Energy Dept Asked to Probe Gasoline Price Rise
August 31, 2003 7:50 AM   Subscribe

The oil refineries are the ones who are in control right now. They're squeezing retail gas stations' margins further and further.
posted by Space Coyote at 8:07 AM on August 31, 2003

So every time we attack Kuwait the price of gas goes up? Last time we went above a $1/gallon. This time it's $2/gallon. That's still half what it costs in Europe and many other regions of the globe, but I can't help but wonder what the valid argument is against adding a tax to gasoline ($0.10, $0.25/gallon) that goes exclusively towards weakening the country's addiction to energy derived from non-renewable resources. I mean, the prices are spiking anyway, why not bite the bullet and invest in a light at the end of the tunnel?
posted by Busithoth at 8:25 AM on August 31, 2003

Energy Dept Asked to Probe Gasoline Price Rise

It sounds so dirty because it really is.
posted by machaus at 8:26 AM on August 31, 2003

For years prices have traditionally risen somewhat each spring through the summer, which I always marked down to taking advantage of people's vacation times.

This year there was an unusually big jump early in the year (about 40 cents where I live). They backed that down, but want to grab a big take while the taking's good. Does supply have something to do with it? Maybe ... anyone got numbers they can trust?

The more important point is that they can do it whenever they want. This time it was a couple of weeks before a few pols decided to respond to complaints for political advantage. After all, prices will be back down by the time the "study" ends.
posted by Twang at 8:44 AM on August 31, 2003

it's gouging- and asshole businessmen have been doing it as long as we've been on earth.

i suppose more safeguards should be in place to stop this kind of opportunistic greed..
posted by shadow45 at 8:45 AM on August 31, 2003

Not *one* (1) new refinery has been built in the US since the late 1970s.

There's no reason for them to do so, since shortages=extra profits.

Rush has taken to daily diatribes about how liberals want to demonize SUVs. Coincedence?
posted by Fupped Duck at 9:06 AM on August 31, 2003

Not *one* (1) new refinery has been built in the US since the late 1970s.

There's no reason for them to do so, since shortages=extra profits.

Hmmm

HMMM

so, if the refinery is close to the US, there is no....what do you mean?
posted by clavdivs at 9:45 AM on August 31, 2003

6 years ago, when I worked at a service station, I would typically be in charge of changing the gas prices. The most wild increase I ever saw was 3 cents over the course of a week. Now you can see 20 cent shifts in prices overnight.

Couple this with a well-documented tendency for gas prices to go up before the weekend, then drop suddenly the Tuesday following.

I always hear the excuse that this is due to supply and demand, but isn't that model based on you running out (or maintaining surplus) of something day-to-day? When is the last time you saw a gas station out of gas?
posted by mortimer at 10:07 AM on August 31, 2003

It's business doing what business can do when it's got ya by the short and curlies.
posted by five fresh fish at 10:28 AM on August 31, 2003

When is the last time you saw a gas station out of gas?

Posing the question: Do you want to pay less and risk finding such? Just as the overall market was overvalued before the bubble finally burst, gas prices in the US have been far too low. This correction in gas prices has been due for well over a decade.
posted by mischief at 10:46 AM on August 31, 2003

It's hard to defend that it's a shortage if we don't in fact run out of gas, at least over some short term period. I also haven't heard anybody refer to it as a correction. I did hear one Republican on television blame it on taxes. Well, bullshit. Wisconsin's, for instance, taxes didn't suddenly rise before the long weekend. A big chunk of the price of gas is taxes, but those taxes are fairly constant and aren't correlated to the proximity to long weekends.

The price of gas is higher in most other countries, but that's tied in to higher taxes. So by stating that we're due for a market correction relative to global standards for gasoline prices you are actually stating that we need to get our taxes in line with other nations since the bulk of the difference isn't corporate profits, it's taxes.

The price of gas doesn't affect me that much, I drive an SUV but in general don't drive it very much. I do believe that to an extent there is more of a potential for a gas shortage in the future than there has been in the past. This isn't really related to production but to an administration overly fond of the energy industry in general and the petroleum industry in particular. The automotive folks have been allowed to produce less fuel efficient vehicles, so, since this is simpler and cheaper, they do.
posted by substrate at 11:16 AM on August 31, 2003

This correction in gas prices has been due for well over a decade.

You mean correction as in "corrected"?

You sound as loony to me. And scary.

My greatest fear about the comparison of prices here or there is that we're only looking at the prices of gas at the pumps, not what's causing the price to be where it is, and we're basically begging the Oil industry to raise the prices another dollar or so, to reduce that discrepency.

Of course, I don't understand their fighting a tax on it, anyway. Obviously all the SUVs we bought have provided a VERY solid customer base for the next ten years or so, and for every quarter the government would add to the price of the gas, the industry would place another $0.50 for profit, blaming the taxes for the whole increase. It's a wonderful thing.
posted by Busithoth at 11:46 AM on August 31, 2003

Of course you can have a shortage if you don't run out. There are certain fixed costs -- and sunk costs -- involved with the refinement and delivery of gasoline. There's also a pretty well fixed capacity, comprising delivery infrastructure such as pipelines and trucks, that can't suddenly multiply when demand does. Gasoline usage is higher on weekends; it's higher in the summer.

But pretty clearly, except in extreme circumstances, consumers don't shop for gas by price. They stop at the place closest to where they live or work, or at the place where they can get the kids each their own slurpee, or the place with the ultra light cigarettes in a case. There's localized price competition all over the place -- sometimes across the street -- but if it really were a consideration for most people, it would be effective. Most of us, though, seem to ignore a few-cent difference in favor of convenience, which means that the prices are not competed down to the lowest point.

This isn't to say that there aren't retailers who "gouge", but gouging is in the eye of the beholder sometimes. Not every price rise is a gouge. As gasoline prices have risen nationally, for instance, the costs of retail delivery have skyrocketed, and it's forced many owner-operators out of the trucking business, because they can't easily transfer these costs onto their limited customer base. (Some large well-known national operations have also failed.) So the costs for convenience marts have probably gone up more than other types of gas stations.

Also, it's true there is probably a refinery shortage, especially in certain areas such as the Midwest. (When a pipeline broke a summer or two back, we experienced a huge gas increase.) But keep in mind that refineries are regulated up the wazoo, new construction has to adhere to stronger regulations than upgrades, environmental impact studies take up to a decade, and NIMBYism political activism can prevent a location from being used. It's cheaper by far to enlarge the capacities of existing refineries. To say that there are no new refineries is not the same thing as saying there is no increase in capacity.
posted by dhartung at 11:59 AM on August 31, 2003

hmmm
The first link in my previous Hmmm
should be this
posted by clavdivs at 12:18 PM on August 31, 2003

...the Natural gas link is an off topic bonus.
posted by clavdivs at 12:19 PM on August 31, 2003

Energy Dept Asked to Probe Gasoline Price Rise,
Consumers Collectively Clench Sphincters
posted by quonsar at 1:24 PM on August 31, 2003

There's no reason for them to do so, since shortages=extra profits.

Actually, it can also be the case that shortages = higher prices = less consumption = less profit. Depends on the supply side. If production costs go up, and they raise prices simply to maintain their per-gallon profit, then their total profit will go down because some people will drive less. If it were as simple as "shortages = extra profit" then there would be shortages all the time.
posted by kindall at 2:07 PM on August 31, 2003

Well, as far as Iraq goes, they don't even have enough oil capacity right now to power themselves, much less export it. One of the interesting things I read was that before the war, Gas in Iraq cost basically one US cent per liter. Now it's much more then that, because none of the refineries work anymore. Gas gets refined in SA and trucked back in.

Anyway, I've got a pretty fuel efficient car, and don't really need to do much driving, so gasoline is pretty much a luxury for me. I could care less about the price, which is still only about $1.50 here. I only need to fill my tank up once a month for $15 or so.
posted by delmoi at 2:18 PM on August 31, 2003

Some argue that the recent surge in prices is due to diverting so much oil from the market to the US reserves.
posted by roboto at 5:08 PM on August 31, 2003

I think that there should be a very tight control of gasoline prices. What about breaking up monopolies? I dont know what im talking about, can someone elaborate as to why gasoline prices raise after these wars? (someone who actually knows what their talking about)
posted by Keyser Soze at 5:17 PM on August 31, 2003

can someone elaborate as to why gasoline prices raise after these wars?

Uncertainty, basically. A barrel of oil is no good to you if you can't get it. Thus, if supply is uncertain, you will be willing to pay more to make sure you get some. That way the seller will give you preference.
posted by kindall at 5:45 PM on August 31, 2003

That way the seller will give you preference.
posted by clavdivs at 6:27 PM on August 31, 2003

Our weekend trips were cut short b/c of the gas prices. Seriously.

I read somewhere that if the trend in these prices continues much longer, country wide this will make an additional 60 BILLION dollars for the gas industry!

A few years ago when prices first started a new jump, diesel fuel was WAY higher than gasoline, but now it's WAY cheaper. ...and why does JET FUEL cost less than gasoline?
posted by tomplus2 at 8:27 PM on August 31, 2003

why does JET FUEL cost less than gasoline?

Requires less refining. It's basically kerosene. Don't worry, they make it up in volume.
posted by kindall at 8:38 PM on August 31, 2003

How about car engines that run off jet fuel? (Please, no rocket car jokes)
posted by Keyser Soze at 9:06 PM on August 31, 2003

jet powered truck
and the beverage wagon

but this seems interesting
posted by clavdivs at 9:19 PM on August 31, 2003

Perhaps there's more need for well-regulated monopolies. I can't think of a single case of a public utility or service being better served by "capitalistic" "competition" than by controlled monopoly.
posted by five fresh fish at 9:27 PM on August 31, 2003

The Mobil station in the next town over has changed their sign to read "Regular - 1 ARM / Special - 1 LEG". I'll try to post a picture.
posted by nicwolff at 10:51 PM on August 31, 2003

$2 a gallon? Whoop-de-do. I'm sure every driver outside the US is waiting to hear the squeals when it gets up around the $5 level that they deal with on a daily basis. Welcome to the future, children.
posted by riviera at 6:49 AM on September 1, 2003

it's gouging- and asshole businessmen...more safeguards should be in place to stop this kind of opportunistic greed..

That is simple. Stop doing business with them. A local (to my location) is a gas station that raised its prices $1 or so a gallon on Sept 11th 2001.

My reaction has been to stop spending my money there. Yet anytime I drive by, there are always cars there. So the 'simplist regulation' - people choosing to buy product elsewhere - doesn't work.
posted by rough ashlar at 9:24 AM on September 1, 2003

it's gouging- and asshole businessmen...more safeguards should be in place to stop this kind of opportunistic greed..

heres a start
posted by clavdivs at 10:10 AM on September 1, 2003

Supply and Demand... and since there is always a demand for gasoline, they can charge whatever they want. It's your own fault for living a lifestyle where you have to drive everywhere.
posted by LinemanBear at 1:46 PM on September 1, 2003

So the 'simplist regulation' - people choosing to buy product elsewhere - doesn't work.

Of course it works. It's just that the people who still buy their gas there care less about price than about other factors. You know, like the people who buy their tools at a locally-owned hardware store even though Wal-Mart is cheaper.

The beauty of a free market is that you can drive down the street and buy your gas at a lower price, while the people who want whatever they're getting at the higher-priced gas station can continue to buy gas there. Both options can remain viable.
posted by kindall at 2:00 PM on September 1, 2003

It's your own fault for living a lifestyle where you have to drive everywhere.

I could cut my gasoline bill from $100 a month to maybe $25 a month if I was willing to pay $500 a month more in rent. Hmmm, spend $500 to save $75... spend $500 to save $75... maybe if I keep thinking about it, it'll make sense.

But you're basically right. Gasoline could basically double or triple in price before it will really affect most people's habits. The most that'll happen is that more people will start carpooling or using public transit. I'd probably do that before moving closer to work. Moving closer to work is problematic when work keeps moving around on you -- I've worked in four different locations in the past three years. Coincidentally, the place I'm working now is less than a block from the first place I worked when I moved out here.
posted by kindall at 2:11 PM on September 1, 2003

Not to worry. Cheney will send in those illusive, top secret people who are on his energy task force to take care of the problem.

You know the ones. Right?

Oh, I forgot that Herr Cheney won't share with the rest of the world.

Never mind.
posted by damnitkage at 8:08 PM on September 1, 2003

Gasoline could basically double or triple in price before it will really affect most people's habits.


look, if your going to guess, which you do well, factor in the rising cost of consumer products if gas is around 6$ a gallon. (your triple example)

cool pooling would be the least of our concerns.
posted by clavdivs at 8:01 AM on September 2, 2003