Fuel Prices

[MEDIK418]

I;d like to add one more point and then I'm through with this.
A case in point to illustrate how the public's perception and the panic buying that follows events in the oil industry.
In February of this year, we blew up a major part of our refinery. End result was we lost production for a little over 100 days. That's 150,000 barrels a day.
The price of gasoline never went up a penny anywhere in the country because of it. Wanna know why?

Nobody heard about it.

Outside of the 20,000 or so residents of this area, the news never got out. The press didn't blow it out of proportion, nobody felt the pinch and more importantly, the company didn't find it a benefit to "gouge" anyone.

[Unit 5302]

MEDIK, I'm talking about an immediate change in taxes, refining technology, and transportation costs. An immediate change that resulted in gas increasing 100% in cost over a two year period, and 50% over a few day period. Double-hulled tankers, ethanol blended fuels, less productive crude, and additional refining cost is all reasonable, and would lead to a general increase in cost for the jobber, and ultimately the consumer. These are changes over time, not a few days or even just the last two years where fuel costs have shot up. Reinvestment into the industry is really a weak excuse because any company that does not reinvest into itself is a dead company in short order.

As far as taxes on profits are concerned, you're barking up the wrong tree. I work for a life insurance company. The state of NJ actually has a retaliatory tax. If our product is sold in a state other than NJ, which has a 2.1% premium tax, and the state it's sold in has a lower tax, NJ actually taxes us for the remainder, LOL. Also, the federal government has concluded that there is profit being made by the insurance companies on the premiums paid to them. Even though the insurance company is already being taxed on actual profits, there is apparently a hidden profit in the premiums. Therefore, the federal government taxes the insurers directly on premiums you pay, and the insurance companies pass that tax along to you. It's called DAC Tax... I think in Oregon they refer to it as administrative tax or something of the sort. Anyway, it's pretty much industry wide at 1.25% that's passed along to the consumer.

You are also correct that many states mandate blended fuels because of EPA emissions laws and testing. Minnesota used to be one, but we no longer need ethanol blended fuels because our air quality has improved. That being said, we still have a state law that requires them, mostly as a subsidy to farmers.

You also make it seem as though I'm arguing over issues that are now 30 years old. I wasn't alive until the late 70s, and it wasn't really an issue of interest until I was at least 3yrs old. hahah. Oil companies were in the red because of competition. Now there is much less competition and prices are soaring. You're helping my point out here.

I was aware of the February incident. As was the rest of Minnesota because our gas prices shot up, thanks. Such was to be expected, just for the record. I can't see the oil company blowing up one of their refineries because they wanted to raise prices. I'm not sure that the economic loss involved from asset reduction would offset the gain from increased revenue and profits.

I don't need to talk about executive compensation. Other people are doing it for me, lol.

http://www.faireconomy.org/press/2005/EE2005_pr.html

Let me just say this. What executives make at a public company almost never has much to do with their salary.

In any case, I don't see as though any of your points are invalid, I just don't recognize them as concrete excuses for the dramatic increases in price at the pump over the past two years, and especially following Katrina. The oil companies also agree with me, as they stated when they spoke with the US Senate, and when they reported earnings for 1Q and 2Q 2005.

I suppose it's fair to ask what price gouging is. dictionary.com defines it as:

"pricing above the market when no alternative retailer is available"

The definition really doesn't make any sense to me. There wouldn't be a "market" to price above if there were no other retailers to buy from. Meh. I define it as really the same thing as price fixing. dictionary.com defines price fixing as:

"The result of an unlawful agreement between manufacturers or dealers to set and maintain specified prices on typically competing products."

This very much seems to be the case to me.

[Unit 5302]

Oh, and btw, I think gas prices right now are fine. Not that I like what the current price is, but I don't see any artificial increases due to price fixing/gouging right now.

[Phillyfanfrombirth]

Originally Posted by MEDIK418

I;d like to add one more point and then I'm through with this.
A case in point to illustrate how the public's perception and the panic buying that follows events in the oil industry.
In February of this year, we blew up a major part of our refinery. End result was we lost production for a little over 100 days. That's 150,000 barrels a day.
The price of gasoline never went up a penny anywhere in the country because of it. Wanna know why?

Nobody heard about it.

Outside of the 20,000 or so residents of this area, the news never got out. The press didn't blow it out of proportion, nobody felt the pinch and more importantly, the company didn't find it a benefit to "gouge" anyone.

Yes, they did go up... however, it was a big issue only in business news. The public generally doesn't react to a couple pennies at the pump.

[MEDIK418]

Originally Posted by Phillyfanfrombirth

Yes, they did go up... however, it was a big issue only in business news. The public generally doesn't react to a couple pennies at the pump.

I beg to differ. The official government watchdog information agency reports that for the month of February, 2005, gasoline prices held steady (actually dropped 2 cents a gallon) until the last few days of the month and rose 4 cents nationwide.

My point is that whenever the public perceives a threat, the whole market goes nuts for no reason. I can't remember the hurricane that tore up the gulf before Katrine. Anyway, there were some damaged resources in the gulf but the Western side of Florida took the brunt. One drilling platform in particular, owned by BP Amoco, was found listing about 30 degrees after the hurricane tore through it. There was fear that it would topple if hit by the next storm which was already brewing. Gas prices went nuts again. Interesting part is that the rig was being towed out to sea when it was hit. It had never been put into production but the media had us believing that we'd lose production for years to come if it sunk during the next storm.