The Inconvenient Truths About Gas Prices

rmn ^ | May 31 | Robert Hardaway

[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.

[Toddsterpatriot]

I don’t churn and burn, I buy and hold for a while, example;

And you'll pay more when you buy in a thinner, speculator free market.

[dynoman]

The gains are big enough that I dont’ care. That is the difference between buy - hold and churn - burn.

[Toddsterpatriot]

That is the difference between buy - hold and churn - burn

It's the difference between a deep market and a shallow market.

[SupplySider]

How do you punish an oil cartel? If they get away with pushing the price up, they gain alot. If they don’t, then they don’t gain quite as much. They can’t lose.

Well, in this example they would only be punished to the extent that they would lose money on any futures transaction that was attempting to manipulate the price, but was out of synch with the real market price. My point was to show that they can't significantly affect the long term oil price by sending someone to bid in the futures pit. The speculative buying and selling in the futures market is benign for the economy, even if the players are driven by greed, and even if the prices gyrate from moment to moment.

I think a true cartel like OPEC can affect the long term price by collusion, but even they will eventually be subject to market forces.

What's driving up oil prices these days is big increases in long term demand from the rising economies of China , Russia, and the rest of the developing world. Though painful at the pump, I can't but think that rising world prosperity is a good thing.

I wish Democrats and other self-interested parties (like Bill O'Reilly) would get out of the way of progress and let refining capacity increase and let evil "big oil" use their reasonable profits for all our benefit, without the threat of idiotic price controls, undue regulatiuons, and absurd "winfall profit" taxes.

[SunkenCiv]

Note: this topic is from 6/01/2007.

Thanks george76. Looks like a great alibi for Zero.

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.