What do you think is the reason gas prices are climbing so fast?

[bimshire]

Part of it is the uncertainty due to the blowhard in the White House attempting to bully Iran. Instead of diplomacy, it's the either our way or shock & awe.
Plus, what do you expect when there is an oil man in power and his friends continue to line their pockets with billions$?

 

[momof2inPA]

1. Oil Oligopoly
2. Culture of Greed
3. Supply and Demand

The free traders are going to cringe, but I think it's time for government intervention and regulation.

 

[brerrabbit]

Having flame suit on and ready for the onslaught I will try to explain what I know. First I work for one of those evil oil companies so I want to let you know that upfront.

World oil demand is up significantly. China and India have emerging manufacturing segments and are demanding more energy than they ever have before. Oil is a global product and unlike some other consumer goods demand on the other side of the world does effect supply in the US. People think that oil prices are set by the oil companies, well thats not 100% accurate. We buy and sell most of our oil using major exchange pricing. There is an exchange in London that trades North Sea Brent and anyone who wishes to participate in that market can whether you have oil or not. The same goes for New York Mercantile Exchange. Thousands of participants in those markets drive the price based on their outlooks and expectations. We (the oil companies) sell and buy our oil based on fixed differentials to those daily market prices.

Next, everyone yells and screams about oil company profits being so huge. Well they are huge in realative dollars but as a percentage on capitalization they are not that huge. Take Microsoft for example. Based on their capital investments they are returning something like 50% plus on their investment. Oil companies are returning in the 10 to 11% range. Think of it this way, you have a $1,000 and put it into a savings account and make 50% annual interest netting you a gain of $500 at the end of the year. I have $100 billion and invest it in a very risky venture and at the end of the year get a 10% return or $10 billion. Who had the better deal? What level of profit is acceptable? Who is being greedy?

Another factor worth at least 15 to 20 cents is your good old government in Washington. You should be noticing on most gas pumps a new sticker that says up to 10% of your gas is now ethanol. Government regulations mandate that 10% of all fuel be ethanol. We don't have enough ethanol to meet the requirement and like it or not we are forced to inport it from Brazil. That means that a tanker carries 600,000 barrels from South America at a cost of about $1.9 million dollars to ports in the US where it then has to be put in rail cars and shipped to terminals all over the US. It is not blended at the refineries and then shipped because the ethanol is to corrosive to be shipped through pipelines which is a much more efficient system.

Finally, the summer blend causes some more troubles and increases cost because it is more expensive to make more enviromentally friendly gas in warmer weather. All these factors play into the mix to increase costs along with refinery shortages.

Blame greed, blame the government, blame anybody you want, but realize that underneath it all is a very complex set of circumstances and regulations that all play into a very complex market that has no easy fixes.

 

[ead79]

OPEC has nothing to do with Capitalism or Supply and Demand. As a cartel, it can manipulate worldwide oil prices and increase or decrease the flow of oil as it sees fit.

Well said.

Plus, people do need to keep in mind that gas prices are based on overall supply and demand, not just the demand of those who drive large SUVs. It's not as simple as that. I had not really given much thought to the fact that the emerging economies in certain parts of Asia and India do drive demand higher, but I think that it makes a lot of sense.

 

[momof2inPA]

Well said.

Plus, people do need to keep in mind that gas prices are based on overall supply and demand, not just the demand of those who drive large SUVs. It's not as simple as that. I had not really given much thought to the fact that the emerging economies in certain parts of Asia and India do drive demand higher, but I think that it makes a lot of sense.

China has the goal of a car for every family, so it will just get worse, but for the oil companies to jump on the bandwagon is unforgivable. Look at an oil companies financial statement sometime and you'll see that it isn't as simple as comparing Microsoft (who basically has intellectual property not "brick and mortar" or "steel and aluminum" buildings) with Oil Companies. The oil companies' profits before extraordinary expenses are unbelievable.

Plus, we shouldn't be allowed to sell our oil from Alaska to Asia, especially when we expand the drilling. It should be kept for our needs-- in my fantasy world, the government oversight would take care of that issue.

 

[Towncrier]

Remember, if you are shopping for a new car and don't want to get a hybrid, get one that does flex-fuel. It's a higher ethanol content gas that costs about a dollar less a gallon.[/url]

We've owned flex-fuel Dodge minivans since 1998. Only problem? The nearest flex-fuel filling station is about 50 miles from our house. I finally found myself near that filling station last week and filled the tank. The price-per-gallon was about a nickel cheaper than regular unleaded. I have heard that E-85 fuel can actually be a little more expensive, but I would buy it in a heartbeat if the filling stations around here (many of which are being refurbished) would just add the darn E-85 tank and pumps. But I guess that won't happen until the politicians enact some major tax breaks for the service station owners as an incentive to do the right thing.

As far as my answer to why I think the gas prices are climbing so fast (and forgive me if this has already been posted):

Because they can!!!

 

[LuvDuke]

1. Oil Oligopoly
2. Culture of Greed
3. Supply and Demand

The free traders are going to cringe, but I think it's time for government intervention and regulation.

There's no reason for the free traders to cringe because the trade in oil is anything but free. OPEC is a cartel and the rest of the oil industry follows the leader.

However, I do agree with you. We have to think in new ways. When oil is the lifeblood of a country, you can no longer treat it like any other commodity. No country should be taken to the brink of crises because a company craves windfall profits. The same with healthcare.

We aren't 13 colonies anymore and our population is approaching 300,000,000. We have to change our way of doing things starting with ........... wow is this ironic ........ the Jimmy Carter way.

http://www.pbs.org/wgbh/amex/carter/filmmore/ps_energy.html

If the Carter energy policies had been followed for the last 29 years, we wouldn't be in the deep doo-doo we're in now.

 

[LadyTrampScamp&Angel]

We've owned flex-fuel Dodge minivans since 1998. Only problem? The nearest flex-fuel filling station is about 50 miles from our house. I finally found myself near that filling station last week and filled the tank. The price-per-gallon was about a nickel cheaper than regular unleaded. I have heard that E-85 fuel can actually be a little more expensive, but I would buy it in a heartbeat if the filling stations around here (many of which are being refurbished) would just add the darn E-85 tank and pumps. But I guess that won't happen until the politicians enact some major tax breaks for the service station owners as an incentive to do the right thing.

Same situation here. We have a flex fuel vehicle we purchased last year (and yes it's an SUV). Nearest station that sells E85 is 30 miles from us, but did fill up there last week, it was about 20 cents cheaper per gallon. When/if we get a station near us - I'll use it all the time.

we're more SUV owners that don't log a lot of miles. I'm a SAHM and DH walks to work - about 300 yds from our house.

Interesting to read opinions on why gas is going up, I was wondering. I just know that when there's an alternative available I'm gonna use it.

 

[corie161]

I also own a caravan, but the way understood it was that you had to use either the E85 or regular gas and shoulldn't switch back and forth. I'm in the same boat, our local station doesn't carry it so I would have to make sure to fill up everytime I'm in the next town, which isn't very convenient at all.

 

[Viking]

Plus, we shouldn't be allowed to sell our oil from Alaska to Asia, especially when we expand the drilling. It should be kept for our needs-- in my fantasy world, the government oversight would take care of that issue.

Plain wrong: The USA lacks the refining capacities to process that oil. So you have to sell it to be able to buy the finished product -gas, diesel/heating oil- i.e. in Rotterdam.

 

[toto2]

"Exxon Mobil's price gouging allowed Lee Raymond to retire in style as chairman.

Mr Raymond received a compensation package worth about $140 million last year.
He is also still entitled to long-term compensation worth at least another $258 million,

Exxon's board also agreed to pick up Mr Raymond's country club fees... "

Corporations are not there to help or be comprehensive towards customer. There job is to get our money. I feel no pity for oil companies and the less I use there products , the happier I am !

 

[LuvDuke]

"Exxon Mobil's price gouging allowed Lee Raymond to retire in style as chairman.

Mr Raymond received a compensation package worth about $140 million last year.
He is also still entitled to long-term compensation worth at least another $258 million,

Exxon's board also agreed to pick up Mr Raymond's country club fees... "

Corporations are not there to help or be comprehensive towards customer. There job is to get our money. I feel no pity for oil companies and the less I use there products , the happier I am !

Unfortunately, there are too many "$50,000 a year" millionaires in this country who think this is just the way the "free market" should work. After all, Mr. Raymond must've worked so hard for those country club fees.

 

[brerrabbit]

People have it set in their minds that the big problem is corporate greed and thats why prices are so high and the problems continue. Thats fine people want to boycott the oil companies by not buying their gas, thats fine also because you buy their products every single day of your life whether you know it or not. You have to live a totally green lifestyle and even at that point you will still have supported the oil companies in some way. Every time you buy anything that is plastic, made from styrofoam, rubber, nylon, fiberglass, your laundry detergents, cleaning products, cars, tv's, radios, stereo's, just about anything you can think of, there are hydrocarbons derived from oil or natural gas in them. There are problems inherent in the system that are driving the cost of oil up and allowing the major oil companies to receive increased profits. But the same is true of any scarce commodity. As demand grows and supplies fall the profitability of the product goes up. Again no one has addressed the fact that oil companies have billions and billions of dollars invested in their businesses. All anybody sees are the gross numbers, no one asks if its a fair return. Look at some people who bought houses ten years ago and invested their capital in that house. In some areas with house prices skyrocketing people are selling their houses for huge profits. The annualized return on their investment is as much as 30 to 40% and yet no one is pointing a finger at them and telling them to sell their house for below market prices because they are making to much money on the transaction. People will argue its not the same thing but from an economic standpoint it is exactly the same thing. Some one stated earlier you can't compare an intellectual property like Microsoft to bricks and mortar businesses in terms of rate of return on investment. Well maybe you can't but I can. I stated that the oil companies may be making 10 to 11% returns and that was low compared to Microsoft. So what oil companies should make less? The say look at the extraordinary charges and the profits are huge. Well guess what the extraordinary charges are real. If they go invest a couple of billion in Borneo to find oil and don't find any and take the write down is that not fair? Study the market and understand the problems, don't just point the finger at greed and feel satisfied that you have all the answers.

Other peopl point to E85 as an alternative. Great if you can get it but guess what? Since congress has mandated that all gasoline sales be comprised of 10% ethanol we don't have enough ethanol to meet that requirement and are now forced to import it. That's not a solution.

There are far to many factors at play to just point to greed and walk away. This is a problem that took years to create and will take years to overcome.

 

[mickeyfan2]

I also own a caravan, but the way understood it was that you had to use either the E85 or regular gas and shoulldn't switch back and forth. I'm in the same boat, our local station doesn't carry it so I would have to make sure to fill up everytime I'm in the next town, which isn't very convenient at all.

It comes setup to run regular gas, but you can run E85 for a few tank fulls. If you want to use E85 as the main gas and regular on occasion, then you take it to the dealership and they change the programing slightly.

 

[dennis99ss]

Brerabit is right, but, forgets to tell the rest of the story.

The ethanol issue has increased prices about 15-20 cents. However, this is not a new issue for big oil. Big oil knew about the proposed shift for a number of years, However, big oil decided to ignore the looming problem in hopes trhat cancer causing environment polluting mtbe's would be exempted from lawsuits. Despite being assured that this would not happen, big oil did nothing to address the issue of ethanol shortages. As a result, big oil is now behind the 8 ball, which suits them well, as they can easily pass on the price, plus some, and blame it on the government. The ethanol surcharge, due to supply is squarly in oil's failure to anticipate their inability to get immunity from liability for the cancer they caused because of mtbe.

The real problem is that while world demand has increased, supply has decreased. Decreased in the gulf, decreased in the middle east (although saudis have increased), decreased in south america, decreased in africa.

And, George has pissed just about all of the oil producing countries off. The missle east, pissed off. The south americans, pissed off. Russia, at odds with us again. All of this has an effect of the speculative prices on the exchange, which increases them.

China, a country who would like nothing better than to rukle the world, is our best friend????? but, controls its prices, wages, currency, to a level that is low, and with the influx of US dollars as a result, has unlimited $$ to get as much oil as they want. In a sense, we are feeding the beast in order for the beast to increase the prices of the oil.

Of course, the fear of war, etc. and the unrest in the middle east adds a 15% or more terrorist element to the prices.

Of course, the low value of the dollar does nothing to help.

The US govt. could take steps to combat the prices. We have done this before. Have we done it today, no. Why,. maybe because the exact people who are getting richer than rich on this oil crisis are those same friends who helped George make money in every loosing busines he was ever involved in. What comes around goes around.

 

[LuvDuke]

The US govt. could take steps to combat the prices. We have done this before. Have we done it today, no. Why,. maybe because the exact people who are getting richer than rich on this oil crisis are those same friends who helped George make money in every loosing busines he was ever involved in. What comes around goes around.

And those losses amounted to over $350,000,000. Must be nice to be an "oil-man" from Texas. With that track record, this "oil-woman" from NY could do just as good a job. Moving on..............

Enough of the "down the Bush crapper". We need a new way of doing things and our problems aren't going to be solved by fuel additives or hybrid cars. Our major expressways in many parts of the country resemble parking lots. We have to get people out of their cars even if they can't do it in Texas because, as Phil Gramm used to say "the distances in Texas are so big" like 50 miles measures any different in Florida or Wisconsin. Yanno, you look back on this with utter amazement that politicians 1) said it with a straight face, and 2) people bought it. But, I digress.

We put ourselves in this pickle because we didn't want to change. The only way to get out of this pickle is to change. And that's going to require government regulation which in turn is going to take generations to change the mindset that government can't do anything right which in turn got us a government that really can't do anything right.

As Studs Terkel once said "the free market fell on it's *** again".