I'm coming up on my first week of fair weather vacation and find myself caught not only by the price of gas and it's impact on my wallet, but where my duties for responsible behavior and consumption might lie. I have a couple of destinations in my pocket for the year that I'll still make the expense and effort to do. But have just about talked myself out of a couple of other scouting trips that will involve a four or five hour drive that could turn out boon or bust. I don't think that the oil companies are overtly manipulating prices or gouging us and to a large degree prices are a reflection of supply and demand. And that we are the demand. It seems like driving, sometimes long distances, is somewhat integral to our hobby or photo income. I was wondering if other are feeling a little "tight" about travel and the current implications of fossil fuel use?
Posted by Kent Staubus on May 25, 2007 at 10:17 AM
I certainly DO think the oil companies are gouging us, and I'm very much a conservative capitalist kind of guy. They are manipulating prices at the refinery, and that's pretty clear. I drive several hundred miles a day on my job, so I do most of my photography on those daily trips. In effect, my company pays for most of my photo trips. However, last weekend I didn't go to western SD. I have the money to buy gas, an extra twenty bucks won't even be noticed. However, I am getting pissed at those bozos for ripping me off. So, I stayed home. I own a farm, and if there was an easy way to convert corn into ethanol myself, I'd do it and quit buying gas from those crooks in a heartbeat. I'm considering replacing my Toyota with a Jetta diesel when it hits 500,000 miles at the end of the year.
Kent - can you define gouging? And manipulating? Are you suggesting collusion among the gas companies? I haven't actually seen anything supporting anything like that.
Back to the original question, I do most of my photography relatively locally, and don't make a lot of trips, so I haven't worried about it. It's a small percentage of my overall driving. For the few longer trips I take, usually there are alternate reasons for going as well - visiting friends or relatives - that I consider important. So it doesn't affect me there either. In fact, I can't think of an instance where I simply chose not to go someplace because I'd have to drive there. And I can't think of anyone I know that has either. I can think of times I've walked to avoid driving, or tried to limit trips, or carpooled, but I'd guess that for most people (Kent excluded ), just giving up on going somewhere doesn't happen.
Of course, given the nature (no pun intended, I think) of the people on here, that may seem wrong...
It's definitely impacted my photography. I take fewer trips, but when I take them I try to stretch them out a little longer, by a day or two. Most of the driving is done getting there and returning, so it doesn't cost much to stay a little longer. I camp, so no motel bills, etc. It's quite disheartening, and yes I do believe the oil companies are manipulating the prices, albeit legally through the futures market. No, I don't have proof, but it's just not that hard to do when you're the size of some of the companies. I'm a stockbroker in my real life, and believe me, manipulation does occur.
Bill - I kind of assumed Kent was talking about some sort of illegal activity. If it's legal, that's a whole other ball of wax as far as ethics, who to be mad at, etc...
"Gouging" is readily discernible, and if politicans weren't so deeply embedded in the luxurious pockets of said oil companies, yes, what is going on would be considered illegal.
Crude oil prices have decreased whilst gas at the pump, here in the US, has recently risen markedly. It's not currently a function of supply, as they'd like you to believe. Record, windfall profits, exhorbitant profit margins, etc point to gouging, and yes, shocks and horrors, manipulation.
Remember the gas price increase after Katrina? Gouging WAS charged at the time, but who'd "they" go after? The little independently owned gas stations, not the oil companies themselves. What constitutes "illegal" is simply that which those in power deem to be illegal - and as is so often the case, legality here is simply a function of the "who".
I wasn't getting at something patently illegal being done, but as pointed out oil prices have stayed steady or even slightly decreased Demand has been flat.. Yet, gas goes up. The prices are being manipulated by future traders, and by refineries. It's not an open market. Not just anyone can go into the refinery business. It has consolidated down to where just a handfull of companies do the refining. The short term cure would be to rush through approval for Walmart to have their own refinery. That would bring in some national competition! Long term, we need to replace gasoline. Even though I typically drive long distances, fuel prices don't impact me all that much. It does annoy me tremendously to think I'm being taken advantage of. When drug companies do that, I simply buy a generic or use a similar product from another company. Can't do that with gas. And how come when there's four gas stations on each street corner, they always have the same price? How come gas prices rarely have more than a 3 cent spread in a town? It's a rigged market.
I just finished a three month road trip and will start another month-long trip in ten days, so I'm all too familiar with gas prices and a thirsty truck. My outlook was recently affected by a discussion comparing the oil industry with other industries and their roles in our lives. With most other products you can buy cheaper brands or substitute or do without for meaningful savings. The first two aren't options with fuel. And the latter isn't going to be effective till lots of people do it and the "market" responds, though I think that term is a joke when referring to the oil industry.
I don't have much choice about making the trips, but I can choose the pace of travel, what I drive, and what other costs I incur while traveling. I've noodled the numbers and even though I could double my gas mileage by leaving the truck at home, I'd lose money in the long run due to the loss of cargo capacity and its impact on my ability to camp and live cheaply for long periods. I.e., even with the increased expenditure on gas, the extra gear I can carry makes me much more self-sufficient and cost effective along the way.
The pace of travel is important too. Like others I make fewer scouting trips, and I spend a lot more time in each location rather than idly driving about. Switch to shank's mare or pedals while in a location, and the thirsty truck may sit idle for days on end.
I economize on gas in my own fashion, but my "lifestyle" changes on the road are having a trickledown effect into other parts of the economy. Due to the high cost of gas I'm not spending as much money in other venues, and I am not spreading it over such large geographic areas. Economizing to save gas is definitely costing other businesses.
I must be an old bird on this. A required reading for one of my college economics courses was "The Limits to Growth", which has become somewhat of an outdated classic and really affected how I think about things. Whether oil or oil refining capabiliites is a current determinant of supply price seems to be a little hard to see through a history of greed, but I do think that at some time it is going to catch up with us. Perhaps sooner or perhaps later, but when it happens we will probably still be calling "wolf" on the big oil companies. Next to photos, prose are among my favorite artistic venues, and a short verse by Louis Jenkins seemed like a possibly appropriate anology,
Earl
"In Sitka, because they are fond of them, people have named the seals. Every seal is named Earl because they are killed one after another by the orca, the killer whale; seal bodies tossed left and right into the air. “At least he didn’t get Earl,” someone says. And sure enough, after a time, that same friendly, bewhiskered, face bobs to the surface. It’s Earl again. Well, how else are you to live except by denial, by some palatable fiction, some little song to sing while the inevitable, the black and white blindsiding fact, comes hurtling toward you out of the deep?"
I guess I'll still be trying to cut back on things, though in the big scheme they seem small. At some time, price will be one of the road signs saying warning, slow down. Maybe it's now, or maybe we should deny for a while longer.
Clearly oil is a finite resource, and I've long been reading and writing about Peak Oil. I'm a firm believer we're in for a hard time, soon.
But when the price of crude oil goes down, and the price of gas at the pump goes up, I'd be very surprised if that's a function of tighter supplies.
Oligopoly pricing seems to be what's going on, and for a bunch of reasons the folks who are supposed to control such things are letting it slide in this situation.
Carl, at least the spin on the news is that this time around the price of crude out of the ground isn't the driving factor for gas prices, but it the capacity for refining that is reducing supply. It's the old supply and demand thing from the refinery. Sounds like one of the major refineries was out of production for repairs. There seem to be just a handful of these huge refineries and they cost billions to build a new one and most seem to be getting old and prone to problems. In the Denver areas we've had a few days recently where a lot of the gas pumps were out of the lower grade regular.
I looked it up, and in the early '70s crude oil was $2.50-$3.00 per barrel and about 2000 had risen to maybe $25 per barrel. In June 2005, it was $49 per barrel. At today's price of $65 per barrel, I'm not so sure that the middle man is getting us at the pump, but maybe so.
"They" said the same thing after Katrina hit .. and yet refinery capacity and production was back to 100% within 2 days oof the 'cane.
Don't get me wrong, I'm with you 100% on the need for less consumption, and alternative energies. But profits and profit margins and price hikes don't bespeak a fair and equitable market either.
Isn't price gouging by the oil companies illegal and wouldn't there be a congresional investigation if it was suspected. (And on a side note isn't it just a little sad that our politicial leaders, some of the largest businesses, and news are so commonly deceptive that we so often assume "they" are not telling the truth. Sort of says something about us as a society).
Posted by Carl Donohue on May 29, 2007 at 10:44 AM
Hey Roger,
Well, after Katrina, there WAS an investigation. And who did "they" go after? Exxon or the little independent gas station owner? One guess? On that note, do you remember how the current administration dealt with supposed "refinery" restraints? They released crude oil from the federal reserves. Can anyone explain how an influx of crude oil helped the situation if the real problem was refinery and distribution lines? All it did was supply oil companies with free crude oil. And was this passed on to the consumer?
If Congress is in the pocket of oil companies, why would Congress go after oil companies? Remember the so-called "investigation" into the windfall profits? Were anybody's feet held to the fire? Of course not. Why not?
I agree with your point about how sad the state of affairs you reference is, and what it says about who we are, and what we value.
There is a pretty easy way to see if the petroleum industry is ripping us off--look at the profit
percentage. The industry as a whole is less than 10%. Exxon was 10.9%. For comparison,
pharmaceuticals was around 17%. To put things in proportion, look up the profitable of
bottled water. It is not unusual for it to cost over $10 per gallon. The petroleum industry
makes an easy target, but a little rational study of the matter will quickly show that other
industries are much higher on the rip-off ladder.
My problem is the lack of viable alternatives or competition within the industry. I can get generic drugs or even go overseas for cheaper alternatives. My bottled water comes out of my tap. Any of the petro companies step forward with generic gas at a fraction of the cost? I'm exploiting the alternative energy and conservation measures I can, but when the miles stretch you're trapped.
Posted by Carl Donohue on May 31, 2007 at 10:17 AM
Hey Art
Profit margins will always vary between industries - simple comparisons between 2 industries don't really ascertain anything beyond "these 2 industries yield differeing profit margins". Even within a given industry, margins can vary enormously: the profit margin on Serengetti sunglasses is way higher than sunglasses purchased at the dollar store.
This leads to something that should be a red flag for the oil industry - there is very, very little difference from one brand to another. The variations we do see tend to be mostly regional.
Another pointer to unreasonable marketing is the price hike. From the mid 80's thru until 2001 or 2002, the price of gas at the pump was reasonably stable. gas prices doubled in 3 years - this increase is not at all in sync with inflation. But don't just look at price increases, look at profit increases for the last few years.
Profits and profit margins have soared recently. Furthermore, when you consider that profit margins AND total profits increase when refinery production decreases, or when supply in general decreases, I think there's reasonable cause for concern every time I hear that there's sudddenly prolems at a refinery or that supplies are restricted.
Oh, and I've never seen bottled water for $10.00 per gallon - or anywhere close to that. Office Depot sell nearly 3 gallons for $7.00. The grocery stores sell 24 x.5 litre bottles (nearly 3 gallons) for $4.00. Blueridge Mountain Water sell 5 gallons for $6.95 and 3 gallon for $4.70. Where is it "Not unusual for it to cost over $10.00 per gallon"?
The cost of gas has definitely impacted me, but it just means fewer long trips and the opportunity to photograph more scenes closer to home. Sometimes I think we forget about how much there is to "shoot" around home.You know, "the grass is always greener."
This is a gas price updtae from AP dated June 1. I suppose I'm starting to beat a dead horse, but mainstream word doesn't mention oil industry price gouging or manipulation and contiues to be all about suplly and demand. I guess we'll all have to meet back here in 10 or 20 years and see how the long term oil supply is going or get Bill Moyers to give us the real scoop.
"Crude oil prices held on to gains Friday after a U.S. government weekly fuel supply report showed an unexpected decline in crude oil stockpiles. The U.S. Energy Department's report showed domestic oil inventories fell 2 million barrels, or 0.6 percent, to 342.2 million barrels for the week ending May 25. It was the first draw in crude oil inventories in six weeks. Analysts polled by Dow Jones Newswires had predicted crude inventories would climb about 300,000 barrels. Prices for gasoline futures have risen this spring on concerns that refineries are not producing enough to meet peak summer demand. Those concerns have been exacerbated by a higher than normal spate of unexpected refinery outages.
Gasoline production has rebounded in recent weeks, but some analysts are still concerned that the inventory increases have not been big enough. That has led to a split among analysts, with some speculating prices could head higher over the next month, while others have concluded prices have peaked.
The report also showed that U.S. oil refineries ran at 91.1 percent of their total production capacity on average last week, unchanged from the previous week.
Unrest continued in Nigeria, as gunmen kidnapped three Asian workers from a residential compound in the lawless southern oil region."
Here's an interesting insight. I wonder how well it translates into the economy at large:
We just finished the accounting on our recent 3-month driving trip. We make similar trips every year, and sometimes twice a year, though usually only 2 months in duration. In a nutshell (thanks to my business manager wife), we're able to compare costs and expenditures over about a ten year period, whether by day, week, or month. If needed we could probably even break it down to cost per mile.
Year in and year out, we tend to spend about the same amount per month, with gasoline being one of the major outlays. This year and last we didn't drive any less in spite of the higher gasoline costs, but spent less on hotels, dining out, entertainment, and yes, camera equipment.
Makes me wonder about consumer spending changes in other sectors of the economy to compensate for higher gas prices. Surely that's been tabulated somewhere? I've not seen any press coverage of the phenom.
Let's say you got a shot of bigfoot. Not just any shot, but a great, sharp, well composed, properly exposed, verifiable shot of the sasquatch. You make a few nice prints, but then your hard drive crashes leaving you with only the prints you've made. (Let's ignore the fact that you could scan one of the prints.) Now with a very limited supply, and a possibly a large demand, would you not want to sell those prints for as much as you possibly could?
Now what about if you're a small businessman selling gasoline? The local refinery was hit by a hurricane, or a fire or for whatever reason had to shut down production. You have only the gas in your storage tanks left, and no idea when the next shipment will come. Why should you not be able to sell that gasoline for whatever people are willing to pay you for it?
Isn't a free market economy based on supply and demand? If people are willing to pay $XX per gallon for gas, then why shouldn't gas stations be able to charge that?
Gasoline prices are dependent on far more than just crude prices. There is limited gasoline production capacity in North America. A fire in a refinery (one happened in Canada a few months back, shutting down many filling stations that were its customers) or a hurricane, or anything else that unexpectedly takes a refinery offline will cause a large upward pressure on gasoline prices, even when crude prices are moving downwards. The same thing that happens at a service station level happens at the refinery level. For example, if two refineries serve an area, and one of them goes offline for any reason, the other one will see more demand than it can supply. The free market system dictates that that will result in a price increase. (Which will be limited, because too much will give incentive to truckers to start hauling from refineries further away, etc.)
Now the day to day issue is something different. If there is actual collusion in the price-setting, that is wrong and should be punished. But since gas stations have big signs saying what their prices are, it's rather hard to prove collusion. It's not collusion to set your price to be the same as the well-advertised price across the road!
People don't generally go into business because they want to provide a needed service out of the goodness of their hearts. They do it to make money. The big companies are owned by shareholders, and the companies have a fiduciary responsibility to make a profit for those shareholders. I see nothing wrong, or even unethical, with taking advantage of glitches in supply and demand to increase profits. So long as anti-trust and collusion laws are not broken, of course. And so long as it's not a situation which would result in a danger to human life or health. (But I can't see how that would apply to the price of gasoline.)
You would laugh Jim. I made some remark about gas prices while filling my truck in Utah, and the fellow across the service island from piped up (in a strong British accent). "Yes, it really is quite amazing. It's the least I've paid for gas in a lifetime!"
All a matter of perspective, and I agree that we're being trained right now.
Posted by Carl Donohue on June 3, 2007 at 11:47 AM
"Mainstream word" doesn't ever mention Peak Oil either - "mainstream word" would rather focus on Paris or Michael or on the Don Imus' of the world. I wouldn't give that too much weight.
Hey Paul
I'm no economist, so I'm probably in way over of my head here. But we don't actually have a "Free market" anyway. And we do have laws against profiteering, price gouging, collusion and cartels, so at least, on paper, we deem those practices to be somewhat unacceptable. OPEC itself is a cartel, correct ? - it's probably perfectly reasonable to say crude oil prices are somewhat a function of anti-competitive price setting, if not outright gouging.
Secondly, we do have laws and regulations allowing certain pricing structures in certain industries. There would be a huge outcry, and rightfully so, if Georgia Power started cranking up the price of electricity. The argument that people in an economic system should simply (a) do without, (b) shop elsewhere, or (c) put up with it, doesn't apply in a number of cases.
Whilst the oil industry isn't a monopoly, it does tend to behave like one. And oligopolistic pricing isn't a result of a fair or free market. The recent mergers as well as other factors like barriers to entry (the huge initial capital investment required to set up shop in the industry of oil and gas) mean the industry is without real competition. A few huge companies have a very real and unfair competitive advantage. Typically, those kinds of situations are dealt with thru Govt regulation. However, when the entire Federal Govt is nestled in the crook of the oil industry's arm, it's unlikely they're going to do anything about it. In England, for example, they did (I believe) legislate against the oil industry with regards to Windfall profits. Here in the US, they didn't do anything at all.
Further, the fact that gas stations do display prices, and tend to have a very homogenous pricing structure from one shop to the next, with almost zero price competition, points to some form of collusion going on. It may be hard to prove, but that hardly means it's not occurring. On the issue of pricing, your arguments regarding the influence of supply and demand (and the whole "free market" issue) are modeled on an assumption of competition. The oil industry has almost ZERO price competition. If it did, we'd see fluctuations in price at the pump while different businesses fight for competitive advantage. That simply doesn't exist in the oil industry.
Whilst you make the argument that "so long as it's not a situation which would result in a danger to human life or health" high prices are acceptable, I'd submit that the potential effect on the greater economy does warrant concern here, and does lead to a potential problem. With no change in discretionary income for given individuals, the result will be a slowing of the economy elsewhere, as people spend more $$$$ on gas and less on other goods and services - though it could be argued this is possibly offset by people driving less having some beneficial environmental changes.
Just as people go into business to make money, a Govt exists to maintain some semblance of protection to its constituents. This ought be economic as well as militaristic. What we appear to have at the moment is a Govt that is more interested in serving the oil industry than the people it presumedly represents. Govt subsidies to the tune of billions of dollars, to an industry currently yielding the highest profits in the history of economic development, seems (to me) to provide ample evidence of this agenda.
I'm not going to argue with you (I'm not an economist either), but I will say that the best thing that can happen for the environment is for prices to stay high, or go even higher. I don't buy the "bad for the economy" argument, since Europe's prices are much higher and they're economies are doing just fine. (But I do agree that an increase in price would have to be gradual to prevent economic problems.)
I was just reading an article in a trade journal by a very highly respected petroleum engineering economist. It was an attempt to debunk the Peak Oil theory. I wasn't buying a word of it! But if his arguments on that point were weak, he threw in an attempt to call the idea of human-caused global warming "preposterous". His argument used heat transfer, an area I am very knowledgeable in. His attempt wasn't even good enough to be called laughable!
I'm uncertain how good higher prices will be. Obviously I can see plausible argument for that supposition, but I'm not convinced it's that simple either. Maybe.
I definitely think higher prices for gas will adversely affect the local economy - it's a very different situation to the European culture, and they have very different attitudes and attachments to their vehicles over there. Most of life here is simply not set up for people to use alternative forms of transport, other than a few cities like NYC, LA, etc.
In reference to your aside about the article, it's interesting to me what people will argue to maintain the status quo - oftentimes very intelligent well-respected folks simply throw rationale to the wind, and say just about anything. I haven't run across the 'heat transfer' argument against anthropogenic global warming, but every time I start to think I've heard them all, out comes a new, previously unthinkable one. :)
Hey Carl,
I'm a little sensitive lately to what I would refer to as a "victim mentality" that I've run into at my workplace and in some personal relationships. The victim blaces total blame on another, which seems to be more common if the other is an anonomous authority figure. And accepts no personal blame or responsibility for an unfortumate or hurtful situation.
In the case of gas prices or oil supply I just can't buy that this is all manipulation by big oil. Though I'm sure some or a little of that happens, we have a role of responsibility in this, too. And are not helpless victims. If I recall my vague economics memory, there is something called "what the market will bear". As long as the collective we continues to buy low efficiency vehicles, have only token efforts at energy alternatives, and contintue to buy at the same volumes despite prices, the oil comanies are no doubt getting the message that regardless of the reason, they really don't have to worry about prices affecting their sales volumes. I know that sometimes an individual seems like a small part of a large machine, I still believe that change starts with one person. Last week was a vacation week for me and I did indeed cut back on my driving. I didn't feel deprived, as I took some short trips and had a nice time. I intentionally have owned a car that is very (or relatively) gas efficient, and my work commute is short and can be biked in good weather.
Roger, I concur with what you are saying - as long as we don't change our habits, neither will the oil companies. In so many ways, we are indeed responsible. I often wonder how expensive gasoline needs to become for the American public to begin making meaningful changes to address it.
Change starts with each of us as individuals, though I know from some past discussion here not everyone believes that. Some believe that simply electing the right politicians will solve all of these problems, but IMO that is wishful thinking.
Posted by Carl Donohue on June 5, 2007 at 11:01 AM
hey Roger
I do hear what you're saying, and I don't dismiss our role in the situation. We can't have our cake and eat it too. We can't have cheap gas and drive willy nilly around the countryside without there being some cost. And in reality, the greater cost is environmental damage, rather than financial. And I'm not saying for a second that we have any right to "cheap gas", or that we have any right to continue rampant pollution. We do have responbility to our landbase and to each other. And we do need to live responsibly. But that's not mutually exclusive from oil companies exploiting the current situation. I think you're being far too generous when you say .. I'm sure some or a little of that (price manipulation) happens."
hey Jim
Don't dismiss the import of the political system, and the import of legislation to bring about change. On one level, I completely agree with you .. change on an individual level is critical. But sometimes that is brought about by external factors. I have a number of good friends here in Atlanta who have told me all about how greatly there lives were affected, in a positive way, by changes in legislation. It was legislature that helped bring about a massive social change, not change that started with "each of us as individuals".
Going back further generations, slaves weren't set free because of individual change that began in the hearts and minds of slaveholders. Slavery wasn't abolished because, one by one, individuals changed the way they felt about it. It was made illegal, and slaves were freed. Almost ALL civil rights progress has been "forced" on the broader culture/society by legislation, not by a "change that starts with each of us as individuals". Child Labor laws were enacted to bring about change that wasn't going to happen if we left it to "each of us as individuals", or if we left the system to simple influences of supply and demand. Womens' rights weren't granted because of individual change. Minimum wage laws are a statement of declaration that says, essentially "left to forces of supply and demand, and left to the potential for "changes starting within each of us as individuals" those with a lot of power will exploit those with very little". "Environmental laws" are enacted because many changes seem to not "start with each of us as individuals", particularly when dealing with corporate entities. Drink Driving laws are in place because when left to each of us as individuals, change doesn't seem to always follow.
Another very simply, very innocent and very innoccuous example: littering. Seriously, how big a deal is it to not throw trash on the ground? And whilst it remains commonplace, it's not nearly as bad as it was 30 or 40 years ago. Why? Because change started within us all, as individuals? No, of course not. Because legislation made it illegal, and laws were enacted to disallow littering. The result of this is that people (generally) litter less than they used to. But more than that, many, many people also changed their attitudes towards littering. Lots of people now feel it's a bad thing. Because they live in a society that said, officially, "we don't tolerate littering". That has tremendous power on our value system.
On a global scale, aren't we in a war right now because our political system decided that change doesn't start with each of us as individuals, it needs to be kick-started with guns and bombs? There are countless examples of incidents and situations where change started ONLY because of political intervention. Further, once legislation did change patterns of behavior, it was amazing how quickly real change, including changes in attitudes, followed. We're creatures of habit. Change those habits, and we'll very quickly come to perceive the world differently.
None of this means we, as individuals, are without responsibility, and without power over our lives. To conflate the 2 ideas is somewhat intellectually dishonest, IMO. We live in communities. We are social creatures, and we seem to need, at this point in our evolution, rules to prohibit exploitation. Sometimes that exploitation is physical, sometimes it's mental, sometimes it's social, and sometimes it's economic (it takes a myriad other forms, as well). And sometimes (probably most times) very little prevention occurs - but I don't think that means the premise is untenable.
Carl, good points - it's just that I don't have much faith in the political process to bring about the kind of change that is needed. We can pass laws until we're blue in the face but that doesn't stop people from speeding, littering, killing others, etc. On top of that, there are tremendous economic implications with any meaningful measure congress might take in regard to this issue. IMO, none of them have the intestinal fortitude to do so.
I'm not sure about the price fixing so to speak, but when OPEC cuts production for price increase I have a problem...untill 2 years ago I drove a semi..how would ya like to put in 300 gal. per day?
Discussion
31 repliesKent in SD
Back to the original question, I do most of my photography relatively locally, and don't make a lot of trips, so I haven't worried about it. It's a small percentage of my overall driving. For the few longer trips I take, usually there are alternate reasons for going as well - visiting friends or relatives - that I consider important. So it doesn't affect me there either. In fact, I can't think of an instance where I simply chose not to go someplace because I'd have to drive there. And I can't think of anyone I know that has either. I can think of times I've walked to avoid driving, or tried to limit trips, or carpooled, but I'd guess that for most people (Kent excluded
Of course, given the nature (no pun intended, I think) of the people on here, that may seem wrong...
Define "illegal"? :)
"Gouging" is readily discernible, and if politicans weren't so deeply embedded in the luxurious pockets of said oil companies, yes, what is going on would be considered illegal.
Crude oil prices have decreased whilst gas at the pump, here in the US, has recently risen markedly. It's not currently a function of supply, as they'd like you to believe. Record, windfall profits, exhorbitant profit margins, etc point to gouging, and yes, shocks and horrors, manipulation.
Remember the gas price increase after Katrina? Gouging WAS charged at the time, but who'd "they" go after? The little independently owned gas stations, not the oil companies themselves. What constitutes "illegal" is simply that which those in power deem to be illegal - and as is so often the case, legality here is simply a function of the "who".
Cheers
Carl
Kent in SD
I don't have much choice about making the trips, but I can choose the pace of travel, what I drive, and what other costs I incur while traveling. I've noodled the numbers and even though I could double my gas mileage by leaving the truck at home, I'd lose money in the long run due to the loss of cargo capacity and its impact on my ability to camp and live cheaply for long periods. I.e., even with the increased expenditure on gas, the extra gear I can carry makes me much more self-sufficient and cost effective along the way.
The pace of travel is important too. Like others I make fewer scouting trips, and I spend a lot more time in each location rather than idly driving about. Switch to shank's mare or pedals while in a location, and the thirsty truck may sit idle for days on end.
I economize on gas in my own fashion, but my "lifestyle" changes on the road are having a trickledown effect into other parts of the economy. Due to the high cost of gas I'm not spending as much money in other venues, and I am not spreading it over such large geographic areas. Economizing to save gas is definitely costing other businesses.
Earl
"In Sitka, because they are fond of them, people have named the seals. Every seal is named Earl because they are killed one after another by the orca, the killer whale; seal bodies tossed left and right into the air. “At least he didn’t get Earl,” someone says. And sure enough, after a time, that same friendly, bewhiskered, face bobs to the surface. It’s Earl again. Well, how else are you to live except by denial, by some palatable fiction, some little song to sing while the inevitable, the black and white blindsiding fact, comes hurtling toward you out of the deep?"
I guess I'll still be trying to cut back on things, though in the big scheme they seem small. At some time, price will be one of the road signs saying warning, slow down. Maybe it's now, or maybe we should deny for a while longer.
Clearly oil is a finite resource, and I've long been reading and writing about Peak Oil. I'm a firm believer we're in for a hard time, soon.
But when the price of crude oil goes down, and the price of gas at the pump goes up, I'd be very surprised if that's a function of tighter supplies.
Oligopoly pricing seems to be what's going on, and for a bunch of reasons the folks who are supposed to control such things are letting it slide in this situation.
Cheers
Carl
I looked it up, and in the early '70s crude oil was $2.50-$3.00 per barrel and about 2000 had risen to maybe $25 per barrel. In June 2005, it was $49 per barrel. At today's price of $65 per barrel, I'm not so sure that the middle man is getting us at the pump, but maybe so.
"They" said the same thing after Katrina hit .. and yet refinery capacity and production was back to 100% within 2 days oof the 'cane.
Don't get me wrong, I'm with you 100% on the need for less consumption, and alternative energies. But profits and profit margins and price hikes don't bespeak a fair and equitable market either.
Cheers
Carl
Well, after Katrina, there WAS an investigation. And who did "they" go after? Exxon or the little independent gas station owner? One guess? On that note, do you remember how the current administration dealt with supposed "refinery" restraints? They released crude oil from the federal reserves. Can anyone explain how an influx of crude oil helped the situation if the real problem was refinery and distribution lines? All it did was supply oil companies with free crude oil. And was this passed on to the consumer?
If Congress is in the pocket of oil companies, why would Congress go after oil companies? Remember the so-called "investigation" into the windfall profits? Were anybody's feet held to the fire? Of course not. Why not?
I agree with your point about how sad the state of affairs you reference is, and what it says about who we are, and what we value.
Cheers
Carl
percentage. The industry as a whole is less than 10%. Exxon was 10.9%. For comparison,
pharmaceuticals was around 17%. To put things in proportion, look up the profitable of
bottled water. It is not unusual for it to cost over $10 per gallon. The petroleum industry
makes an easy target, but a little rational study of the matter will quickly show that other
industries are much higher on the rip-off ladder.
Art L.
Profit margins will always vary between industries - simple comparisons between 2 industries don't really ascertain anything beyond "these 2 industries yield differeing profit margins". Even within a given industry, margins can vary enormously: the profit margin on Serengetti sunglasses is way higher than sunglasses purchased at the dollar store.
This leads to something that should be a red flag for the oil industry - there is very, very little difference from one brand to another. The variations we do see tend to be mostly regional.
Another pointer to unreasonable marketing is the price hike. From the mid 80's thru until 2001 or 2002, the price of gas at the pump was reasonably stable. gas prices doubled in 3 years - this increase is not at all in sync with inflation. But don't just look at price increases, look at profit increases for the last few years.
Profits and profit margins have soared recently. Furthermore, when you consider that profit margins AND total profits increase when refinery production decreases, or when supply in general decreases, I think there's reasonable cause for concern every time I hear that there's sudddenly prolems at a refinery or that supplies are restricted.
Oh, and I've never seen bottled water for $10.00 per gallon - or anywhere close to that. Office Depot sell nearly 3 gallons for $7.00. The grocery stores sell 24 x.5 litre bottles (nearly 3 gallons) for $4.00. Blueridge Mountain Water sell 5 gallons for $6.95 and 3 gallon for $4.70. Where is it "Not unusual for it to cost over $10.00 per gallon"?
Cheers
Carl
"Crude oil prices held on to gains Friday after a U.S. government weekly fuel supply report showed an unexpected decline in crude oil stockpiles. The U.S. Energy Department's report showed domestic oil inventories fell 2 million barrels, or 0.6 percent, to 342.2 million barrels for the week ending May 25. It was the first draw in crude oil inventories in six weeks. Analysts polled by Dow Jones Newswires had predicted crude inventories would climb about 300,000 barrels. Prices for gasoline futures have risen this spring on concerns that refineries are not producing enough to meet peak summer demand. Those concerns have been exacerbated by a higher than normal spate of unexpected refinery outages.
Gasoline production has rebounded in recent weeks, but some analysts are still concerned that the inventory increases have not been big enough. That has led to a split among analysts, with some speculating prices could head higher over the next month, while others have concluded prices have peaked.
The report also showed that U.S. oil refineries ran at 91.1 percent of their total production capacity on average last week, unchanged from the previous week.
Unrest continued in Nigeria, as gunmen kidnapped three Asian workers from a residential compound in the lawless southern oil region."
We just finished the accounting on our recent 3-month driving trip. We make similar trips every year, and sometimes twice a year, though usually only 2 months in duration. In a nutshell (thanks to my business manager wife), we're able to compare costs and expenditures over about a ten year period, whether by day, week, or month. If needed we could probably even break it down to cost per mile.
Year in and year out, we tend to spend about the same amount per month, with gasoline being one of the major outlays. This year and last we didn't drive any less in spite of the higher gasoline costs, but spent less on hotels, dining out, entertainment, and yes, camera equipment.
Makes me wonder about consumer spending changes in other sectors of the economy to compensate for higher gas prices. Surely that's been tabulated somewhere? I've not seen any press coverage of the phenom.
Now what about if you're a small businessman selling gasoline? The local refinery was hit by a hurricane, or a fire or for whatever reason had to shut down production. You have only the gas in your storage tanks left, and no idea when the next shipment will come. Why should you not be able to sell that gasoline for whatever people are willing to pay you for it?
Isn't a free market economy based on supply and demand? If people are willing to pay $XX per gallon for gas, then why shouldn't gas stations be able to charge that?
Gasoline prices are dependent on far more than just crude prices. There is limited gasoline production capacity in North America. A fire in a refinery (one happened in Canada a few months back, shutting down many filling stations that were its customers) or a hurricane, or anything else that unexpectedly takes a refinery offline will cause a large upward pressure on gasoline prices, even when crude prices are moving downwards. The same thing that happens at a service station level happens at the refinery level. For example, if two refineries serve an area, and one of them goes offline for any reason, the other one will see more demand than it can supply. The free market system dictates that that will result in a price increase. (Which will be limited, because too much will give incentive to truckers to start hauling from refineries further away, etc.)
Now the day to day issue is something different. If there is actual collusion in the price-setting, that is wrong and should be punished. But since gas stations have big signs saying what their prices are, it's rather hard to prove collusion. It's not collusion to set your price to be the same as the well-advertised price across the road!
People don't generally go into business because they want to provide a needed service out of the goodness of their hearts. They do it to make money. The big companies are owned by shareholders, and the companies have a fiduciary responsibility to make a profit for those shareholders. I see nothing wrong, or even unethical, with taking advantage of glitches in supply and demand to increase profits. So long as anti-trust and collusion laws are not broken, of course. And so long as it's not a situation which would result in a danger to human life or health. (But I can't see how that would apply to the price of gasoline.)
-Paul
All a matter of perspective, and I agree that we're being trained right now.
Not quite:
http://money.cnn.com/pf/features/lists/global_gasprices/price.html
What's weird is that gas is cheaper in Sydney (according to this) than it is in the US.
Caracas have a good deal. :)
Cheers
Carl
"Mainstream word" doesn't ever mention Peak Oil either - "mainstream word" would rather focus on Paris or Michael or on the Don Imus' of the world. I wouldn't give that too much weight.
Hey Paul
I'm no economist, so I'm probably in way over of my head here. But we don't actually have a "Free market" anyway. And we do have laws against profiteering, price gouging, collusion and cartels, so at least, on paper, we deem those practices to be somewhat unacceptable. OPEC itself is a cartel, correct ? - it's probably perfectly reasonable to say crude oil prices are somewhat a function of anti-competitive price setting, if not outright gouging.
Secondly, we do have laws and regulations allowing certain pricing structures in certain industries. There would be a huge outcry, and rightfully so, if Georgia Power started cranking up the price of electricity. The argument that people in an economic system should simply (a) do without, (b) shop elsewhere, or (c) put up with it, doesn't apply in a number of cases.
Whilst the oil industry isn't a monopoly, it does tend to behave like one. And oligopolistic pricing isn't a result of a fair or free market. The recent mergers as well as other factors like barriers to entry (the huge initial capital investment required to set up shop in the industry of oil and gas) mean the industry is without real competition. A few huge companies have a very real and unfair competitive advantage. Typically, those kinds of situations are dealt with thru Govt regulation. However, when the entire Federal Govt is nestled in the crook of the oil industry's arm, it's unlikely they're going to do anything about it. In England, for example, they did (I believe) legislate against the oil industry with regards to Windfall profits. Here in the US, they didn't do anything at all.
Further, the fact that gas stations do display prices, and tend to have a very homogenous pricing structure from one shop to the next, with almost zero price competition, points to some form of collusion going on. It may be hard to prove, but that hardly means it's not occurring. On the issue of pricing, your arguments regarding the influence of supply and demand (and the whole "free market" issue) are modeled on an assumption of competition. The oil industry has almost ZERO price competition. If it did, we'd see fluctuations in price at the pump while different businesses fight for competitive advantage. That simply doesn't exist in the oil industry.
Whilst you make the argument that "so long as it's not a situation which would result in a danger to human life or health" high prices are acceptable, I'd submit that the potential effect on the greater economy does warrant concern here, and does lead to a potential problem. With no change in discretionary income for given individuals, the result will be a slowing of the economy elsewhere, as people spend more $$$$ on gas and less on other goods and services - though it could be argued this is possibly offset by people driving less having some beneficial environmental changes.
Just as people go into business to make money, a Govt exists to maintain some semblance of protection to its constituents. This ought be economic as well as militaristic. What we appear to have at the moment is a Govt that is more interested in serving the oil industry than the people it presumedly represents. Govt subsidies to the tune of billions of dollars, to an industry currently yielding the highest profits in the history of economic development, seems (to me) to provide ample evidence of this agenda.
Cheers
Carl
I'm not going to argue with you (I'm not an economist either), but I will say that the best thing that can happen for the environment is for prices to stay high, or go even higher. I don't buy the "bad for the economy" argument, since Europe's prices are much higher and they're economies are doing just fine. (But I do agree that an increase in price would have to be gradual to prevent economic problems.)
I was just reading an article in a trade journal by a very highly respected petroleum engineering economist. It was an attempt to debunk the Peak Oil theory. I wasn't buying a word of it! But if his arguments on that point were weak, he threw in an attempt to call the idea of human-caused global warming "preposterous". His argument used heat transfer, an area I am very knowledgeable in. His attempt wasn't even good enough to be called laughable!
-Paul
I'm uncertain how good higher prices will be. Obviously I can see plausible argument for that supposition, but I'm not convinced it's that simple either. Maybe.
I definitely think higher prices for gas will adversely affect the local economy - it's a very different situation to the European culture, and they have very different attitudes and attachments to their vehicles over there. Most of life here is simply not set up for people to use alternative forms of transport, other than a few cities like NYC, LA, etc.
In reference to your aside about the article, it's interesting to me what people will argue to maintain the status quo - oftentimes very intelligent well-respected folks simply throw rationale to the wind, and say just about anything. I haven't run across the 'heat transfer' argument against anthropogenic global warming, but every time I start to think I've heard them all, out comes a new, previously unthinkable one. :)
Cheers
Carl
I'm a little sensitive lately to what I would refer to as a "victim mentality" that I've run into at my workplace and in some personal relationships. The victim blaces total blame on another, which seems to be more common if the other is an anonomous authority figure. And accepts no personal blame or responsibility for an unfortumate or hurtful situation.
In the case of gas prices or oil supply I just can't buy that this is all manipulation by big oil. Though I'm sure some or a little of that happens, we have a role of responsibility in this, too. And are not helpless victims. If I recall my vague economics memory, there is something called "what the market will bear". As long as the collective we continues to buy low efficiency vehicles, have only token efforts at energy alternatives, and contintue to buy at the same volumes despite prices, the oil comanies are no doubt getting the message that regardless of the reason, they really don't have to worry about prices affecting their sales volumes. I know that sometimes an individual seems like a small part of a large machine, I still believe that change starts with one person. Last week was a vacation week for me and I did indeed cut back on my driving. I didn't feel deprived, as I took some short trips and had a nice time. I intentionally have owned a car that is very (or relatively) gas efficient, and my work commute is short and can be biked in good weather.
Best regards,
Roger
Change starts with each of us as individuals, though I know from some past discussion here not everyone believes that. Some believe that simply electing the right politicians will solve all of these problems, but IMO that is wishful thinking.
I do hear what you're saying, and I don't dismiss our role in the situation. We can't have our cake and eat it too. We can't have cheap gas and drive willy nilly around the countryside without there being some cost. And in reality, the greater cost is environmental damage, rather than financial. And I'm not saying for a second that we have any right to "cheap gas", or that we have any right to continue rampant pollution. We do have responbility to our landbase and to each other. And we do need to live responsibly. But that's not mutually exclusive from oil companies exploiting the current situation. I think you're being far too generous when you say .. I'm sure some or a little of that (price manipulation) happens."
hey Jim
Don't dismiss the import of the political system, and the import of legislation to bring about change. On one level, I completely agree with you .. change on an individual level is critical. But sometimes that is brought about by external factors. I have a number of good friends here in Atlanta who have told me all about how greatly there lives were affected, in a positive way, by changes in legislation. It was legislature that helped bring about a massive social change, not change that started with "each of us as individuals".
Going back further generations, slaves weren't set free because of individual change that began in the hearts and minds of slaveholders. Slavery wasn't abolished because, one by one, individuals changed the way they felt about it. It was made illegal, and slaves were freed. Almost ALL civil rights progress has been "forced" on the broader culture/society by legislation, not by a "change that starts with each of us as individuals". Child Labor laws were enacted to bring about change that wasn't going to happen if we left it to "each of us as individuals", or if we left the system to simple influences of supply and demand. Womens' rights weren't granted because of individual change. Minimum wage laws are a statement of declaration that says, essentially "left to forces of supply and demand, and left to the potential for "changes starting within each of us as individuals" those with a lot of power will exploit those with very little". "Environmental laws" are enacted because many changes seem to not "start with each of us as individuals", particularly when dealing with corporate entities. Drink Driving laws are in place because when left to each of us as individuals, change doesn't seem to always follow.
Another very simply, very innocent and very innoccuous example: littering. Seriously, how big a deal is it to not throw trash on the ground? And whilst it remains commonplace, it's not nearly as bad as it was 30 or 40 years ago. Why? Because change started within us all, as individuals? No, of course not. Because legislation made it illegal, and laws were enacted to disallow littering. The result of this is that people (generally) litter less than they used to. But more than that, many, many people also changed their attitudes towards littering. Lots of people now feel it's a bad thing. Because they live in a society that said, officially, "we don't tolerate littering". That has tremendous power on our value system.
On a global scale, aren't we in a war right now because our political system decided that change doesn't start with each of us as individuals, it needs to be kick-started with guns and bombs? There are countless examples of incidents and situations where change started ONLY because of political intervention. Further, once legislation did change patterns of behavior, it was amazing how quickly real change, including changes in attitudes, followed. We're creatures of habit. Change those habits, and we'll very quickly come to perceive the world differently.
None of this means we, as individuals, are without responsibility, and without power over our lives. To conflate the 2 ideas is somewhat intellectually dishonest, IMO. We live in communities. We are social creatures, and we seem to need, at this point in our evolution, rules to prohibit exploitation. Sometimes that exploitation is physical, sometimes it's mental, sometimes it's social, and sometimes it's economic (it takes a myriad other forms, as well). And sometimes (probably most times) very little prevention occurs - but I don't think that means the premise is untenable.
Cheers
Carl
Sometimes, the "leaders" must be lead.