Why does gasoline cost so much?
All the so-called experts are only too happy to explain that it is merely supply and demand. But it is not that easy, my friend.
Isn’t there supposed to be some sort of correlation between the price of crude oil and the cost of gas at the pump? Typically gas prices move roughly together with crude oil prices, but for the last year or so gasoline prices have soared at a far faster rate than the cost of crude oil.
By some measures, the cost of gasoline is rising nearly five times as fast as crude oil. In 2007, gasoline prices, as measured by the AAA, are up about 31 percent while West Texas crude oil is up only 6.4 percent.
Some people are accusing Big Oil of price gouging, but, Joe Sparano, president of the Western States Petroleum Association said "The gas price is up not because of excessive profit margins, not because of gouging, it is not because oil companies are anti-competitive, It is a market that is doing what a market does when there is a shortage of supply."
Judy Dugan, research director with Oil Watchdog, a consumer group, disagrees. "This is shocking," she said. "Given that the cost of refining is pretty stable, the only thing that comes out of that disconnect between crude and gasoline is enormous profits for the oil companies."
To lessen the gasoline supply somewhat Big Oil has “unplanned down time” and “unexpected problems” in bringing the downed refineries back on line. Consumer groups say that Big Oil is manipulating this down time.
The domestic refining industry has come together, allowing operators to not build additional refineries and run existing ones at full throttle thus causing accidents and outages the nation has experienced over the last year or so.
"They have no interest in building spare capacity because that would undermine their pricing power," said Mark Cooper, research director for the Consumer Federation of America. “The refining industry hasn't even tried to build new refineries and has instead closed 50 since the 1990s rather than make investments to make them comply with pollution laws.
Even as big oil companies such as Exxon Mobil are continuing to report record profits each quarter, gasoline prices have still continued to rise, mostly with little real justification.
Not too long ago, the nation was in an uproar, screaming and hollering over rising gas prices, and the fire was further fueled when Exxon Mobil posted its earnings. They had gained the largest profits ever in its history. But the outrage about the rising gas prices was soon abated, people have now gotten used to being screwed by the oil companies and besides, we all have to drive.
The California Curmudgeon
All the so-called experts are only too happy to explain that it is merely supply and demand. But it is not that easy, my friend.
Isn’t there supposed to be some sort of correlation between the price of crude oil and the cost of gas at the pump? Typically gas prices move roughly together with crude oil prices, but for the last year or so gasoline prices have soared at a far faster rate than the cost of crude oil.
By some measures, the cost of gasoline is rising nearly five times as fast as crude oil. In 2007, gasoline prices, as measured by the AAA, are up about 31 percent while West Texas crude oil is up only 6.4 percent.
Some people are accusing Big Oil of price gouging, but, Joe Sparano, president of the Western States Petroleum Association said "The gas price is up not because of excessive profit margins, not because of gouging, it is not because oil companies are anti-competitive, It is a market that is doing what a market does when there is a shortage of supply."
Judy Dugan, research director with Oil Watchdog, a consumer group, disagrees. "This is shocking," she said. "Given that the cost of refining is pretty stable, the only thing that comes out of that disconnect between crude and gasoline is enormous profits for the oil companies."
To lessen the gasoline supply somewhat Big Oil has “unplanned down time” and “unexpected problems” in bringing the downed refineries back on line. Consumer groups say that Big Oil is manipulating this down time.
The domestic refining industry has come together, allowing operators to not build additional refineries and run existing ones at full throttle thus causing accidents and outages the nation has experienced over the last year or so.
"They have no interest in building spare capacity because that would undermine their pricing power," said Mark Cooper, research director for the Consumer Federation of America. “The refining industry hasn't even tried to build new refineries and has instead closed 50 since the 1990s rather than make investments to make them comply with pollution laws.
Even as big oil companies such as Exxon Mobil are continuing to report record profits each quarter, gasoline prices have still continued to rise, mostly with little real justification.
Not too long ago, the nation was in an uproar, screaming and hollering over rising gas prices, and the fire was further fueled when Exxon Mobil posted its earnings. They had gained the largest profits ever in its history. But the outrage about the rising gas prices was soon abated, people have now gotten used to being screwed by the oil companies and besides, we all have to drive.
The California Curmudgeon
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