Gas, Green(back), and the Great American Way
I’ve been quiet for too long. A year and a half of opinions, rants, and whining (just
kidding, Jimmy) and not one of mine. Well,
it’s time to throw in my two cents worth – make up for lost time.
So here goes . .
Petrol, Gasoline, Go-Juice, Fuel. We all need it. We
all use it. Gas prices go up at
every world (or third world) event. Most
of the time they come back down some, but rarely to the level they were before
some corrupt Venezuelan president or (insert dictator name) is ousted.
And don’t get me started on the wild oil price speculation that goes on
every time we invade another country. You’d
think our president was involved in the oil business!
Oh, wait – he is isn’t he? And
let us not forget the unconscionable price gouging that took place immediately
following the tragic events of September 11, 2001.
There are several local and national gas companies that will NEVER have
my business again.
And did you ever notice how gas
prices go up INSTANTLY when something happens?
I just can’t figure that one out.
Gas futures are bought 30 to 90 days in advance.
What they got in the tank at the corner BP was paid for three months ago.
How the hell do they justify charging me more when rates go up for
product that won’t deliver for another three months?
But I digress. On with the
show!
The gas companies have us by the
tank, and they’re not letting go any time soon.
Gas prices are up over 20 cents per gallon during the first three months
of 2004. Prices were already
significantly higher at the close of 2003 than the previous year.
As a matter of fact, fuel prices have been steadily climbing for the past
four years at a pace that FAR exceeds inflation or the Consumer Price Index
(CPI). Why?
Well, I’m glad you asked.
The oil and refinery companies
have a plausible story to explain these dramatic increases . . . plausible that
is if you don’t look too far past the load of unrefined crap they’re crudely
(pun intended) trying to feed us. They
are claiming that demand is exceeding supply, and that new environmental
regulations have driven up the cost of the refining process.
And you know what? They’re
right . . . kinda . . . sort of . . . maybe . . . NOT!!
Well, you might ask how I think
we’re being screwed by the oil and fuel industry?
Doesn’t the law of supply and demand state that reduced supply and/or
increased demand = higher prices? Wouldn’t
it cost more to change the way fuel is being refined?
The answer to both questions, in principle, is yes.
However, there is more to this story than meets the eye,
and it’s the rest of the story that the gas companies are trying to downplay
and hope we ignore.
Let’s start with the supply and
demand portion of the equation. What
the gas companies have done is slowly create an artificial supply shortage.
Hmmm . . . Can you say price fixing, boys and girls?
Good, I thought you could.
Let’s say I’m an oil
executive who understands the basics of supply and demand.
Imagine also that I want to set a long-range plan for my company (and
industry) to ensure continued increases in profitability.
What is the best way to do that? Get
people to pay ever-increasing amounts for my product while I control production
costs and reduce output. How can I
do this and avoid the outward appearance of price fixing?
Reduce capacity. Artificially
create a shortage. This of course
artificially inflates the selling price of their product.
Let’s
look at some facts:
1. Consumer demand for fuel products has increased 39% since 1980 (Blame it on your SUV!)
2. Since 1980 the number of domestic fuel refineries has shrunk from 320 to 150
3. Since 1980 total refining capacity has been decreased by 12%
4. Gas prices have increased approximately 56% since 1993
The facts speak for themselves. What industry not looking to artificially set prices
would ignore a 39% increase in consumer demand and reduce production capacity?
And heaven forbid one of the refineries breaks down.
When that part only available via carrier pigeon from a remote Chinese
village breaks and the refinery is shut down, guess what happens?
You got it – INSTANT (but temporary) SHORTAGE! Higher Prices! It
doesn’t cost the other oil company(s) any more to produce the fuel, but
we’re sure gonna pay more for it. Those
darn carrier pigeons are expensive.
Now, let’s look at the reported
increase in refining costs to produce a cleaner-burning fuel.
OK, I grant that initially the production costs would go up.
Certain chemical additives are being slowly banned by environmental
legislation (and YES, I support those changes).
Refineries would have to change a portion of the refining process
for some of their products. Original
estimates pegged the cost per gallon of gasoline for the environmental changes
at 2-3 cents per gallon. A small
price to pay for cleaner air.
Well guess what, ladies and
gentlemen? The oil tycoons**
realized that they could use the environmental spin to get more buck for our
bang (internal combustion, that is) and reduce supply at the same time.
Rather than upgrade some of their facilities, they just closed them.
Said it was not financially feasible to upgrade the process to handle the
ethanol additive instead of the chemicals.
Never mind the fact they were already going to raise the price of their
product to pay for the upgrades. Let’s
just raise the price and upgrade half of our facilities!
Close the rest. Some
companies have even gone so far as to declare “open season” on refineries
that had closed but were preparing to reopen.
Stop the competition and added supply at any cost.
Capitalism at its finest.
**Hey, Mr. President, – we’re gonna give ourselves a multi-million dollar bonus for thinking of this grand scheme. Might we convince you to accept a campaign donation from us? Oh by the way, we want to drill in the unspoiled Alaskan wilderness – I think it’s in a national park up there. That won’t be a problem, will it? No? Why, thank you, Dubya. That’s mighty neighborly of ya.
Now
the oil and refinery companies are going for the big score.
They are looking to repeal the environmental regulations mandating
cleaner-burning fuel oils. According to a recent news article, “America's
oil companies tried to pull off a financial triple play – boosting profits by
reducing refinery capacity, tagging consumers with higher pump prices and then
arguing for environmental rollbacks."
(http://www.commondreams.org/headlines01/0615-02.htm)
If
the oil companies get the environmental regulations repealed, we will suffer in
two ways: 1. Air quality will deteriorate at a faster rate than it already
is; 2. We’ll still be paying
higher prices at the pump. After
all, they have already upgraded their refineries, haven’t they? We’ll be seeing the depreciation write-offs on their
corporate tax returns for the next 20 years.
All
this on top of the fact that we are already paying for their environmental
negligence. When their drunken
tanker captain runs aground and spill millions of gallons of raw crude, who do
you think picks up the bill? Exxon?
Texaco? Nope.
Try again. YOU.
ME. We’re paying for their
carelessness and greed. They may
say they just spent 15 gazillion dollars to clean up their “accident”
and pick up the dead wildlife, but the truth is, they’ve just charged us an
extra 20 gazillion dollars in higher pump prices (hey, they’ve still
gotta have their performance bonuses).
Well, the only real question left
is: “What can we do about it?”
There are four really simple answers
1. Write your congressman/woman and express your concern for the escalating fuel prices and the apparent unethical conduct of the oil companies. Be sure to mention that you are a registered voter willing and able to make campaign contributions. (Hey, that’s no less ethical than the lobbying, PAC contributions, and “soft money” donations he/she is already guilty of receiving. So what if you may never give them a dime. They still need your vote to get elected.)
2. Boycott the big oil producers: Texaco, Chevron, ExxonMobil, and the like. They pretty much dictate the playing field that the little regional producers must play on. They also push the envelope of monopoly in some areas of the country.
3. Support the low-price retail distributors. Avoid buying gas in affluent parts of town (usually about 5 to 10 cents a gallon higher there). Sam’s Club is about 15 cents a gallon cheaper than the next closest competitor. Conoco is usually one of the lower price fuel vendors. Shop around, baby. Get the best deal. There are a few internet sites dedicated to monitoring regional fuel prices. Do a search!
4. Sell your SUV. OK – that’s asking too much sacrifice, I know.
Just think about it will you? And I’m begging someone to prove me wrong. I want to believe – That our country is better than this - That our leaders and lawmakers aren’t blind or corrupt enough to allow this type of behavior – That our captains of industry haven’t let greed and corruption overcome the true ideals of a capitalistic society. Unfortunately, I wake up and read the news about the WorldCom’s, Enron’s, and Martha’s. Maybe it’s all a dream and I’ll wake up and it will be yesterday – when I remember gas was 50 cents a gallon. Hey – it could happen. Everybody has a dream . . .
And thus ends my first rant. I’ve got more coming, though. Stay tuned . . .
Kevin Bennett 3/31/2004