Friday, May 19, 2006

Meditations on Price Gouging.

Just got back from filling up Ye Olde Faithful Steed.

Ye Gods and little fishies: $2.78 a gallon.

I am given to understand that the Gummint, in its Infinite Wisserdom, has decided to chastise the oil companies for 'Price Gouging'.

Being a curious chap, I decided to look and see what percentage of the price of a gallon of gasoline went where.

In 2004, the average price per gallon of gasoline was $1.85.

Of that $1.85:
47% bought the crude oil.
18% was refining cost and profits.
23% was Federal and State taxes.
12% went to distribution and marketing.

Those are averaged figures, of course.

Refining cost and profits: 18% - average.
Taxes: 23% - average.

*blink, blink*

23% is okay, but 18% is gouging? Isn't that kind of bass-ackwards?

Since those are average figures from last year, let's see waht I can find out specifically for my fair State.

In Texas, today, of the $2.78 I just got done paying, 20 cents was Texas State Taxes and 18.4 cents belonged to the Federal Government.

20 gallons @ 38.4 cents a gallon comes to...get my boots off here...carry the little piggy...$7.68.

While I was buying 20 gallons of gasoline, the various government offices were helping themselves to $7.68 out of my wallet.

Seven dollars and sixty-eight cents per twenty gallons.

Yeah, there may be gouging going on, but I think the gouging is being euphemistically referred to as "taxes".



Anonymous said...

$3.00+ per gallon here in Bend Oregon. Suck it up and walk it off...

Anonymous said...

Exxon had a profit of some $35 billion on $335 billion in sales. The math is left as an exercise for the student, but I admit to difficulty in calling it "windfall" or "obscene" profits.

I also note that nobody sympathized with "Big Oil" when awl was $10 a barrel.

Last I heard, oil cost the Saudis some $3/bbl at the wellhead. Who'd making "obscene profits"? Not much higher, I'd bet, in Iran.

It's much easier to bite the hand that feeds your car, though...


Anonymous said...

"Refining cost and profits: 18% - average."

I'm not sure that's even right, I know that for YEARS the whole refining end of the business was basically only marginally profitable.
One of the many reasons that new refineries weren't being built. It was unprofitable to invest in a process that makes a commodity product. I had a oil guy tell me that only reason a lot of oil co's were doing it was so they could sell the crude, and vertical integration made it make sense.

i.e the whole precess was reasonably profitable, but the refining stage was a high cost, breakeven operation.

Anonymous said...

It's hovering around $3.18 here.

I note that shipping costs for everything are getting ready to go sky-high. When shipping costs go up, then the cost of food, clothing, and basic staples won't be far behind.

I think we're seeing the beginning of the next Great Depression.


Ann said...

I hear you, LawDog...I'm paying about $3.20-$3.25 per gallon here in CA and taxes make up at least 30% of that. The best part is that my great state taxes me twice (sales tax + a per-gallon surcharge) and then has the audacity to go after "big oil."

My dad used to tell me that when you point a finger at someone, you've got all the others pointed at be careful about pointing fingers! I guess lawmakers haven't considered that one since going after big business seems to be a big business here in CA (and apparently to a certain extent in TX).

Thanks for your post; it's good to be reminded of who's actually profiting the most from high prices.

Anonymous said...

$2.89 for premium here in west central Alabama. I can't help but be glad I'm in a state that has a flat tax on gas.

Bernard Brandt said...

$2.78? My heart bleeds pink CoolAid for you.

Try $3.33. That's what it's like in LA LA land. And that's Regular at ARCO, which seems to be the lowrunner around these parts.

Of course, that's probably because the local taxes here are through the roof. It's probably also because the corporate lords of gasoline are squeezing every penny they can out of the local yokels here, just as they did when Enron was bidding the then governor of California to grasp his ankles and take it like a real man.

Some days I feel more than kinda like Lot sojourning with his family in Sodom, and waiting for the fire and brimstone to start raining down.

I entirely agree with the analysis, however. Good work, Dog.

Rorschach said...

Heh, I gust got back from a trip down to Robstown Tx. In Refugio, gas was selling for 2.59/gal regular. when we got within 20 miles of Houston, it jumped to 2.90/gal. Why the huge spread? Especially given Houston's proximity to Texas City and Beaumont compared to Refugio? Ask the EPA and thier "Boutique fuels" requirement.

Just remember, they are from the government and they are here to help...NOT!

markm said...

"I think we're seeing the beginning of the next Great Depression." No, considering inflation, the price jump from $.35/gallon to approximately $1.00/gallon in 1973 was at least as much and more sudden, and it didn't cause a Great Depression. It did contribute to an economic slump, which was officially called a recession, but I think "depression" might have been more honest - but I think that (like the 1930's) boneheaded government interference in the economy did more damage than the OPEC cutbacks on oil and the price increases. Pres. Johnson's "guns and butter" had left us with a record inflation rate lasting for years BEFORE the oil crunch. Nixon then imposed wage and price freezes, which fouled things up much worse. Somewhere along there, they also imposed "windfall profits" taxes on oil companies, which meant that it was pointless to look for low-cost oil, because the government would take away the profits on it.

Oh wait, didn't Congress just do that again...