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5/9/2007
Boycott gas stations - that's stupid
Surely is a lot of chatter out there about high gas prices. Ok. Gas prices are high. Most of us are having trouble paying for fill-ups. Certainly we’re having trouble staying within our gas budgets. Ok. Do we have that part out of the way?
So why are gas prices high? Here’s how a FoxPolitics.net reader (who happens to be my husband) explained it last fall. This spring’s a bit of a different story, but the basics are the same. Supplies are constricting for lots of reasons. This is the time of year many areas of the country are switching over to a summer-blend and reportedly, several U.S. refineries are producing less than normal amounts because of standard – or extraordinary – maintenance needs.
Prices are NOT rising because the huge oil companies are running away with barrels and barrels of extra money. And deciding you’re going to boycott all the horrible oil companies May 15 isn’t going to make one whit of difference to big oil, little consumers, or the market price of gasoline.
As I’ve mentioned in the past, Exxon Mobil nearly always earns more money than any other company on the Fortune 500. But that’s because it’s the largest company in the world! If you look at gross profit margin percentages however, Exxon Mobil ranks well behind in the pack. Financial institutions, pharmaceutical companies and tobacco conglomerates typically earn significantly greater gross profit margins than “big oil.”
And it surely isn’t going to help to have the government call for a “crackdown on price gouging,” as Representative Kagen has joined several of his compatriots in doing. Give me strength. The price of gas is what it is because of the market pressures that determine the balance between supply and demand. That’s it. Certainly no need to pass the “Energy Price Gouging Prevention Act” as congressional dem’s touted yesterday.
Kagen, simply trying to make points with us drivers back home said "The FTC has a duty to the people across Wisconsin to investigate gas price gouging. I'm sending a clear signal to everyone - particularly speculators in New York - who try to artificially raise gas prices. There's a reason the government has never found any evidence of price gouging - it's never been investigated.[!!!] I am telling the FTC to do its job and protect consumers from the unreasonable escalation in gas prices."
Well, that’s ridiculous. If you want to make a difference in gas prices and/or in your gas bill, you know what the options are. Drive less. Dump your F150 for a compact hybrid. Use fluorescent bulbs. Maybe even get drastic and wean yourself from the grid with solar panels and backyard wind turbines.
I’m not going to get deep into energy policy here. It’s nuanced and controversial and I surely don’t have all the answers. What’s important is that we don’t waste time thinking about “gouging,” but rather that 1) it’s the market that determines the price of gas and oil and 2) apart from market prices, the U.S. must decrease its dependence on foreign oil.
One thing I am pretty sure about is that nobody’s gouging anybody – and it’s about time we stop blaming ‘big oil,” President Bush and the boogey man and start finding ways to both conserve energy and find and mine more of it (coal, bio, natural gas, oil) right here in the good ol’ U.S. of A.
COMMENTS
Jo: I agree for the most part with your assessment. The only question I have is this: How come the price of retail gas has increased by 15 cents in the past two weeks, when the price of gas futures (which is supposed to be the measuring stick for retail pricing) has dropped 20 cents? Something sure smells with this scenario.
Thanks Jeff. Let's both check it out...JE
Jeff Prickette (Wed May 09 07:56:29 2007)
I've long had an issue with the whole "it's the market" explanation for gasoline, simply because it's as crucial as water and electricity in our society at this point. And utilities that want to raise their rates for those products must get approval from the government before doing so, as evidenced by the We Energies story today. A day without gasoline in this country would be catastrophic, far more than a day without power plant electricity. So why is a product that important to our society completely within the control of private industry? Understand, I'm not calling for the nationalization of oil companies. But to simply shrug your shoulders and say, "Eh, it's capitalism" ignores the fundamental role gasoline plays in the U.S. We're not talking about gym shoes, here.
Are you talking collusion Matt? Now that's a different issue... Can I credibly argue that the gas and oil industry is not a monopoly as the water and electric industries you site? JE
Matt Neistein (Wed May 09 08:36:31 2007)
Left unsaid is the Wisconsin Unfair Sales Act, requiring stations to sell gas for 9.2% more than wholesale.
Good point Brian. Did you see the FoxPolitics News link yesterday about the mandatory markup issue raising its ugly head? Station owner reminded of pesky minimum markup law JE
Brian (Wed May 09 10:50:09 2007)
Jo, if I were a gas company lobbyist I couldn't have said it better myself.
Oooh.... right to my soul. JE
Lon Ponschock (Wed May 09 11:25:11 2007)
I don't remember the oil industry or its lobbyists talking about the pleasures of the free market and the joy of no government interference when they go looking for subsidies, tax breaks, investment credits, cheap rents to drill on Federal land, etc.
Good points. All variables that affect the market. All part of our complex energy policy, which we could debate. Would you argue then that government incentives allow you to support price controls? It's not an argument I would make. JE
John Foust (Wed May 09 13:06:29 2007)
One thing I forgot earlier and which is perhaps the most telling is that a boycott is a market element. But Americans in the modern age need to have a singleness of spirit to engage in such a movement. The libertarian notion or Milton Friedman economics that state markets should be allowed to rise and fall would be good in principle. But corporate welfare-- particularly to big coal-- and other end around energy substitutes only produce rises and no falls. That's where the argument breaks down. That there is any sort of actual free market is an illusion touted by those oil lobbyists and other apologists for the status quo. It's the 'let them eat cake' response of the haves and the have mores.
Lon, how does the price of gasoline today compare with 1960 or 1980 prices, in 2007 dollars? Check out p. 102 of http://www.doa.state.wi.us/docs_view2.asp?docid=773. An aside - please don't give me this haves and have mores class envy stuff. JE
Lon Ponschock (Wed May 09 14:30:32 2007)
Everybody raise your hand that doesn't remember George W. Bush calling his base the haves and have mores. In 1960 wages were going up. I think that can reasonably be said up until the first year of the Reagan administration. The relative price of fuel from the days of the 'classless society' after World War II compared to the current times where wages are losing ground on the same economic index is a spurious argument. The only thing I apologize for is the bashed sentence in my previous post. (I think I edited that the way you meant it - I missed it before, or would have done it earlier. Nuts.) On your comment: Why is comparing the price of gasoline standards with the CPI a spurious argument? JE
Lon Ponschock (Wed May 09 18:00:39 2007)
One thing most people neglect in all of this. We here in America are not the only ones who need/want gasoline.
Back in 1999 gasoline was just under $1.00. Interesting. What is different from then & now? The WOT and the world wide economic boom, back in the late '90s East Asia was in deep economic crisis. Guess, what the growing middle class in China probably wants, boats and 4x4s too in addition to fueling their industries.
This all smacks of a baby who can not get what they want. I dislike gas prices as much as the next guy. I am watching my gas expenditures much more closely. The wife & I are building and I am investigating and considering alternative energy sources (solar electricity not there yet, small scale wind I am very skeptical of, I have yet to make a determination on earth heat pumps). Guess what? If electricty and energy were very cheap then it would be a no-brainer against alternative energies.
In the early '80s gasoline was at its highest price in real terms. Remember the days right before? Lines, rationing, and artifially (more like coerced) low prices. What then happened? Gasoline prices went down (again in real terms) so much so people would drive up north with a huge SUV pulling a trailer load of 4x4s and gas cans full of gas for a weekend of waterskiing.
Time to pay the piper folks.
Right on Mark. Thanks for the insights. Heard Ben Stein tonight. Phenomenal. JE
Mark Framness (Wed May 09 20:33:20 2007)
Re: Spurious (and I looked it up too!) My point was that saying gas prices have 'risen with everything else' doesn't include the variable of real earning power in wages that have gone down. Like the fellow said above he is starting to watch his trips. That means that reality is starting to set in for people when a tank of gas for a large vehicle is about as much as a budget audio receiver.|
So do you think it's appropriate that by hook or by crook this nation starts using less gasoline? JE
Lon Ponschock (Thu May 10 13:06:04 2007)
Jo - I'm glad you and your husband are so serenely confident that the oil companies are such paragons of social responsibility and corporate ethics. It may interest you to know that your opinion is not shared by a bi-partisan array of state attorneys general. Perhaps you'd like to dig into this a bit more. This web page is a starting point: Regards, Joanne Roush
I saw mention on this page of "a number of ... colleagues." I don't know if that's an "array" or not. I would welcom links to investigations of collusion. If this entry, posted on Speaker Pelosi's web site, is the best that came out of the Judiciary Committee's Task Force on Antitrust hearing (Prices at the Pump: Market Failure and the Oil Industry), I wouldn't be convinced of wrongdoing. I'd be curious what those offering testimony said as to why they believed markets failed - if indeed that was the conclusion of some. JE
(Thu May 17 10:36:34 2007)
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