Gas is cheap! Where's your rebuttal???

[Ed Garrett]

3+ dollar gas is cheap. I wonder why folks pumping three dollar gas get angry, while the car they are leaning on cost them $30,000 or $40,000 dollars plus interest, plus insurance, plus maintenance, plus....

I've seen many people with cars this expensive express hatred toward the oil companies, and yet they love the company that made their car!!! Why??? Cars are far more expensive. During the lifetime of your car, only a fraction of your total transportation cost will be gasoline. Insurance, maintenance, taxes, and the cost of the car itself dwarf the cost of filling the tank.

I'm not just guessing at this. I was anal enough in 1991 to quantify all these costs (from meticulous records I kept on my 1979 Ford truck), and put together a Fortran program to add the hidden compounding capital (opportunity) costs from all the expenses my truck was accumulating. Result: Gasoline proved to be a fraction of the total cost, so from then on I was happy to pay for the gas and minimize the other costs, notably the cost of replacing the truck. I kept the truck for 27 years (and it ran great because I was happy to pay for the maintenance too).

I submit to you that if you look hard at all the costs involved in driving, you will also find that expensive gas is no big deal.

I work for the state as an oil and gas regulator. From what I've observed at work, I can tell you that a big chunk of everybody's gasoline cost is taxes. Government makes an infinite profite margin on gasoline because it costs government zero to explore, drill, refine, and distribute gasoline. The tax bite you're paying as part of the price for each gallon of gas is more than the oil company's profit. Over the long term, oil companies average about a 10% to 12% profit margin, which is mediocre among giant corporations. Banks currently enjoy a much higher profit margin. Should we be angry at banks? Should we be angry at government? Should we be angry at the insurance companies? Wouldn't it make more sense to attack the windfall profits on the government contribution to the high gasoline taxes?

Or is it easier to just blame the oil companies. A lot of people say the oil companies should be hit with a punitive windfall profits tax. But if that's reasonable, then wouldn't it also be reasonable for government to bail out big oil when they are losing money. We did it for Chrysler. Why not Exxon? Someone I knew who worked from ExxonMobil once told me they were laying off one third of their staff per year in the late '80's. Should we as taxpayers have given Exxon tens of billions of dollars to tide them over?

If you feel the oil companies are really making obscene profits, why don't you buy a few shares and reap those profits for yourself??? For the price of some of the tools I've seen described on this forum, you could start a healthy oil company stock portfolio. They even offer commission free direct stock purchase plans. Wouldn't those profits make anyone happy while leaning against thier car and pumping that three dollar gas?

Just my 302 cents.

[Chuck Wintle]

Compared to European prices gas is still relatively cheap in the US.:D

[Steven Triggs]

Ed, I think you are right on. I'm so tired of hearing people talk about gouging too. When did free market economics become price gouging? Why on earth anyone want the government to tell the oil companies or the gas stations how much money they are allowed to charge for gas is beyond me. Can you imagine if someone, other than the potential consumer's willingness to pay, got to tell you how much your woodworking projects are worth and was able to use the law to force you to sell them for that amount!

When I was growing up, gouging was usually understood to mean take advantage of a natural disaster to artificially inflate prices in a localized area. In fact, I just checked three different online dictionaries, and they all define it as "Pricing above the market price when no alternative retailer is available." It seems that society has been re-writing that concept to mean "charging more than you used to."

I would sumbit though, that if the four gas stations at an intersection are all charging approximately the same price, that IS the "market price."

"Fair market value" is usually defined as "The price that an interested but not desperate buyer would be willing to pay, and an interested but not desperate seller would be willing to accept, on the open market assuming a reasonable period of time for an agreement to arise."

I think it just boils down to this: Some people just feel the government should fix all of their problems.

[Kyle Kraft]

If you don't like the price, don't buy (as much of) it. Unfortunately, as a carpooler, I'm already buying as little as I can. I understand that "most of the price of a gallon is taxes", so did they double the taxes on gas and I just never noticed it or what?

The majority of my driving is the commute back and forth to work, and I would be perfectly happy driving a small rechargeable car every day and only use the gas hog for out of town trips.

[Ken Garlock]

Ed, you make some very good points.

If you take a look at the consumer price index (ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt) from 1913 to this year, the price of gasoline per gallon is roughly equal to the value of the CPI.

In Europe they are paying much more than we are. Their solution is to use Diesel engines in a majority of cars. For example, take a look at the German site for Mercedes Benz. Probably 80% of the new cars shown are diesel. These are not just a specific engine, but the same displacement engines that are sold in the US. Can you say 4.3 liter diesel with 300 hp? Then there are places like Taxachusetts and California that have such restrictive clean air laws, you can't buy the best diesel engine the industry has to offer.

The problem, as I understand it, is that the oil companies have not built a new refinery in 20 to 30 years. We have numerous untapped oil reserves available. The weak sisters from Florida and California don't want to risk the possibility of an oil spill ruining their tourist income. Oh yes, don't forget the "not in my backyard" town meetings to keep the refineries out.

[Steven Triggs]

The weak sisters from Florida and California don't want to risk the possibility of an oil spill ruining their tourist income.

Who are the "weak sisters"? I don't think I follow...

[Steven Triggs]

If you don't like the price, don't buy (as much of) it. Unfortunately, as a carpooler, I'm already buying as little as I can.

Kyle, that is true. On the other hand to everything I said in my first response, I do also get tired of people telling me to drive less to save gas. I currently average 500 miles per week of driving (it is VERY consistant), and my commute accounts for 455 of those, so it really is the case that only 10% of my driving is "discretionary".

I feel your pain;)

[Ken Garlock]

Who are the "weak sisters"? I don't think I follow...

The weak sisters are the politicians and other special interest groups that work to make sure we can't make use of the off-shore oil reserves. They are more worried about the remote possibility that some crude oil might get on a bird wing some time, somewhere.

[Jason Roehl]

I'd love it if gas were actually priced based on the free market, but it really isn't. First, you have an artificially suppressed supply at the source (OPEC and a couple other smaller groups), then in the U.S., you have a permit process that has essentially banned new refinery capacity, thus no new refineries in 30+ years. And we all know what happens to equipment that is 30+ years old...

How many of you drive over the speed limit on a regular basis? Cut back on your speed--that will save you gas. Maybe not much, but if everyone did it...we might see sub-$2 gas again.

I'd like to see us have instead of the nonsensical "Gas Out" days, have maybe 1-2 days a month, where we all drive the speed limit up to 45 MPH--no faster, even on the interstates. (I picked 45 because that's typically the lowest speed a vehicle can maintain in top gear, roughly the best mileage it will get). If everyone did THAT, it would reduce consumption for one, but it would also send a message...

[Steven Triggs]

Ken, thanks for the clarification. I don't think I've ever heard that phrase...

Jason, all good points. I just think it is funny/sad when people act like a high price at the pump means that the owner of the gas station is ripping us off. I suspect the factors you mentioned have very much to do with the gas prices, and of course, gas station owners have no more control over those things than you or I do.

[Frank Guerin]

I have worked and still do in the refinery business. I have various stocks in different refineries which I have done VERY well in. It is some what questionalble that when the price of a barrel of oil goes up to the refineries my stock also goes up. But even yhough gas is high and in honesty (my opinion) may go beyond three dollors a gallon in the next three years, that means nothing compared to my house payment, truck payment, groceries, insurance. If I'm going to start complaining it will be with the one's making the most from doing the least.

[Cliff Rohrabacher]

Bar none: the best way to insulate yourself from OPEC oil gouging is to need less oil.

[Steven Triggs]

Kind of on a side note, but I just had a thought that is kind of sick/funny. I bet that if one day we do all go to running solar panels on our roofs, the government will require US to pay to install meters so that they can collect taxes on the amount of SUN that we use.:D Afterall, it's got to come from somewhere (tax revenue), so if one source is eliminated, another will have to be put in its place.

[Bruce Shiverdecker]

Well, let's see! The last time I remember oil at 66.00 a barrel, Gas Rose to a ridicules 1.50/ gal. Oil is at 66.00 a barrell again and gas is 3.50/gal. HMMMMMMMMMMMMMMM!

Gas prices double, Energe (Electric) up from 225.00 to 453.00 in January - supposed to go up 55% and just got notified that rates are going up some more for the summer, and long term care insurance up 300.00 per year.

The fuel prices are and will be increasing prices for everything, and WE ALL know who gets the price increase--------------the consumer.

Now add a fixed income, with little cost of living increases. This, after working hard for over 40 years and saving diligently.

By the way, I'm driving a 1995 with 139000 miles on it (ain't driving a 30-40K Auto)

I guess your perception is based on your situation. From MY point of view - You're Darned Right - Gas, Energy, and insurance costs are OUT OF CONTROL!

Just my opinion-------From my point of view!

Bruce

[Ben Grunow]

I see both sides here. We are (were) spoiled with our gas prices but it seems to me that the only reason prices went up is so oil companies could make more money. Little has changes on their end and who cares if other countries pay more, what does that have to do with the US. Its gouging if you ask me.

Relatively speaking though it is low on my list of concerns as you say. Lots of bigger expenses to worry about.

It all just make me want a nice hydrogen or electric truck (only need about 50 mile ranger per day). Quiet, powerful and no oil idioits to screw up our politics and raid our wallets. Sorry for ranting but we are already off topic.

Ben

[Tim Morton]

with the price of oil and gas where it is, a family a four can easily spend close to $10,000 a year on fuel to heat the house and drive the cars and such. With a pellet stove and hybrid car I am cutting down alot, but i still have to pay for the stove and extra for the hybrid...so its in reality a money shift and not a money savings.:( :( Plus with over half of that going to the governement in taxes....:mad: :mad:

thats why I am not thrilled.:( :(

[Joe Chritz]

Not really a rebuttal but a question for the oil guys.

If gas costs $2.00 a gallon with a barrel price of $50 (those are arbitrary numbers) and the barrel price doubles to $100 wouldn't it stand to reason the cost per gallon would not double?

100% of the cost of a gallon of fuel is not in the raw material to produce it. Those costs would increase somewhat but not at the same rate.

On a related note the fuel costs may be a small % of your costs but what about a business that drives thousands of miles a week?

Joe

[Brian Elfert]

Yes, gasoline is the least expensive part of owning many cars, but it is the only part of the total cost that has almost tripled in price in five years. It is also the only cost that goes up and down in price on a daily basis.

Some people actually buy vehicles and keep them for 8 to 10 years or more. A large SUV bought 8 years ago could have been fueled for 99 cents a gallon and so was downright cheap to fill up. The total operating cost of that SUV is quite a bit higher today. Nobody in 1999 would have believed gas prices would hit $3 a gallon in 7 years.

Consider a single mother earning $10 an hour at a job. She drives an old junker. Her biggest vehicle expense is likely to be gasoline. If she uses 30 gallons a month, her gasoline expenses have increased $30 a month since prices bottomed out around the first of the year. $30 to someone in this situation is huge.

Consider another situation. A family has two SUVs. They use around 100 gallons of fuel a month. That extra $100 a month is money not flowing into the economy via various retail establishments, but is instead flowing to owners of oil.

If the cost of gasoline had steadily increased at the rate of inflation hardly anyone would be complaining even though prices would still be about the same. It is the increase of $1 a gallon in five months and $2 a gallon (or more) in five years that has folks riled up.

I drive a Volkswagen Golf TDI that gets around 40 MPG so the price of gas doesn't affect me too much. I bought back in June 2003 when gas was around $1.40 a gallon.

Brian Elfert

[David Epperson]

Ken, thanks for the clarification. I don't think I've ever heard that phrase...

Jason, all good points. I just think it is funny/sad when people act like a high price at the pump means that the owner of the gas station is ripping us off. I suspect the factors you mentioned have very much to do with the gas prices, and of course, gas station owners have no more control over those things than you or I do.
Well except for those stations where it takes more gallons to fill your tank than it will physicaly hold. There are several places I no longer go to that it took 22 gallons to fill a 19 gallon tank, that wasn't on empty to begin with. As well as those places where the octane is not correct (for whatever reason). So right now I look for 3 things in a fuel supplier, full size gallons, miles per tank, and price. They have to come close on all three.

[Brian Elfert]

Not really a rebuttal but a question for the oil guys.

If gas costs $2.00 a gallon with a barrel price of $50 (those are arbitrary numbers) and the barrel price doubles to $100 wouldn't it stand to reason the cost per gallon would not double?

On a related note the fuel costs may be a small % of your costs but what about a business that drives thousands of miles a week?


I remember a movie on FX channel I think last year in which oil prices shot up to $90 or $100 a barrel due to supply issues. The cost of gasoline in the movie went to $8 or $9 a gallon and gas stations simply had no fuel.

The prices of gasoline seemed unrealistic in the movie since the oil prices in the movie were only 1/3 more than oil prices in reality at the time, yet the prices of gasoline in the movie were three times the reality prices.

Any business that drives 1000s of miles per week also has huge labor, vehicle, and insurance expenses in addition to huge fuel expenses.

Brian Elfert

[Randy Denby]

So Ed, I see you work for an Oil company. I have seen this same reasoning from other Oil company employees on other forums. I can only conclude that "Oil " companies are having their employees spread propaganda to lesson the public outrage over their gouging.
Refineries are not being built....But I can gaurantee the refineries we have today are NOT the same that were built back then. They are constantly updating, expanding, and have become MUCH more efficient. What the reaL PROBLEM is....no competition. They can set the price at their whim...using any excuse that they believe we'll buy..... All the mergers in the 80-90's should be reversed.
BTW, other countries pay more per gallon because of higher taxes per gallon.

[Greg Funk]

So Ed, I see you work for an Oil company. I have seen this same reasoning from other Oil company employees on other forums. I can only conclude that "Oil " companies are having their employees spread propaganda to lesson the public outrage over their gouging.
Refineries are not being built....But I can gaurantee the refineries we have today are NOT the same that were built back then. They are constantly updating, expanding, and have become MUCH more efficient. What the reaL PROBLEM is....no competition. They can set the price at their whim...using any excuse that they believe we'll buy..... All the mergers in the 80-90's should be reversed.
BTW, other countries pay more per gallon because of higher taxes per gallon.
I don't work for an oil company and I agree with Ed. I don't think there is a shortage of competition or greed in the US. If it was so easy to make money refining oil there would be no shortage of companies stepping up to the plate. The issue is that historically returns on refining oil have been poor. Back in the 70's and 80's there was a significant excess of refining capacity and the margins were low. Since then a number of refineries have closed and supply is now tight hence the margins for refining oil is tight. It can easily cost $7B to build a new refinery and there is no guarantee demand will continue to be strong. It's better risk/return to explore for more oil rather than build refineries.

Greg

[Jeffrey Makiel]

Well, let's see! The last time I remember oil at 66.00 a barrel, Gas Rose to a ridicules 1.50/ gal. Oil is at 66.00 a barrell again and gas is 3.50/gal. HMMMMMMMMMMMMMMM

This is worth repeating. It kind of puts a kink in the argument about supply and demand economics, refinery capacity, prohibitive environmental restrictions, etc....

We know pure socialism doesn't work. Now we are proving that pure capitalism doesn't work either.

-Jeff :)

[Bart Leetch]

I don't drive expensive cars. I haven't had a car payment in over 20 years. My last truck was 12 years old when I purchased it. This is why I have a cell phone. The truck runs fine & gets 25.5 MPG on the road & about 15 MPG in town. I used less than 10 gallons of gas around town since the 27th of last month. I work & live in the same place. I earn a reasonable wage but may never be rich. I've cut our driving in 1/2 since last month on both vehicles just by examining how we were using our vehicles.

I realize most people are not able to do what I've done but there are a lot of people out there that can & I encourage you to do everything you can to cut back. As we know prices are dependent on demand. If we can remove a good amount of that demand the price can come down.

At any rate my cost stayed the same or is less than it was.

I really appreciate that other people buy brand new expensive vehicles it provides good quality used vehicles for me to purchase. Another thought is I never purchase any vehicle off a car lot. All my purchases over the last 20 years have been from private party.

Of course if we could force all oil company CEO's & Presidents & their families to wear a ID tag so that when they go to any store they pay at least 3 times more than anyone else for the same products?????:eek: :D

Remember it not just the cost of gas that has gone up everything else costs more too because of the cost of fuel to transport it.


Ed please tell this to the poor people that live in outlaying areas where there is no public transportation that now are having to choose between gas to get to work for their low wage & food on the table. All the while hearing about the high 6 figure income that the fuel brass hats make.

Remember the poor will always be with us while the rich will always skim the best off the top. I would like to know how much of their 6 figure income all the rich people are giving to the poor.

I see it all the time working in Federally subsidized housing providing homes for the poor. Some will stay the same.

But we have the blessing of seeing some grow & do things like go to school & get an education or better jobs or just get a job & start improving their lives & increase their income then move on to non-subsidized housing & owning a car & other items necessary to just live.

[Brian Elfert]

So Ed, I see you work for an Oil company. I have seen this same reasoning from other Oil company employees on other forums. I can only conclude that "Oil " companies are having their employees spread propaganda to lesson the public outrage over their gouging.


Doesn't Ed's post say he works for government regulating oil/gas companies?

Ed is likely to keep his job for many more years until all of the oil in the world is exhausted regardless how much money gasoline sells for.

Brian Elfert

[Craig D Peltier]

Ken, thanks for the clarification. I don't think I've ever heard that phrase...

Jason, all good points. I just think it is funny/sad when people act like a high price at the pump means that the owner of the gas station is ripping us off. I suspect the factors you mentioned have very much to do with the gas prices, and of course, gas station owners have no more control over those things than you or I do.

How come one day gas is 321 and the next its 329? This happens so often and its the same gas in there tanks.Isnt that close to price gouging.

[David Hoefler]

First, I remember the long gas lines in the 70's and am happy to be able to get it when I need it. At that time I believe gas was 0.43/gal give or take. And gas stations would often run out.

Gas where I live now is around 3.59 for 87 octane and 3.23 at CostCo about 40 miles from home. CA vs. NV so state taxes do come into play it seems.

Diesel on the other hand is lower than the lowest cost gas for the first time in a long time. I replaced my gas truck with a Cummins diesel two years ago ($31k) and based on my calcs get about a 40 perecnt overall improvement in MPG so am happy with the decision and wish I could get a good diesel car in CA.

Rumor has it by 2008 VW and MBZ will have met CA standards for diesel. Not sure where other manufactures stand. My current car is 10 years old and running fine so I can wait.

So for me, I just accept the world as it is today and play the game accordingly. I also own a number of energy stocks and funds. As an offset to higher fuel prices.

The one thing that I think people can do is to push for better MPG standards. Driving an SUV and getting 12 MPG is part of the problem IMHO. My diesel truck gets between 20 and 24 unloaded and weighs 7,500 lbs. I don't understand the politics that are pushing for making fuel from corn, which is now a net loss because of the energy required to produce it. Oh well.

Time to end this rant and get out on my mountain bike on this fine day.

D - :)

[David Hoefler]

Just one more quick comment, my wife and both rode a Segway a few days ago and found it easy and fun. The street model will go around 24 miles on a charge. It can be equipped to carry two grocery bags. Perfect for a quick run to the store. But, it all depends on where you live. The route needs to be safe.

And another rant - as long as we have mostly lousy public transportation and a car crazy culture we will be held hostage by the need for fuel.

:)

[Steven Triggs]

How come one day gas is 321 and the next its 329? This happens so often and its the same gas in there tanks.Isnt that close to price gouging.

Gas stations set their pricing based on the daily market value. Keep in mind that this works both ways. When you see the price go down at a gas station, couldn't your argument just as easily say that they are losing money on the gas still in their tanks? Afterall, it is the same gas that they bought yesterday when it was 10 cents higher.

Although it is true that today's gas may be the same as what was in their tanks yesterday, it is still the case that the value of it can change. Fair market value of an item is based on what people are willing to pay, not what the seller originally paid for it.

As to whether that is "price gouging", I think it is not, because you are free to buy it from another gas station. I don't believe that the amount they paid for the gas has anything to do with whether or not it is gouging.

For example: Let's say I go to Home Depot and find a good deal on sheetrock and buy 20 sheets for $5.00. I put these sheets in my front yard and put up a sign that says "sheetrock: $10.00. On the first day, I sell half of the sheetrock. On the second day, I decide that I could probably haven't gotten more for it, so I replace my sign to say "sheetrock" $15.00. Is that price gouiging? I think it is not. I think it is free trade. Just my opinion...

[Randy Denby]

Doesn't Ed's post say he works for government regulating oil/gas companies?

Ed is likely to keep his job for many more years until all of the oil in the world is exhausted regardless how much money gasoline sells for.

Brian Elfert

I missed that in his post. I looked at his public profile and it says he is a geologist-oil and gas.
Its nice to hear we have a "Oil and gas regulator" working for the gov. that is pushing the oil companies agenda.

[James Phillips]

Originally Posted by Bruce Shiverdecker
Well, let's see! The last time I remember oil at 66.00 a barrel, Gas Rose to a ridicules 1.50/ gal. Oil is at 66.00 a barrell again and gas is 3.50/gal. HMMMMMMMMMMMMMMM

This is worth repeating. It kind of puts a kink in the argument about supply and demand economics, refinery capacity, prohibitive environmental restrictions, etc....

We know pure socialism doesn't work. Now we are proving that pure capitalism doesn't work either.

-Jeff :)

Huh?

This does not go against any economic theory at all. It is just very incomplete information. This compares the cost at the pump to the cost for a barrel. It says nothing about supply or demand. Pure capitalism does work for the ones that make it work for them. Sorry guys the world is not and never will be a fair place.

[Ben West]

Lots of great observations. But, there's a basic fact that we're (society in general, not SMC!) not talking about enough.

I learned in 6th grade Earth Science class that fossil fuels are a nonrenewable resource. One day, there will be no more oil on the earth, and our energy demands will have to be met by other sources. Between now and then, as human populations increase and the oil supply decreases, the discrepancy between supply and demand will only get worse, and prices will continue to rise. All of the things that have been discussed -- more production, more competition, more exploration, more conservation -- may have a short-term impact on gas prices, but the trend will be upward throughout the next several decades.

The bottom line, in my opinion, is that we have to get serious about developing alternative energy sources. There is no more serious issue facing us, and it deserves all of the resources we can muster to solve it.

[Joe Pelonio]

Of course if we could force all oil company CEO's & Presidents & their families to wear a ID tag so that when they go to any store they pay at least 3 times more than anyone else for the same products?????:eek: :D

Remember it not just the cost of gas that has gone up everything else costs more too because of the cost of fuel to transport it.


Good points. When a local gas station came in to order "3" signs for the price boards, I charged him 3 times as much as I would have charged anyone else, and got some small satisfaction from it. Supply and demand.

Yes, everything else goes up when gas does. Pizza deliveries have always been free until recently. Several of my suppliers used to deliver daily, free. Now only ones does, the rest charge or limit the days they will come out.

What really gets me is that our government limits profits and requires approval of rate increases for many things, like utilities. Their reasoning is that they are critical to people so the profits should be limited, and monopolies have to be policed or will gouge consumers. Remember the suits against Microsoft? How is gas any different? You have to get to work, to the store to buy food, to the doctor/hospital. Many people (like me) have no public transportation in their area. As mentioned before the oil companies have merged to the point where there is a real lack of competition and yet they can make whatever profits they want by raising prices with no control.

I have a brother that works at a refinery in CA. As an emplyee and a consumer, he agrees that gas prices are way too hig, in fact he cancelled a trip up here this summer because of it.

[David Hoefler]

With respect to everyone's viewpoints, I believe runaway population growth is the underlying problem (world wide). More people demanding more resources. If something does not change, soon, the next genrations will have to face issues we cannot even imagine (or maybe you can). Sure, greed and the lack of social maturity, especially it seems in the people elected to run this nation and powerful special interest groups that they respond to, play a role but, how much effort does the electorate put into making their voices heard? How many even bother to vote?

I'm glad I was born when I was and not a young person today. Pretty negative, huh?

[Greg Funk]

Well, let's see! The last time I remember oil at 66.00 a barrel, Gas Rose to a ridicules 1.50/ gal. Oil is at 66.00 a barrell again and gas is 3.50/gal. HMMMMMMMMMMMMMMM!

Either your memory isn't what it used to be or someone was subsidizing the cost of gas. There are 42 Gals/Barrel so if oil was $66/barrel the crude oil price was $1.57/Gal. No one would have been able to buy crude oil at 1.57/gal, process it, distribute it, add taxes to it and sell it for $1.50.

Greg

[Rob Bourgeois]

Either your memory isn't what it used to be or someone was subsidizing the cost of gas. There are 42 Gals/Barrel so if oil was $66/barrel the crude oil price was $1.57/Gal. No one would have been able to buy crude oil at 1.57/gal, process it, distribute it, add taxes to it and sell it for $1.50.

Greg
even worse than 42gal per barrel... try 19.5 gallons per barrel.(plus other stuff)

http://www.gravmag.com/oil.html#dollar

Check out chart...says the cost of getting oil from the ground to your car as gas....2.65/gallon. I am not defending it just reporting it.

[Steven Triggs]

What really gets me is that our government limits profits and requires approval of rate increases for many things, like utilities. Their reasoning is that they are critical to people so the profits should be limited, and monopolies have to be policed or will gouge consumers. Remember the suits against Microsoft? How is gas any different? You have to get to work, to the store to buy food, to the doctor/hospital. Many people (like me) have no public transportation in their area. As mentioned before the oil companies have merged to the point where there is a real lack of competition and yet they can make whatever profits they want by raising prices with no control.

I'm not sure that I'm in favor of any form of government pricing control, but in the case of the utilities, it is kind of a mutually beneficial relationship between the government and the utilities. These are called "naturalized monopolies." The basic principal is that the government will allow them to be a monopoly in exchange for them being regulated. The potential benefit to the public is that it keeps us from paying the overhead for multiple infrastructures. It would cost signifigantly more than half as much money for my local EMC to provide power to half of the people living where I do, so if there were two companies doing it, we would all being paying more.

Regarding Microsoft, those lawsuits didn't go very far. And I think rightly so. Other companies produce and sell software. Many people are using Linux or Mac for their operating systems. I realize the percentages are low, but the fact that we know what they are proves that they are competing with Microsoft. If they aren't very good at competing, perhaps the issue lies with them, whether it is in functionality or marketing or whatever.

By the way, kind of a side note, but I don't know what people want to get out of being "protected" from Microsoft. Windows costs substantially the same now that it did at least 12 years ago when Windows 95 and NT 4.0 came out. (I don't know the pricing from the previous versions, and actually, I think NT4.0 came out just a bit before 95) The home version is about $100 for upgrade, and $200 for full blown. The professional version is about $200 for upgrade and $300 for full blown. Since they haven't raised the price in 12 years, I fail to see how they are hurting us.

Anyway, I digress...

[Chip Olson]

The bottom line, in my opinion, is that we have to get serious about developing alternative energy sources. There is no more serious issue facing us, and it deserves all of the resources we can muster to solve it.
Indeed, and for far more pressing reasons than high gas prices. The US desperately needs to reduce its dependence on Middle Eastern oil, and potential new development (ANWR, etc) is only going to be a drop in that particular bucket, never mind the environmental consequences. Speaking of which, then there's global warming.

I'm very glad I live in a place where I can take public transportation to work and only have to drive my car a couple times a week. Obviously, that isn't an option for everyone. Sometime down the road I'd love to put a solar array on my roof.

[Michael Gibbons]

O.K. somebody straighten me out please. We have the law of supply and demand; who comes up with this stuff anyways? I make gasoline and sell it for a dollar a gallon. A holiday comes up and demand goes up. How does the demand make the price go up? I never understood. They are still making the gas in the same refineries that got the oil from the same opec countries that delivered the oil on the same ships that was delivered to your local gas station on the same trucks. Seems nothing has changed but the greed of the oil companies and the price at the pump. And how does the price manage to change so quickly? It's 3.48 on Monday morning the 3.58 on Tues then down to 3.45 on wed? It's insane! the demand doesn't change that much from day to day.

[Chuck Wintle]

O.K. somebody straighten me out please. We have the law of supply and demand; who comes up with this stuff anyways? I make gasoline and sell it for a dollar a gallon. A holiday comes up and demand goes up. How does the demand make the price go up? I never understood. They are still making the gas in the same refineries that got the oil from the same opec countries that delivered the oil on the same ships that was delivered to your local gas station on the same trucks. Seems nothing has changed but the greed of the oil companies and the price at the pump. And how does the price manage to change so quickly? It's 3.48 on Monday morning the 3.58 on Tues then down to 3.45 on wed? It's insane! the demand doesn't change that much from day to day.
Gas is priced at what the market will bear. And the nature of the market changes daily, summer travel, holidays etc, so the price changes to reflect.

[Steven Triggs]

I make gasoline and sell it for a dollar a gallon. A holiday comes up and demand goes up. How does the demand make the price go up? I never understood. They are still making the gas in the same refineries that got the oil from the same opec countries that delivered the oil on the same ships that was delivered to your local gas station on the same trucks.

It is all based on the belief that you have the right to sell something for any price that you can find a buyer willing to pay. This is what capitalism is all about, the premise that something's value is based on available supply, and the desire or need for people to have it. An items's value has no correlation to what costs to make it. It isn't like there is some "rule" that says if you make a product, you are entitled to a certain percentage profit. In a free market, you are entitled to how ever much profit you make.

Think of it like the cost of labor. If two people install an identical HVAC system, but person A is more efficient and can therefore do it in 4 hours instead of the 8 hours that person B requires, does that make person A's service worth half as much as person B's? Of course not, the installation of an HVAC system is just worth a certain amount. If someone finds a way to do it faster, or for less cost to them, that doesn't make the HVAC system worth any less.

[Bart Leetch]

Well I still think they couldn't be bigger robbers if you gave the a mask & a gun. They've got the whole country over an oil barrel.

[Jason Roehl]

O.K. somebody straighten me out please. We have the law of supply and demand; who comes up with this stuff anyways? I make gasoline and sell it for a dollar a gallon. A holiday comes up and demand goes up. How does the demand make the price go up? I never understood. They are still making the gas in the same refineries that got the oil from the same opec countries that delivered the oil on the same ships that was delivered to your local gas station on the same trucks. Seems nothing has changed but the greed of the oil companies and the price at the pump. And how does the price manage to change so quickly? It's 3.48 on Monday morning the 3.58 on Tues then down to 3.45 on wed? It's insane! the demand doesn't change that much from day to day.

Think of it like an auction. If you're selling gas for $1.00/gal, and then a holiday weekend comes along when everyone will be driving, demand is up. If you don't raise your price, you may sell out entirely, which would mean that you've left money on the table. Since you're out, anybody who still needs to buy gas will go somewhere else or not buy if you're the only one. So, as you see business start to pick up, you start raising your price, hopefully just to the point where people will not pass you up. If you raise the price too high, some people won't pay that price, so that lowers the demand. The supply and demand curves (graphed on price vs. units desired/available) are not linear, but can be steep. In other words, if demand goes up 10%, price may go up by 5 TIMES--if people are willing to pay that.

What's being left out here is that we are sending a LOT of money to China right now, buying their goods. While their particular governmental system takes a large chunk of that, some of it does trickle into their economy. So, more people than ever there are now buying consumer goods, including cars. Add to that fact that they have over 4 times the population of the U.S., and the potential for their fuel demands to far eclipse ours is HUGE. Oh, and India isn't far behind--except they aren't necessarily selling us goods, they've just taken over all our telephonic customer service.

Just wait until next year, late summer--the 2008 Olympics are in China....imagine what that will do to the fuel demand worldwide.

[Greg Cuetara]

The whole initial argument is very good.....except for the fact that you say people buy $40k cars. Most of the people in this country make less than $25k. In most parts of this great country people are driving cars which they paid hundreds of dollars for and not thousands. Paying thousands more in gas per year is a real hardship on a lot of families. If you are making the minimum wage at $5 something per hour gas going up $.50 / gallon is a hardship. I think the problem most people have is that these same oil companies are recording record profits. One problem we have is that we are so dependant on oil they have us by the neck. I am one all for the free market. The only problem I have is people are so dependant on oil for gas...for heat...it runs our lives. For the most part supply and demand doesn't work with oil because people don't have a choice to go to work...they don't have a choice to go buy food...they don't have a choice....we don't have a choice...we have to go to work...we have to go to the grocery store where food is trucked in...

[Jeffrey Makiel]

I don't seem to grasp the 'demand' part of supply and demand economics in this case. The price of gas has currently taking a another big hike because 'demand' has suddenly become high? Why did it go down in price last fall when the holidays were approaching as well as the heating season? Perhaps it was in anticipation of the long drive to the voting booths last fall?

In April and May, home heating is at its lowest need or nearly non-existent. Also, the weather continues to be cool enough that air conditioning is not prevalent yet. Other than Memorial Day, there has not been a large travel holiday since December. And, I don't know anybody that has taken their annual vacation yet. So where is the current demand hike that is raising gasoline at a rate of 5 cents per week in the past two months?

I understand our country's overall energy demand is gradually increasing, but what accounts for gasoline going from $2/gal to $3/gal in less than one year? I'm told in the nightly news that there is now a global demand. Does this mean 1 billion Chinese folks suddenly bought microwave ovens last year.

For the most part, I see the average and below average income US family as a captive customer with little recourse. Further, it appears that oil companies are consolidating, and appear to have powerful lobbying resources second only to pharmaceuticals companies. Perhaps this would explain the crazy quarterly profits in the recent past year, and sudden shifts in price.

-Jeff :)

[Curt Harms]

If I were able to buy a new computer with Linux or whatever installed with all the hardware support like there is for Windows, there'd be less of an issue. Microsoft's Marketing & Licensing policies have always been the issue to me. Their software is mediocre at best, their marketing & licensing is brilliant. Anticompetitive but brilliant. My view anyway....

Curt

[Bruce Shiverdecker]

Sorry, Greg, gettin' OLD. We have seen $66/barrel before AND gas was NOT $3.50/Gal.

[Christopher Stahl]

Bruce, unfortunately, the price of a barrel of oil and the price of gasoline is not directly proportional. It's possible for oil to be $20/barrel and gas prices to be $3/gallon.

Someone stated earlier about using alternative fuels, like ethanol, but the energy required to make ethanol is high. While this is true, not many people know that the amount of energy to refine oil is enormous. Oil companies and refineries don't point that out, but you'll hear plenty about it when it comes to alternative fuels.

The other thing that bothers me is that many Europeans complain about us complaining about the price of fuel. While their petrol is very expensive, it's only expensive because their government taxes the heck out of it.

[Jason Roehl]

I'm thinking it was here, but someone in the oil industry posted about the price of a barrel of oil that we see--it's only the price on the speculative/futures market. Basically, that's the price oil companies charge each other to cover spot shortages in their distribution system or something like that. What it actually costs them to get one of their own barrels of oil to the refineries.

Again, this is just one of those random factoids floating around in the back of my head--I won't swear by it.

[Dennis Peacock]

Again, this is just one of those random factoids floating around in the back of my head--

Wow Jason....you got stuff floating around in your head? :p

I'd like to hear what really goes on and the why's for our oil supply. Could it be because the truth is well hidden from view? I have no idea.

[Christopher Stahl]

Dennis, if you want some facts that will blow your mind, here ya go. Big oil companies, I'll use Exxon, are able to pump the oil out of the ground for less than a dollar a barrel. This is in the middle eastern countries like Iraq. So, go figure they post billions of dollars profit each quarter.

[Jason Roehl]

Wow Jason....you got stuff floating around in your head? :p



Well, except for the rocks--those have mostly settled to the bottom. :D

[Lee DeRaud]

Big oil companies, I'll use Exxon, are able to pump the oil out of the ground for less than a dollar a barrel.Let me guess: that's the operating cost for an existing producing well.

True, but absolutely meaningless in terms of the cost of putting fuel in your car's tank...unless your car happens to be parked next to that well and can run on crude oil.

[Larry James]

More gas pricing and mileage info.

Check compare car mileage at - http://www.fueleconomy.gov/ . How many of these cars/trucks/SUVs have what you would consider "Good mileage?"

Check what makes up the cost of a gallon of gas at - http://www.fueleconomy.gov/feg/gasprices/FAQ.shtml .

Larry

[David Epperson]

Check what makes up the cost of a gallon of gas at - http://www.fueleconomy.gov/feg/gasprices/FAQ.shtml .

Larry
Hmmmm. At $66 per 42 gallon barrel of oil - And only 51.4%(21.6 gallons) of that barrel goes to gasoline,
per http://www.energy.ca.gov/gasoline/whats_in_barrel_oil.html
that's $33.924 per 21.6 gallons or $1.57. Which is according to that site 57% of the total....Which would mean that gas at $66 per barrel should be right at $2.75 per gallon. So the numbers must be off just a tad cause I can't find it that cheap.

[Brian Elfert]

Hmmmm. At $66 per 42 gallon barrel of oil - And only 51.4%(21.6 gallons) of that barrel goes to gasoline,
per http://www.energy.ca.gov/gasoline/whats_in_barrel_oil.html
that's $33.924 per 21.6 gallons or $1.57. Which is according to that site 57% of the total....Which would mean that gas at $66 per barrel should be right at $2.75 per gallon. So the numbers must be off just a tad cause I can't find it that cheap.

Gasoline here in Minneapolis is getting a lot closer to the $2.75 level. I saw at least one station today at $2.99 which is quite a bit down from a peak of $3.39 or more a few weeks back.

Now, I just wish diesel was also going down. We will probably be paying more for diesel than for gasoline again soon if things continue the way they are.

Brian Elfert

[Chris Padilla]

Here is an interesting little tidbit you might find entertaining for this discussion.

**********************

http://www.baltimoresun.com/news/opinion/oped/bal-op.gasprices24may24,0,5695084.story (http://www.baltimoresun.com/news/opinion/oped/bal-op.gasprices24may24,0,5695084.story)
From the Baltimore Sun
What pandering politicians won't tell you about gas prices By Robert Hardaway
May 24, 2007
Few politicians can resist the urge to exploit consumer angst over rising prices at the pump. Here are 10 things the politicians won't tell you about gas
prices:
1. At more than $3 a gallon, the U.S. inflation-adjusted price for gasoline is now less than it was in 1981, a remarkable decrease in price over a 25-year period during which real prices in other sectors, such as health and education, have tripled and quadrupled.
2. This decline in the price of gasoline since 1981 is enjoyed almost exclusively in the United States. In most other developed countries, the price of gas is at least double what Americans pay. Consumers in the Netherlands pay an average of $7.77 a gallon, while those in Great Britain pay more than $7 and consider it a bargain.
3. The gross profit margins of the major oil companies are far less than those for many other sectors, such as beverages, electrical equipment, chemicals and computers.
4. At present gas prices, the major oil companies make a profit of 10 cents to 12 cents a gallon. If you really think that's a lot, buy some of the stock. But most people believe investing in oil companies is a pretty risky business - witness the devastating losses that oil company investors endured in the 1980s.
5. At present prices, combined federal and state government profit (i.e.,
taxes)
on each gallon of gas is 28 cents to 68 cents a gallon, depending on which state you live in. San Francisco, home of House Speaker Nancy Pelosi, tacks on an extra 26-cent bite.
6. Gasoline consumption in the United States increased drastically during the last year.
7. Oblivious to, and largely insulated from, the $7 to $8 per gallon that consumers in other industrialized countries pay, energy-greedy Americans continue to buy such gas-guzzling behemoths as Hummers and SUVs at a brisk pace.
8. If government singled out oil companies for a confiscatory 50 percent profit surcharge, it is tempting to think that the price of gas might decline by up to 6 cents a gallon, say, from $3.38 a gallon to $3.31 a gallon. In fact, gas prices would soar, as investors would no longer capitalize oil companies, turning instead to industries with higher profits. The oil companies would then either have to cut back exploration (Exxon alone has invested $15 billion in new capital investments) or go out of business, thus causing supplies to tighten and prices to skyrocket.
9. Crude oil prices are set not by private companies but by the international market of supply and demand, which fluctuates hourly. While the major oil-producing countries can form cartels that can set prices higher than a free market, these countries are not subject to U.S.
antitrust laws.
10. If government is serious about curbing oil company profits and U.S.
reliance on foreign oil, the only way to do it is the way the Europeans do
it: a gasoline tax that raises the pump price to about $8 a gallon. And that's one thing you can be sure the politicians will never, ever tell you.
Robert Hardaway, professor of law at the University of Denver Sturm College of Law, is the author of "Population, Law and the Environment."

[Joe Pelonio]

Gasoline here in Minneapolis is getting a lot closer to the $2.75 level. I saw at least one station today at $2.99 which is quite a bit down from a peak of $3.39 or more a few weeks back.

Now, I just wish diesel was also going down. We will probably be paying more for diesel than for gasoline again soon if things continue the way they are.

Brian Elfert
My parents looked into that a while back since they have a diesel pickup to pull their travel trailer. Normally diesel is cheaper spring-summer, which is nice for them since that's when they travel. In winter it's higher because heating oil and diesel come from the same source so there's more demand.

[Bruce Shiverdecker]

Can't add to my original post. Just thought I'd add yesterday's news. 1 Gal Milk 2.64-------------------- reason stated-------------Fuel costs.

Bruce

[Frank Guerin]

'I'm thinking it was here, but someone in the oil industry posted about the price of a barrel of oil that we see--it's only the price on the speculative/futures market. Basically, that's the price oil companies charge each other to cover spot shortages in their distribution system or something like that. What it actually costs them to get one of their own barrels of oil to the refineries."

There is some truth to that but not as rule. There are refineries locked in to packages that are paying more for guarenteed oil than others that are buying on the spot market. A big problem is the irrational goverment regulations. I will be the biggest tree huger ( don't beat me up) but when millions are spent to build a new unit in a refinery and that unit runs for a few months and is shut down, it does bring questions.
Less than a year untill retirement and I'm buying a rubber band car because I won't have to go to work.

[Brian Elfert]

My parents looked into that a while back since they have a diesel pickup to pull their travel trailer. Normally diesel is cheaper spring-summer, which is nice for them since that's when they travel. In winter it's higher because heating oil and diesel come from the same source so there's more demand.

Diesel fuel prices have been higher than gasoline year round for several years until the last 6 or 8 weeks. Diesel prices were lower than gasoline for a short time around hurricane Katrina time simply during to the sharp runup in gasoline prices.

Gasoline prices here in Minneapolis have been in free fall for the past 10 days. It will only be a matter of days before diesel and gasoline cost the same again unless diesel prices start falling.

I have read of a lot of people who bought pickups with V10 gasoline engines instead of diesel engines in recent years since any extra fuel economy was negated by diesel prices up to 60 cents higher than gasoline.

Brian Elfert

[Lee DeRaud]

Can't add to my original post. Just thought I'd add yesterday's news. 1 Gal Milk 2.64-------------------- reason stated-------------Fuel costs.

BruceThat actually sounds low...must be a regional thing. Milk out here has been roughly the same price as gasoline for as long as I can remember: $3.09/gallon as of this morning for the local 'generic', close to $4/gallon for "name-brand" (e.g. Lucerne).

[Brian Elfert]

I paid $1.99 or $2.09 for a gallon of 1% milk yesterday at a gas station of all places. Even Sam's Club is at least $2.19 for 1% milk.

Back when gas was 99 cents or less, people used to compare the price to milk and say gas is cheap.

Brian Elfert