be inclined to help with investigation - money.

Each state that does sales tax does so on a straight percentage of the total price per gallon - after taxes. Right now, sales tax collections in California are at an all-time high, because the sales taxes on gasoline are now being computed on $3 per gallon rather than $1.75 a year and a half ago.

No one in state Guvmint will lift a finger to stop that kind of moolah coming into the bank.

On average, oil company mar... (Below threshold)

On average, oil company margins run 8%, or at least they did last time I looked it up. Sure they are making a lot of money with that 8% right now, but who are we to begrudge them that with the risk they have to assume buying this ridiculously priced oil?

OPEC doesn't set the price on oil, they only set supply amounts, so you can't blame them either.

The blame lies with exchange traders and end product users. The exchange traders bid up oil prices by speculating in oil futures. The end product users increase gas prices by refusing to place limits on themselves. I am just as guilty as any, but gas prices will not go down significantly until demand slows or supply stabilizes. Pick your poison.

This is highly simplified, but I don't have the time and energy to give it my all tonite.

Minimum prices are set by t... (Below threshold)
frankr:

Minimum prices are set by the distributor, based upon the asking price (price the gas station owner pays for the gas, usually every 3 - 4 days). But the final price is set by the station owner, after a review (drive-by) of his/her competition. My mama used to own a 76 and this is how they set prices.

Bush, Rove, Haliburton, etc have nothing to do with the price at the pump. It's called "I don't want a refinery in my back yard" added to "Hey lets make more profit, now that people are willing to pay more at the pump, until they get pissed, and we have to lower our profit" by the distributors.

The mapgasprices.com websit... (Below threshold)
Richard:

The mapgasprices.com website will show you the cheapest gas in your area.




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