The Price of Gas

[Takara_Soong 4]

We had a discussion a month or two ago about the high price of gas. Some members talked about contacting government officials to cut taxes on gas to give consumers a break. Yesterday it was announced that Exxon Mobil had second quarter profits of $11.68 billion US (that's just for the quarter, not year to date). Royal Dutch Shell also announced a second quarter profit in excess of $11 billion US. So who is really at fault for high gas prices? Should governments step in and force oil and gas companies to lower prices in light of the huge profits that these companies are making?

[DaboGirl 7]

I say 'Demand' is to blame, but I couldn't vote for that because it isn't an option.

[Trekmachine 0]

Greed of oil and gas companies :) and Yes, their profits are ridiculous

[VaBeachGuy 12]

I try to shy away from the political debates so I won't do it here either, but I voted for greed and no I don't think the government should force prices lower.

 

The cause for the high prices has multiple sources I believe, the greed of the oil companies, Output by OPEC, Speculators and probably a few others including demand.

 

I don't believe the government should force companies to lower prices though because it would set a dangerous precedent and I wouldn't want the government dictating to companies what they can or can't charge for their product. The people that should force the companies to lower their prices is the consumers.

 

Ideally we'll start to wean ourselves off oil/gas but for now we need it and just have to strive for a time when we don't. In the meantime, since we do need it and since ANWR supposedly has enough oil to supply the United States with oil for many decades. It's senseless to not drill there. Yes we want to rid ourselves of the need for oil but we do need it, so DRILL!

[He Who Shall Not Be Named 2]

Let's look at it this way:

 

Gas has come down slightly in my part of the country. It is now about $4.20 / gallon for the cheap stuff at the cheap stations. A couple months ago it was about $4.50 / gallon which was the high point.

 

Did I pay $4.50 / gallon? Yes I did. Was I willing to pay $4.50 / gallon? We can conclude that yes I was willing to since I in fact did.

 

So now that I am paying $4.20 / gallon for something I am willing to pay $4.50 / gallon for, aren't I ripping off the oil companies by $.30 / gallon? How dare I take advantage for cheaper gas when my behavior suggests I am willing and able to pay more for it!

 

The oil companies have a business model that appears to be efficient for their desired ends. So do drug companies, Starbucks, Wal-Mart, and Microsoft. Why do Americans seek to bring down profitable enterprises? As I have attempted to point out in the above paragraph, I also make a profit of sorts from my use of gasoline even at our current prices. How long will it be before people come after me?

[Theunicornhunter 2]

The list is way too short and really should be - all of the above.

 

A lot of it boils down to laziness, greed, vanity and sometimes wilfull ignorance on the part of the public - at least in America.

 

People don't need to drive monster sized, gas guzzling road hogs - there have always been large vehicles for those that really need them. But does pampered stay at home wife need to drive an oversized SUV from her pedicure to hair appointment? And how many people won't spend a few dollars to buy reusable shopping bags rather than get plastic every time?

 

And how about these idiots (one of my biggest pet peeves) that floor the gas between red lights just so they can sit there longer waiting for it to turn green - if they just drove the speed limit - they'd save gas, lower their blood pressure and ultimately make the roads safer for life and property.

 

Yes, oil companies are greedy - but I wonder how many of our 401k's contain oil company stock? I don't really know.

 

And NO - government should not regulate prices. One thing I can say for Gov Crist - I have become an adamant opponent of government regulation from his glorious example (of over regulation). Now, there are things government could do but refuse to - such as offer tax credits for carpooling - shorten the work week - require offices to turn off the lights at night etc. I also believe that the reason we haven't found alternate fuel sources isn't because it isn't there but because too many special interests including the government are more interested in maintaining the status quo rather than making progress as a society.

 

I'm not a proponent of drilling ANWR - it would be years before the wells were located and drilling established and we'd still have to deal with lack of refineries and transport of the oil etc. Aside from that, drilling in ANWR furthers the attitude that we can continue to waste and pillage nature rather than learn to conserve and be responsible and think outside the box and develop new technology. But in true NIMBY fasion - if it's ANWR versus the Gulf - go drill in ANWR :)

[VaBeachGuy 12]

I'm not a proponent of drilling ANWR - it would be years before the wells were located and drilling established and we'd still have to deal with lack of refineries and transport of the oil etc.

 

Yeah, it would be years. But if they had drilled years ago like people have been trying to get them to do then we'd have it now. So the longer we keep saying "it'll be x number of years" the longer we don't start that clock running.

 

We need to be weaned off oil for sure. Hopefully the new Lunar missions and the proposed Mars missions will generate innovation in battery technology and advance the march toward getting off oil. But in the meantime we need the oil and we can't be left open to being held hostage through oil prices.

[trekz 7]

I believe gas prices don't need to be as high as they are. And prices always shoot up in a hurry but take forever to go back down, and rarely drop back all the way. Often the reason for prices to go up are related to speculation on what might happen, not what has, or related to lack of refineries, or some refineries being out of commission. There is definitely greed operating and OPEC and oil companies are both trying to make as much money as they can.

 

Rather than try to set prices, government should require joint oil company investment in building or updating refineries. If that isn't done, then the subsidies to the oil companies for developing new oil sources should be decreased or eliminated, and the vast profits of the oil compainies used for developing new energy sources.

 

I believe that the govenment needs to offer tax credits to citizens who buy more fuel efficient houses, major appliances, and cars, and continue to pile on taxes on fuel inefficient vehicles (unless they can be proven to be needed for business purposes or the disabled). Also recreational vehicles ATV's, speedboats, etc that are fuel inefficient and produce noise pollution should be taxed to the hilt. Provide incentives for development of alternative energy - wind, solar, etc. And agree with TUH regarding tax credits for carpooling, a shortened work week, and turning off lights in offices, etc at night. Conservation can produce savings far sooner than drilling in pristine areas imo.

Edited August 1, 2008 by trekz

[He Who Shall Not Be Named 2]

I believe that the govenment needs to offer tax credits to citizens who buy more fuel efficient houses, major appliances, and cars,

They do that now. One of the reasons everyone was in a rush to buy a Prius when they came on the market is because of the tax credits. But if you offer a tax credit to one group of people you need to raise taxes on another group to compensate for it. If you raise taxes on SUV owners you are really going to hear it from the residents of states where the alternative to owning an SUV is getting stuck in the snow or mud.

[VaBeachGuy 12]

If you raise taxes on SUV owners you are really going to hear it from the residents of states where the alternative to owning an SUV is getting stuck in the snow or mud.

Or "soccer moms/soccer dads"

[Theunicornhunter 2]

I lived in snow country before SUVs were popular and people managed - you had all weather tires on your car and kitty litter and a shovel in your trunk. Not to mention small cars are much easier to push than an SUV. And cars are safer in accidents because of the center of gravity

 

Soccer moms don't needs SUV's unless you have more than two kids. Maybe they should develop a car with three seats - wait that's a van and people don't buy vans because .... oh because they're not cool - ie vanity. You're safer carting your kids around in a van or car than an SUV.

[VaBeachGuy 12]

I lived in snow country before SUVs were popular and people managed - you had all weather tires on your car and kitty litter and a shovel in your trunk. Not to mention small cars are much easier to push than an SUV. And cars are safer in accidents because of the center of gravity

 

Soccer moms don't needs SUV's unless you have more than two kids. Maybe they should develop a car with three seats - wait that's a van and people don't buy vans because .... oh because they're not cool - ie vanity. You're safer carting your kids around in a van or car than an SUV.

Yeah, when I mentioned soccer moms/dads I was mainly thinking of minivans and such.

[He Who Shall Not Be Named 2]

Soccer moms don't needs SUV's unless you have more than two kids. Maybe they should develop a car with three seats - wait that's a van and people don't buy vans because .... oh because they're not cool - ie vanity. You're safer carting your kids around in a van or car than an SUV.

Vans are safer because of the center of gravity, but I'm not sure they are any more fuel-efficient than SUVs.

[trekz 7]

I lived in snow country before SUVs were popular and people managed - you had all weather tires on your car and kitty litter and a shovel in your trunk. Not to mention small cars are much easier to push than an SUV. And cars are safer in accidents because of the center of gravity

 

Soccer moms don't needs SUV's unless you have more than two kids. Maybe they should develop a car with three seats - wait that's a van and people don't buy vans because .... oh because they're not cool - ie vanity. You're safer carting your kids around in a van or car than an SUV.

If there are some states, northern ones then where snow can be agreed upon by the government to be a major transportation factor that SUV's are required, or people live in isolated rural areas, then there could be a waiver for such a tax. But in urban areas such as where I live, SUV's clog up the streets, are impossible to see over or around, and are often rarely used to get around in major snowstorms etc.

 

Also to comment on TUH's point about snow country and how things used to be: where I lived in a more rural area, when there was bad weather, more people used to curtail their driving. More people heeded storm warnings and used common sense. People didn't feel compelled to go out in horrible weather.

 

As far as tax credits, yes they exist. But to get more people to switch to energy efficient products, increase the tax credits.

 

People are all crying for change. Well, real change won't be easy. In order to really change things, some temporary suffering may be necessary. I'm willing be inconvenienced if we can lower energy prices, increase conservation, recycling, etc, have more energy efficient vehicles, appliances, homes etc. IMO limit lobbyists, the over-influence of big corporations, etc and things will be better.

[VaBeachGuy 12]

It's too simplistic to say that the only thing that needs to be done is conserve or change, the reality of life is that oil prices are too high and people will suffer because of it. Everyone tends to focus on SUV's as the end all of evil gasoline usage but that's not the whole story. Heating oil is sky high too and when winter comes there will be people in northern states that can't afford to heat their homes. We can say "conserve" and "change" all we want but those things will only go so far. The reality is that right now and for the foreseeable future we are dependent on oil.

 

We need to develop more efficient ways of using it as well as ways of getting off it entirely but those are more mid to long range plans for the future. The present needs to be focused on also though and I know ANWR won't help for the present in a huge way but it will help, if drilling in ANWR begins then the speculators that are driving prices up won't be speculating on shortages anymore and prices will come down. When prices come down then grandmas and grandpas can be warm when it's 20 below outside. People shouldn't have to choose between food and heating oil.

[Takara_Soong 4]

I say 'Demand' is to blame, but I couldn't vote for that because it isn't an option.

Demand is always a factor in pricing but shouldn't competition offset that to a degree. There isn't a shortage. When is the last time you heard about stations running out of gas like there was during the energy crisis in the 70s. The price of crude is artificially high but the price set at the pump has obviously got a major mark-up to support the type of profits companies are earning.

 

I don't know what it's like in the States but in Canada there have been accusations of collusion and price fixing amongst the major oil and gas companies for years. Why is it that the price of gas is virtually the same at every gas station? Why are their no price wars amongst competing brands?

[nerd359 0]

I say 'Demand' is to blame, but I couldn't vote for that because it isn't an option.

 

Here here.

 

We need to be weaned off oil for sure. Hopefully the new Lunar missions and the proposed Mars missions will generate innovation in battery technology and advance the march toward getting off oil.

 

We have the tech now - Look up Tesla Motors. It's just expensive has heck.

 

But in the meantime we need the oil and we can't be left open to being held hostage through oil prices.

 

To late.

 

Demand is always a factor in pricing but shouldn't competition offset that to a degree. There isn't a shortage. When is the last time you heard about stations running out of gas like there was during the energy crisis in the 70s. The price of crude is artificially high but the price set at the pump has obviously got a major mark-up to support the type of profits companies are earning.

 

Stop thinking local end products. The World production of Petroleum is 87 Million Barrels a Day (MBD), while Demand is 88 MBD. Thus the price rises (econ 101). Now oil and derivatives have been generally inelastic, but as prices have risen, a point has been reached where they have some elasticity (partly from alternatives (Fischer-Tropsch, Thermal Depolymerization, Unconventional sources, biofuels (with subsidies), ect) coming online).

 

I don't know what it's like in the States but in Canada there have been accusations of collusion and price fixing amongst the major oil and gas companies for years. Why is it that the price of gas is virtually the same at every gas station? Why are their no price wars amongst competing brands?

 

Limited Diferentiation in supply, and a very, very small margin.

[Theunicornhunter 2]

Soccer moms don't needs SUV's unless you have more than two kids. Maybe they should develop a car with three seats - wait that's a van and people don't buy vans because .... oh because they're not cool - ie vanity. You're safer carting your kids around in a van or car than an SUV.

Vans are safer because of the center of gravity, but I'm not sure they are any more fuel-efficient than SUVs.

 

The heavier a vehicle is - the more gas it will burn - vans are worse than small cars but not as bad as supersized SUV's

 

It's too simplistic to say that the only thing that needs to be done is conserve or change, the reality of life is that oil prices are too high and people will suffer because of it. Everyone tends to focus on SUV's as the end all of evil gasoline usage but that's not the whole story

.

 

I didn't mean to sound as if that was the only solution - right now conservation isn't even part of the picture and that's the part that bothers me - our government encourages waste. As of the discussion of SUV's -that's mainly because SUVs are in many cases a vanity purchase. And to this point I have managed to avoid any comments about 40% of our fuel is used on shipping food across country - eat more locally grown foods (or at least less prepared foods). :) It's the fact that our government does nothing to educate the people about conservation or encourage it that really, really bothers me.

[VaBeachGuy 12]

I didn't mean to sound as if that was the only solution - right now conservation isn't even part of the picture and that's the part that bothers me - our government encourages waste. As of the discussion of SUV's -that's mainly because SUVs are in many cases a vanity purchase. And to this point I have managed to avoid any comments about 40% of our fuel is used on shipping food across country - eat more locally grown foods (or at least less prepared foods). :) It's the fact that our government does nothing to educate the people about conservation or encourage it that really, really bothers me.

You misunderstood, I wasn't responding to your post when I typed that so it wasn't intended to go to anything you had said.

 

We really need cars that will do 100 miles or 200 miles per gallon, I know the technology exists but there's too many powerful people with interests in oil. I've seen a car advertised that can drive from California to Washington D.C. on 1 tank of gas, in fact I believe the car is going to be in the new Star Trek movie (the futuristic 3 wheeled car that's been in some pics that were leaked).

 

The technology is there, we just need politicians with the guts to enact laws to require it become the standard like has been done with HDTV signals.

[youbroughtheryouRiker 2]

I think mostly greed/oil companies. But I hold some blame to the government, but NOT because of the taxes. Part of the reason this happened is because of the merger-mania of the '90s. Companies merged and got bigger while the government laid (or is it lied?) dormant. I also suspect an intentional oligopoly is a big part of it, but unfortunately, that is an INCREDIBLY difficult thing to prove in a court of law. And the DOJ's last probe into the oil industry turned up negative, which is more than just a hard pill to swallow, honestly. So, the government is to blame in the sense that they, via the FTC, allowed these mergers to occur, and also have not done their job in enforcing the anti-trust laws that are out there. If they had not allowed these mergers, the oil companies would not have gotten powerful enough to the point to where they could be doing these things.

 

As to the second... I don't necessarily support the government controlling the price, but I did vote yes because I think the government should go ahead with the windfall taxes, taxing the excess profits. If the companies then raise their prices to recuperate those excess profits, bring them up on charges of price fixing. There's no market-justifiable reason to raise the prices. It's only to pad the excess profits.

[youbroughtheryouRiker 2]

The technology is there, we just need politicians with the guts to enact laws to require it become the standard like has been done with HDTV signals.

 

That's only half the battle. Part of the reason the technology is so darn expensive is because the patents themselves for the various items of technology are less than seventeen years old, which means exclusivity. If you want to build the technology in your company, you have to buy or license from the original patent holder, and they have the right to charge as much money as they want for that. And there ain't nothing anybody can do about it. A patent is a permission slip to create monopoly. That's how AT&T got so big. During the time they had protection of Bell's telephone patent (I believe AT&T was his company, or else he just licensed it to them), they worked to expand their business, and anyone who tried to copy was brought to court for patent infringement. I believe some eight hundred cases of copyright infringement were brought forth during those seventeen years. And AT&T won each and every one of those. So until the technology itself is about twenty years old, it's not going to get any cheaper to get the technology.

[Kor37 9]

The fact that the price of gas is about 35 cents a gallon in most of the major oil producing countries should give us a clue as to who is doing the gouging..........

[He Who Shall Not Be Named 2]

Here are a couple charts detailing the price of crude oil:

 

 

 

Crude oil is what goes into the refineries. After it is refined some of it is then converted to gasoline. Think of it as a raw material, since that's what it is.

 

Now, if the cost of a raw material is increasing, what would you expect to find in the price of the finished product?

[Kor37 9]

Precisely my point as to who is gouging who

[Odie 0]

ANALYSIS-US oil firms seek drilling access, but exports soar

 

07.03.08, 2:40 PM ET

 

 

United States - By Tom Doggett

WASHINGTON3 (Reuters) - While the U.S. oil industry want access to more federal lands to help reduce reliance on foreign suppliers, American-based companies are shipping record amounts of gasoline and diesel fuel to other countries.

 

A record 1.6 million barrels a day in U.S. refined petroleum products were exported during the first four months of this year, up 33 percent from 1.2 million barrels a day over the same period in 2007. Shipments this February topped 1.8 million barrels a day for the first time during any month, according to final numbers from the Energy Department.

 

The surge in exports appears to contradict the pleas from the U.S. oil industry and the Bush administration for Congress to open more offshore waters and Alaska's Arctic National Wildlife Refuge to drilling.

 

"We can help alleviate shortages by drilling for oil and gas in our own country," President Bush told reporters this week. "We have got the opportunity to find more crude oil here at home."

 

"As a nation, we can have more control over our energy destiny by supplying more of the oil and natural gas we'll be consuming from resources here at home," Red Cavaney, president of the American Petroleum (otcbb: AMPE.OB - news - people ) Institute, said in a letter last week to U.S. lawmakers.

 

But environmentalists and other opponents to expanding drilling areas could seize on the record exports to argue Congress should not open more acres if U.S. refineries are churning crude oil into petroleum products that are sent out of the American market.

 

I wonder more drilling in Alaska will change anything. If we don't build more refiners the crude oil will just get exported to another country.

 

Now who is actually gouging us.

[Wishfire 2]

I've been noticing that gas prices have been going down. A few weeks ago I was seeing an average of about $4.75, and as high as $5.40, and lately the average has been about $4.15, and as low as $3.90.

 

Of course, that's still ridiculous. I remember $.85 per gallon...

Edited August 5, 2008 by Derek

[He Who Shall Not Be Named 2]

My point with the above charts is the price that oil companies pay for crude oil is rising about as fast as the gasoline end product. If you want to stop the gouging then stop it at the source, not at the very end of the value chain.

 

The oil companies have an efficient business model *in spite of* rising fuel costs, not because of it. Targeting the oil companies for high-priced gas is a strategy that is doomed to failure.