We are being gouged at the pump! Or, so we think …

I was asked by a co-worker today whether I thought the oil companies are gouging people at the pump.  Now this currently is a popular conception of the public.  Every few years or so, all the major oil execs are brought to Washington to defend themselves for their hateful gouging of the common consumer (incidentally, I fit into the latter category).  Nothing ever seems to come from it, thankfully.  This could change since this is an election year, though, and the Democrats are perched on the eve of a great re-taking of both houses of Congress, and their subsequent three-ring circus of impeachment, censure, or whatever the flavor of the day is for President Bush, Rumsfeld, etc.  To be fair, the Republicans seem to have joined in on the chorus as well; presumably to help their re-election efforts too.  I guess we'll see how it all plays out. Anyhow, the price of gasoline isn't what it used to be for many reasons. 

Yes, our gasoline price depends on demand from countries OTHER than the United States.   China has become a major oil hog in a relatively rapid timeframe (say the last 4 – 10 years); India is not that far behind either.  The competition for scarce resources has driven up the price of a barrel (bbl) of oil on the open market.  The entire mess of joint venture drilling in banana republics (kickbacks to government officials and "taxes", both real and bribes) surely drives up the price of oil.  The Iran Nuclear insanity alone may have caused speculative traders to bid up the price due to uncertainty about supply by as much as $15 / bbl, from one source I heard. 

Our environmental regulations (I like a clean planet as much as the next Joe) are nonsensical at times and contribute to our problems.  For example, the crazy "summer" custom cocktails of gasoline ordered by different areas of the country curtail production.  It would be nice for the nation to agree on ONE standard gasoline blend for the entire year.  Even the normal restrictions are stifling at times: following Hurricane Katrina, environmental restrictions were TEMPORARILY lifted in order to boost supply to the affected areas — and we needed it badly.  Regarding diesel fuel, more effort and manufacturing resources are required to produce, say, ultra low-sulfur diesel, than just plain low-sulfur diesel, or high sulfur diesel, etc; thus, the regs further RESTRICT volumes produced. Or, here's an idea: if Congress wants to have a rapid effect (other than temporarily supending environmental regs), why not temporarily SUSPEND or ELIMINATE all gas taxes!  The state, local, and federal taxes amount (varies by locale) to at least 15-20% of the price, in my conservative estimation.  Or, here's another idea: let's lift restrictions on drilling along the east and left coasts of our own country.  But, don't even consider opening the Arctic National Wildlife Reserve (ANWR) for drilling; the Democrats have stifled that plan for YEARS (backed, of course, by environmental "fundamentalists"). 

Since 1988 the miles per gallon efficiency of vehicles has been decreasing.  In 2003, the truck-type vehicle, for the first time, outnumbered the car in sales.  Bigger and bigger SUVs, trucks, etc., are gas hogs and are more numerous than ever, in a typical "bigger is better" mentality that Americans manifest.  Even our Honda Odyssey boasted of MUCH better gas mileage (18-20 mpg in the city; 26 on the highway) than we actually got (11-12 (!) mpg in the city; 22-24 on the road) thanks to outdated CAFE calculation standards used on the sticker.  We are simply a gas guzzling society; we can't even escape with a good minivan.

Final caveat: By not working in the oil production or gasoline manufacturing businesses, I cannot say for sure if we are being gouged at the pump.   However, keeping in mind that Americans seem to love a good conspiracy (I know I do), the belief that the oil companies "control" the price of gasoline and are gouging all of us is hardly believable in my book.

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Published in: on April 27, 2006 at 3:25 am  Comments (2)  

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2 CommentsLeave a comment

  1. You make a lot of good points! I believe that the profit margin is still lower than a lot of other industries as well.

    It may not be true for everyone, but many people still have choices about what (and whether) we drive. We new that gas could go up, but Americans can’t get enough of the huge vehicles (ex. Hummer).

  2. I apologize for the double comment, but I found this cartoon on Cox and Forkum. Interesting.


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