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The Inconvenient Truths About Gas Prices
rmn ^ | May 31 | Robert Hardaway

Posted on 06/01/2007 8:05:41 AM PDT by george76

Few politicians can resist the urge to exploit consumer angst over gasoline prices, and thereby deflect where the blame certainly lies — with them.

Here are 10 things the politicians won’t tell you:

1. At over $3.00 a gallon, the U.S. inflation-adjusted price for gasoline in May 2007 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 U.S. In most other developed counties in the world, the price of gas is at least double what Americans pay. Consumers in the Netherlands now pay an average of $7.77 gallon, while those in Great Britain pay over $7 and consider it a bargain.

3. The gross profit margins of the major oil companies is far less than that 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 between 10 cents and 12 cents a gallon...

5. At present prices, combined federal and state government profit (i.e. taxes) on each gallon of gas is 28-68 cents a gallon, depending on which state you live in. Pelosi’s San Francisco enjoys tacking on an extra 26 cents bite.

9. Crude oil prices, which make up 90% of the total cost of running gas refineries, are set by the international market of supply and demand, which fluctuates hourly, and not by private companies; while the major oil producing countries can form cartels (such as OPEC) which can set prices at higher than a free market, these countries are not subject to U.S. antitrust laws.

(Excerpt) Read more at blogs.rockymountainnews.com ...


TOPICS: Business/Economy; Extended News; Government
KEYWORDS: energy; gas; gasoline; gasolineprices; gasprices; gastaxes; inconvenient; inconvenienttruths; opec; prices; taxes; truths
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1 posted on 06/01/2007 8:05:41 AM PDT by george76
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To: george76

Don’t confuse the economically ignorant (politicians especially) with facts.


2 posted on 06/01/2007 8:10:15 AM PDT by M203M4 (Vote Fruity Giuliani or the terrists will win! Abortion & gun control = price for freedumb!)
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To: george76

“9. Crude oil prices, which make up 90% of the total cost of running gas refineries, are set by the international market of supply and demand, which fluctuates hourly,...”

Should read:

“9. Crude oil prices, which make up 90% of the total cost of running gas refineries, are set by SPECULATORS, which fluctuates hourly,...”


3 posted on 06/01/2007 8:13:47 AM PDT by gas0linealley
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To: george76

Brilliant. I’ve been saying that bit about prices skyrocketing after government stepping into the profits for a while now.


4 posted on 06/01/2007 8:14:18 AM PDT by justt bloomin ("Political correctness is really the only form of hate speech." Mike Adams, UNC-W)
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To: george76

Bottom line: Big Government is raking in 3-6 times the profit that the oil companies make for doing nothing but writing a tax law. I had to shut up the other day while a tin-foil hatter went on and on about how Bush and Cheney are so intertwined with oil and that Bush is personally setting the oil prices to his economic advantage. Nothing I said would change her mind.


5 posted on 06/01/2007 8:22:07 AM PDT by Eagle of Liberty (The United States of America is the only country strong enough to go it alone.)
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To: gas0linealley
Crude oil prices, which make up 90% of the total cost of running gas refineries, are set by SPECULATORS, which fluctuates hourly

Yes, speculators are a part of supply and demand. So what?

6 posted on 06/01/2007 8:25:32 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: Kerretarded

Liberals are blinded by their hatreds.

The tax revenues that the government receives are real. The tin-foil crowd will never see reality.


7 posted on 06/01/2007 8:26:54 AM PDT by george76 (Ward Churchill : Fake Indian, Fake Scholarship, and Fake Art)
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To: M203M4; Bonaparte; thackney; Grampa Dave

I think that many politicians know the truth but choose to pander to the lowest common denominator ( stupid voters ).


8 posted on 06/01/2007 8:30:49 AM PDT by george76 (Ward Churchill : Fake Indian, Fake Scholarship, and Fake Art)
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To: justt bloomin

Plus government regulators demand different regulations ( varied summer mixtures, etc. ) that cause political ( not economic ) seasonal shut downs of refineries to re-tool.

This stuff also increases costs and prices.


9 posted on 06/01/2007 8:35:07 AM PDT by george76 (Ward Churchill : Fake Indian, Fake Scholarship, and Fake Art)
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Bookmarking for future reference


10 posted on 06/01/2007 8:39:55 AM PDT by 2nd amendment mama ( www.2asisters.org ? Self defense is a basic human right!)
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To: george76
the price of a gallon of gas reached 2.05 in 1981...then dropped like a rock to under 1.50.

makes me all warm and fuzzy knowing that today, paying over a half a hundo for a tank of gas in inflated adjusted dollars, is better than paying 20 bucks a tank in the 80’s.

11 posted on 06/01/2007 9:25:07 AM PDT by stylin19a (It's easier to get up at 6:00 AM to play golf than at 10:00 to mow the yard)
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To: stylin19a; M. Espinola

Oil Price History and Analysis

Crude oil prices behave much as any other commodity with wide price swings in times of shortage or oversupply. The crude oil price cycle may extend over several years responding to changes in demand as well as OPEC and non-OPEC supply.

http://www.wtrg.com/prices.htm


12 posted on 06/01/2007 9:35:56 AM PDT by george76 (Ward Churchill : Fake Indian, Fake Scholarship, and Fake Art)
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To: gas0linealley
“9. Crude oil prices, which make up 90% of the total cost of running gas refineries, are set by the international market of supply and demand, which fluctuates hourly,...”

Should read:

“9. Crude oil prices, which make up 90% of the total cost of running gas refineries, are set by SPECULATORS, which fluctuates hourly,...”

No, he got it right.

13 posted on 06/01/2007 9:43:06 AM PDT by xjcsa (In memoriam...Jerry Falwell, August 11, 1933 - May 15, 2007. Enter into your eternal inheritance.)
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To: george76

Today, gas went up by 2 cents in Georgia. A new tax increase went into effect.


14 posted on 06/01/2007 9:45:26 AM PDT by coon2000
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To: george76

I don’t pretend to know the intricacies of crude oil prices re. production or delivery costs to us.
I DO know what a friend who ran a small convenience store told me they paid for the gas they had delivered to their 2 pumps.
This was not a chain store, so it did not benefit from the lower costs for huge amounts purchased.
This store paid about 75cents a gallon for the gasoline.
It charged about $2.00 a gallon. This was pre Katrina.

Even if the price they pay is double now- $1.50 a gallon, it’s at the pump that the price is doubled!
So if the crude price is half what the supplier charges and they double the price to make a profit; then the service stations double or triple it again, who is gouging here?


15 posted on 06/01/2007 9:50:32 AM PDT by ClearBlueSky (Whenever someone says it's not about Islam-it's about Islam. Jesus loves you, Allah wants you dead!)
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To: xjcsa

Really? How many of the players in the oil futures market are actually willing and able to take delivery of the product they are bidding on?


16 posted on 06/01/2007 9:50:53 AM PDT by gas0linealley
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To: gas0linealley
How many of the players in the oil futures market are actually willing and able to take delivery of the product they are bidding on?

Speculators only make oil more expensive?

17 posted on 06/01/2007 9:57:48 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: Toddsterpatriot

“Speculators only make oil more expensive?”

No, George Soros invented the oil futures market as a way to help hard pressed consumers.


18 posted on 06/01/2007 10:03:09 AM PDT by gas0linealley
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To: gas0linealley
Soros didn't invent oil futures. So is your answer to my question yes?

Or are you going to dance around some more?

19 posted on 06/01/2007 10:05:23 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: george76

Good stuff.

#9 Should say the Opecker Thugs have set up an illegal cartel to make oil scarce and expensive. Their excess $’s fund their Islamofacist terrorists and terrorist countries like Iran/Syria.


20 posted on 06/01/2007 10:41:14 AM PDT by Grampa Dave (GW has more Honor and Integrity in his little finger than ALL of the losers on the "hate Bush" band)
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To: gas0linealley
Really? How many of the players in the oil futures market are actually willing and able to take delivery of the product they are bidding on?

It doesn't matter. You've got to actually think this thing through. So a speculator buys a bunch of oil. What then? He tries to sell it at a higher price, to whomever will buy at that price. But ultimately it has to be bought by someone who will take delivery, and that person isn't competing against speculators to buy it; he's only competing against other end users of the oil. If there aren't enough end users to actually take delivery, the price tanks; if there are too many who want it, the price rises.

Speculators *can* cause temporary spikes in prices if there are enough of them. But over a relatively short time they lose their influence, because the real demand for oil is the end user who actually takes delivery of the product. It really is simply supply and demand; the speculators are just middlemen.

There is one other point to be made here, which is that the current problem is not simply a function of the price of oil. The price of oil has not increased like the price of gasoline; the current rise in gas prices is driven more by refinery problems, many of which are associated with the changeovers to summer fuel requirements. Refinery construction, expansion, and improvements are slow because the government's push to move to ethanol has made them an extremely risky investment (they're *not* cheap), and all the environmental requirements for fuel blends cause a great deal of expense at the refinery stage.

So basically, the current high gasoline prices are caused by a combination of supply and demand affecting the price of oil, and government regulation causing a rise in the expense of refining oil into gasoline. Speculators play no real part in it; they're just along for the ride like everyone else.

21 posted on 06/01/2007 10:41:53 AM PDT by xjcsa (In memoriam...Jerry Falwell, August 11, 1933 - May 15, 2007. Enter into your eternal inheritance.)
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To: xjcsa

I appreciate your thoughtful reply, however, I think you have failed to consider the impact that a “middleman” has on prices. They are not in for nothing. There may be risks involved, but if so, then the potential for profit must also exist.

“the speculators are just middlemen....

Speculators play no real part in it; they’re just along for the ride like everyone else.”


22 posted on 06/01/2007 10:51:43 AM PDT by gas0linealley
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To: Toddsterpatriot

What, you want to be the only dancer in this club?

LOL


23 posted on 06/01/2007 10:53:32 AM PDT by gas0linealley
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To: gas0linealley
Unlike you, I'm actually answering questions.

Did you really think Soros invented oil futures? Or were you joking?

Do you really think speculators only make oil more expensive? Or were you joking?

24 posted on 06/01/2007 10:55:42 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: george76

Not to mention that prices are high because we aren’t building refineries thanks to the environmentalists


25 posted on 06/01/2007 10:57:53 AM PDT by AppyPappy (If you aren't part of the solution, there is good money to be made prolonging the problem.)
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To: gas0linealley
I appreciate your thoughtful reply, however, I think you have failed to consider the impact that a “middleman” has on prices.

And that impact is always to raise prices? That's funny. I guess you've never been involved in the financial markets.

26 posted on 06/01/2007 11:06:42 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: Toddsterpatriot

I suppose you have?


27 posted on 06/01/2007 11:18:43 AM PDT by gas0linealley
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To: gas0linealley

Only since 1984.


28 posted on 06/01/2007 11:19:43 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: gas0linealley
They are not in for nothing. There may be risks involved, but if so, then the potential for profit must also exist.

Of course there's potential for profit, but it's no different than stock traders on the floor at NYSE, or other commodity traders in Chicago. They try to buy low and sell high; they're not just buying, buying, buying, because then they'd have to take delivery. They have to sell it too, to someone who can actually use it. There's serious risk to the speculator; if they guess wrong then prices will tank at the wrong time and they'll lose their shirts.

Speculators cannot affect prices in the long term, because they have no real effect on either side of the supply/demand equation. They sell the same amount of oil that they buy over time, so their net effect over time is essentially zero.

By definition, speculators are speculating (betting) on the future price of oil. If they bet right they'll do well, if they bet wrong they'll do poorly, but they have no real effect on the outcome of the bet over time.

29 posted on 06/01/2007 11:22:19 AM PDT by xjcsa (In memoriam...Jerry Falwell, August 11, 1933 - May 15, 2007. Enter into your eternal inheritance.)
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To: xjcsa

These guys have a different opinion than yours:

“Oil has become a speculator’s paradise. Surging energy prices have attracted a horde of investors — and their feverish betting on rising prices has itself contributed to the climb.”

http://online.wsj.com/article/SB109321816171898083.html?mod=home_whats_news_us


30 posted on 06/01/2007 12:33:08 PM PDT by gas0linealley
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To: Toddsterpatriot

Helps to explain your bias, doesn’t it?


31 posted on 06/01/2007 12:39:26 PM PDT by gas0linealley
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To: gas0linealley
Helps explain my knowledge.
32 posted on 06/01/2007 12:41:07 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: gas0linealley
Oil has become a speculator’s paradise. Surging energy prices have attracted a horde of investors

Where do they store the oil they buy?

33 posted on 06/01/2007 12:43:44 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: gas0linealley
These guys have a different opinion than yours:

Not necessarily. I'm not a subscriber so I can't read the whole article, but I didn't deny that speculators can affect the price in the very short term. But it's fundamentally impossible for them to sustain that effect because of the realities of the market; the oil they buy has to go somewhere. If it's not bought and used - *really* used - then the supply will exceed the demand and the price will crash back to earth. That's just a logical fact of life; to deny it is to avoid thinking about it critically in favor of swallowing demagoguery.

34 posted on 06/01/2007 12:53:33 PM PDT by xjcsa (In memoriam...Jerry Falwell, August 11, 1933 - May 15, 2007. Enter into your eternal inheritance.)
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To: Toddsterpatriot

The same place your opinions belong, a crock.


35 posted on 06/01/2007 12:53:40 PM PDT by gas0linealley
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To: gas0linealley
Thanks for sharing your ignorance.
36 posted on 06/01/2007 12:57:01 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: Kerretarded
Nothing I said would change her mind.

Nor will it.....ever. These people are truly delusional in the literal sense of the word.

37 posted on 06/01/2007 1:15:28 PM PDT by Tokra (I think I'll retire to Bedlam.)
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To: gas0linealley
The same place your opinions belong, a crock.

So much for thoughtful responses, I guess. With all due respect, you have so far failed to substantively address the issue and have only been reciting the typical thoughtless remarks that I expect to hear from liberals, not conservatives. Have you actually taken the time to think any of this through?

38 posted on 06/01/2007 1:39:38 PM PDT by xjcsa (In memoriam...Jerry Falwell, August 11, 1933 - May 15, 2007. Enter into your eternal inheritance.)
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To: xjcsa

You think that the speculators are “only” middlemen, and that their activities have no long term effect on the price of oil.

If that were true, then in the long term, speculators, as a group, would gain nothing, and lose nothing. Obviously the speculation has been going on for years, and has attracted many well-heeled players. Do you really believe they are in it purely for the sport?

As for my remark to Todd, he asked me where they store the oil. Please...let’s not presume our opponents are that stupid.


39 posted on 06/01/2007 2:37:48 PM PDT by gas0linealley
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To: gas0linealley
set by SPECULATORS

Some percent of the commodity market, both crude and RBOB gasoline, is speculators no doubt. Most contract owners are in the business and buy and sell according to what they need. The commodity market is totally regulated, which is the only way to keep the market free.

40 posted on 06/01/2007 2:41:40 PM PDT by RightWhale (Repeal the Treaty)
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To: george76
Here is number 10

10. If government is serious about both curbing oil company profits as well as curbing 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 of gas to about $8. And that’s one thing you can be sure the politicians will never, ever tell you. <

It is worth noting that since 1970, our population has increased by 100 million and we will add another 63 million by 2030 or the equivalent of the current population of the UK. Since 2000, we have added 21 million people or the equivalent of our six largest cities. Three-quarters of the population increase can be attributed to immigration, legal and illegal. Is it any wonder that demand is going up and we are just treading water to stay afloat?

41 posted on 06/01/2007 2:50:08 PM PDT by kabar
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To: gas0linealley
If that were true, then in the long term, speculators, as a group, would gain nothing, and lose nothing.

Is that also true of all commodity traders and stock brokers too? Have you really not thought this through at all? Speculators make their money by buying low and selling high; they can also speculate by short-selling high in anticipation of a downturn. They make money by anticipating the price curve; they lose money by guessing wrong. There's simply no mechanism by which they can influence the price of oil over any significant amount of time.

42 posted on 06/01/2007 3:08:57 PM PDT by xjcsa (In memoriam...Jerry Falwell, August 11, 1933 - May 15, 2007. Enter into your eternal inheritance.)
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To: xjcsa

” Speculators make their money by buying low and selling high;”

Selling to whom?


43 posted on 06/01/2007 3:39:56 PM PDT by gas0linealley
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To: gas0linealley
If that were true, then in the long term, speculators, as a group, would gain nothing, and lose nothing.

You got one right! Did you ask your mommy? Actually, in the long term, as a group, they'd lose money because of brokerage fees, exchange fees and other charges.

As for my remark to Todd, he asked me where they store the oil.

And you didn't answer. LOL!

44 posted on 06/01/2007 4:07:38 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: gas0linealley
Selling to whom?

Each other, producers, consumers.

45 posted on 06/01/2007 4:08:56 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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To: george76

“At over $3.00 a gallon, the U.S. inflation-adjusted price for gasoline in May 2007 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.”

Not being old enough to drive in 1981, why would I care?


46 posted on 06/01/2007 4:10:11 PM PDT by Grunthor (I am a GREAT sinner but I have a GREATER Saviour.)
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To: george76

2. This decline in the price of gasoline since 1981 is enjoyed almost exclusively in the U.S. In most other developed counties in the world, the price of gas is at least double what Americans pay. Consumers in the Netherlands now pay an average of $7.77 gallon, while those in Great Britain pay over $7 and consider it a bargain.

I live in America, I do not care what they pay in Eurpoe.


47 posted on 06/01/2007 4:10:52 PM PDT by Grunthor (I am a GREAT sinner but I have a GREATER Saviour.)
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To: george76

4. At present gas prices, the major oil companies make a profit of between 10 cents and 12 cents a gallon...

Really? Then how are they taking in recored breaking profits year after year?


48 posted on 06/01/2007 4:11:41 PM PDT by Grunthor (I am a GREAT sinner but I have a GREATER Saviour.)
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To: Toddsterpatriot

“Yes, speculators are a part of supply and demand. So what?”

So when a Saudi prince has a bad case of acne, speculators drive the price up.


49 posted on 06/01/2007 4:13:09 PM PDT by Grunthor (I am a GREAT sinner but I have a GREATER Saviour.)
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To: Grunthor
Then how are they taking in recored breaking profits year after year?

Oil.

50 posted on 06/01/2007 4:17:59 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so dumb?)
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