Friday, April 11, 2014
The Price of Gas
As of today the average price for regular gas (depending on your location) is $3.29 and $4.23 respectively. Price is subject to increase based on someone farting in a middle eastern country. Yeah, I know that was a rash statement, but seriously, when something starts brewing over in the middle easy gas prices spike. If middle east peace occurred tomorrow guess what? I bet you think that gas prices would plummet right? Wrong.
The fact of the matter is, oil is a traded commodity. Speculation drives the large part of the price. See, oil companies, as I understand it, trade the oil, refine the oil into fuels of various types, and sell it to us for use, they are making their profit. Oddity of note for you all, diesel and kerosine are by-products of refining gasoline, but they cost more at the pump.
Ah, I was talking about the price of gas, how it wouldn't go down tomorrow if there were peace in the middle east. That is because of the profits, not supply, certainly not demand. Ever notice that this time of year gas prices increase? Yeah, that is because the majority of refineries go down for their spring cleaning this year. Keep in mind that gas is stored, and a week or month long drought in people buying what they needed to work and eat would cripple gas companies because of lack of storage. Anyway... So the refineries are shut down for a few weeks, repairs are made, pipes are cleaned, they spruce up the place, make sure it is in tip top order. OF course the majority of refineries shutting down creates the notion that gas will be in short supply, prices increase.
But that isn't really happening, oil is still coming in, gas is still being refined, it is still being shipped out, but that price increase is used to fix everything, but it also pads profit. Now, I am not against making a profit, profits are good for business. It means, when profits are used correctly, money going into the economy via employees and contracts to other companies. But at this point, lets look at the profits from the "Big Five". In 2013 Exxon Mobil made 32.6 billion dollars in profit, which made it the most profitable company in the world. That same year the Big Five totaled 93.3 Billion Dollars profit. You know the money that comes after expenses. But they still want all those lovely tax breaks the government gives them.
Speaking of which that total is currently around 2.4 billion dollars a year, and they want to expand that to 3.8 billion a year, just because their already massive profits are sagging. Of course drill baby drill plays no role in this one, see we do produce our own oil, but the oil companies want to lift the export ban on our produced oil, which guess what, will make it more expensive at the pump, while they reap profits from it. Another tidbit, did you know most of the coal produced in the US is exported, then bought back at a higher price to fuel our current need for it?
Now, I want to ask, because I didn't know as I started writing this... How much do you think it costs to produce a gallon of gas? The closet I found was 2005, and that was a total of 50 cents a gallon. So, when you add a bunch of other factors together you get a total cost of the oil, marketing and distribution, refining costs, and taxes. So, if we assume that seventy-five percent of the cost for gas is crude oil that would be around seventy-five dollars for roughly forty gallons. That is about a $1.78 per gallon. Add 18 cents to that for the taxes (federal) and 8 cents for state (varies by state). Say the refining cost is 45 cents and 10 cents are for distribution and marketing on that gallon of gas. That brings us to $2.59 per gallon of gas.
A dollar shy of the current price for the majority of us. That dollar per gallon, that would be the profit made. So, if you put 20 gallons in, and it costs you say $72, the profit would be somewhere in the neighborhood of a quarter of your total tab, depending on who you are getting your gas from. Of course, as oil supplies dwindle worldwide, gas prices will increase. But with the influx of bio-fuels, the prices should be dropping, but they aren't. That is because to maintain those record profits, the price continues to expand, as costs are passed along. In normal business that is how it works, and while I hate to say it, it is only fair that oil companies do the same.
But there is a problem. When you are paying more at the pump, do you take that vacation somewhere out of state? Do you spend more money eating out, shopping for the newest cloths, maybe buy that PS4 or XBox Zero? Nope. You have less income, you spend less income focusing more on ensuring you keep your job, and have food in the house. High gas prices hurt the economy. As more technology and renewable sources come online, the price won't drop because of the desire for profits, maximum profits, and in the end, it will kill us in multiple ways. As few people spend, the economy remains stagnant. Sure it will reduce demand, which we see happening today, but that only helps our long-term health, because there is one key thing that we do not take into account.
Our environment. See, when we drill baby drill, we damage our environment. When we refine, we damage our environment; when we ship it to the pump you guessed it. When we fill up at the pump, we damage our environment. Everyone thinks that because they are driving a gas sipping Prius that they are helping the environment. Really, you are, if you are driving a high mpg vehicle, you are helping on your end, but it does nothing for the other factors that are damaging the environment.
Now I know some people deny climate change is occurring, or live under this semi-mythical belief that it has always happened. Sure, climate change has happened in the past, it is part of a cycle our planet goes through. The problem is, we are adding to it. We are adding all kinds of things to the environment at a level that it cannot process. That oil from the Exxon spill in Alaska when I was a child, guess what, its still there. Sure we cleaned up a lot of it, but we couldn't and cannot clean it all up. In time the Earth will take care of it, but trust me, so many generations will have passed that our daily lives will be thought of like we think of the daily lives of the dinosaurs.
But in the short term, the high prices instigated by speculators, and the insistence of maximum profit at any cost, will keep the cost of gas high, stifle the economy, and destroy our fragile planet. And with nowhere to go, that is going to leave a ton of people in the cold.