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http://news.yahoo.com/news?tmpl=story&am..._gasprices_wa_1

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Today's high gas prices have many roots

By Kevin G. Hall, Knight Ridder Newspapers

WASHINGTON - You're at the gas pump, fuming about $2.25 or more for a gallon of regular unleaded. Who's getting rich off you, how'd prices get so high, who's to blame?

Not your local convenience store, where three-quarters of Americans buy their gas. Shop owners make a penny or two per gallon. Their bonanza is inside the store, not at the pumps. They're feeling your pain because Americans are spending on gas what they used to spend on Snickers bars or Slurpees.

The most obvious villains are the giant oil companies and rich oil countries such as Saudi Arabia. But they're just two pieces of a complicated answer to why the price at the pump is so high.

Other villains include, in no particular order: you, environmentalists, the weak dollar, government regulators, Wall Street investors, China and other developing nations. All played a role in creating today's high gas prices.

For starters, many major metropolitan areas have passed laws requiring special summer blends of fuel that are less likely to evaporate in hot months and cause smog. These special blends generally are introduced about now, in early spring, and trigger price increases of roughly 30 cents a gallon during the warmer months in many parts of the country.

"This is the average we have seen every year since 2000, and it is exactly what we have seen so far this year," said Jeff Lenard, a spokesman for the National Association of Convenience Stores in Alexandria, Va.

The biggest reason pump prices have risen is the surging global price of crude oil, which is refined into gasoline. Crude oil prices are set on international markets, where price generally is determined by old-fashioned supply and demand. When a product is in short supply, people are willing to pay more for it.

Oil isn't a finished product but a commodity. That adds a wrinkle to the supply-and-demand explanation. It's traded in contracts for future delivery, and these contracts are bought and sold like stocks.

Also like stocks, the perception of risk can be as much a factor as the underlying supply-demand fundamentals in determining the value of oil. Some buyers of oil contracts are users of oil or gas who seek to lock in prices now out of concern that they might rise later. Others are investors who trade in oil as speculators, trying to guess a trend they can get rich from.

Oil prices are being driven up by investors who think the price will go higher in the future. In many cases, they might be acting for you.

"The oil market, believe it or not, is being fueled by your pension fund," said Philip K. Verleger, a noted oil economist in Aspen, Colo. "For more than a decade, investment bankers have been advising pension funds to put 10 percent or 11 percent of their assets into commodities."

The New York Mercantile Exchange last month reported an all-time high in trading for crude oil-futures contracts. Regulators said noncommercial traders, pension funds and the more speculative hedge funds accounted for 34 percent of the contracts last month.

Then there's you, the consumer. Gas-guzzling SUVs help make the United States the world's largest consumer of oil, at 21 million barrels a day. Americans will consume 1.7 percent more gasoline this year than last despite the higher prices, the Energy Information Administration estimated Thursday. It's the analytical arm of the Energy Department.

India and China also are stretching supplies, as fast-developing nations. China is on course to equal today's U.S. consumption of oil by 2020. While the United States imports oil mainly to power vehicles, China imports it to power industry. China's industrial growth, in great measure, is tied to the strong U.S. economy that buys its exports. American consumers pay China's oil bills.

"We're the ones buying the goods from China. It is driving their increased demand for energy," said John Giglio, an oil expert and the executive director of the National Association of State Energy Officials in Alexandria, Va.

Meanwhile, the supply of oil, industry analysts said, is growing at only 2 percent a year. Refineries are running at 90 percent capacity or more. There's no margin for error.

"There is no cushion in the market to absorb any unexpected changes in supply and demand," said Guy Caruso, the head of the Energy Information Administration. Saudi Arabia reportedly pledged this week to pump oil up to the limits of its matchless production capacity in an effort to calm market nerves, but so far markets haven't much reacted.



A single event - such as a strategically placed bomb in Iraq or Saudi Arabia, or sabotage at a U.S. refinery - could spark global shortages.

"We're used to an oil market that if Iraq goes down or Nigeria goes down, Saudi Arabia and other producers can cover it. We don't have that anymore," said Rick Mueller, an analyst at Energy Security Analysis Inc. in Wakefield, Mass.

The potential for scarcity drives up the price of oil.

The weak U.S. dollar is another reason that gasoline costs more. Oil is traded in dollars, and the dollar has lost 15 to 20 percent against most major currencies. Oil companies and producing nations have raised prices to compensate for the dollar's slump.

Your loss at the pumps is the gain of oil-rich nations and global oil giants.

Big oil companies posted record profits last year and should grow even flusher this year. Oil companies will occupy three of the top 10 spots when Fortune magazine releases its ranking of the top 500 publicly traded companies Monday.

Exxon Mobil Corp. ranks second, behind only Wal-Mart. Exxon posted sales nearing $221 billion in 2004, a figure roughly equivalent to the economy of Greece. Fortune ranked it the most profitable company on its list, with $21.5 billion in profits, a staggering figure larger than the economies of Madagascar and Iceland combined.

ChevronTexaco Corp. and ConocoPhillips ranked 7th and 8th, respectively. ChevronTexaco saw its net income - or profit - jump to $13.3 billion in 2004, almost twice its 2003 take.

Oil-producing countries also get rich, by requiring the oil companies to cut them in on the deal. Norway, the world's third largest oil exporter, is thought to have the world's highest standard of living, thanks to oil income. Booming oil prices brought Norway a 19 percent increase in oil exports last year, to $38 billion.




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Other factors include:

When you pump $20 dollars into your tank, that money is broken up into little pieces that get distributed among several entities. Gas is just like any other consumer product: There's a supply chain and several groups who are responsible for setting the price of the product. The media can sometimes lead you to believe that the price of gas is based solely on the price of crude oil, but there are actually many factors that determine what you pay at the pump. No matter how expensive gas becomes, all of these entities have to get their slice of the pie.







Source: U.S. Department of Energy




Let's look at where your money goes when you pay for gas:


  • Crude oil - The biggest portion of the cost of gas -- about 45 percent -- goes to the crude-oil suppliers. This is determined by the world's oil-exporting nations, particularly the Organization of the Petroleum Exporting Countries (OPEC), which you will learn more about in the next section. The amount of crude oil these countries produce determines the price of a barrel of oil. Crude-oil prices rose to as high as $37 per barrel (1 barrel = 42 gallons or 159.6 L) in 2000(Source: U.S. DOE).Sometimes, gas prices go up even though there is plenty of crude oil on the market. It depends on what kind of oil it is. Oil can be classified as heavy or light, and as sweet or sour (no on actually tastes the oil, that's just what they call it). Light, sweet crude is easier and cheaper to refine, but supplies have been running low. There's plenty of heavy, sour crude available in the world, but refineries, particularly those in the U.S., have to undergo costly retooling to handle it.


  • Refining costs - The refining of crude oil makes up about 13 percent of the price of gasoline. To learn more about oil refining, read How Oil Refining Works.


  • Distribution and marketing - Crude oil is transported to refineries, and gasoline is shipped from the refineries to distribution points and then to gas stations. The price of transportation is passed along to the consumer. Marketing the brand of the oil company is also added into the cost of the gasoline you buy. Together, these two factors account for about 13 percent of the price of gasoline.


  • Taxes - Taxes, including federal and local, account for about 31 percent of the total price of gas in the United States. Federal excise taxes are 18.4 cents per gallon, and state excise taxes average 20 cents per gallon. There may also be some additional state sales taxes, as well as local and city taxes. In Europe, gas prices are far higher than in America because taxes on gas are much higher. For example, gas prices in England have risen as high as $6 per gallon, with 78 percent of that going to taxes.


  • Station markup - In order to stay in business, service stations have to add on a few more cents to make a profit. There's no set standard for how much gas stations add on to the price. Some may add just a couple of cents, while others may add as much as a dime or more. However, some states have markup laws prohibiting stations from charging less than a certain percentage over invoice from the wholesaler. These laws are designed to protect small, individually-owned gas stations from being driven out of business by large chains who can afford to slash prices at select locations.


Gas prices also vary from state to state for several reasons. Taxes are probably the biggest factor in the different prices around the country. Additionally, competition among local gas stations can drive prices down. Distance from the oil refineries can also affect prices -- stations closer to the Gulf of Mexico, where many oil refineries are located, have lower gas prices due to lower transportation costs. There are also some regional factors that can affect prices.


World events, wars and weather can also raise prices. Anything that affects any part of the process, from the moment the oil is drilled, through refining and distribution to your car will result in a change in price. Military conflicts in parts of the world with lots of oil supplies can make it difficult for oil companies to drill and ship crude oil. Hurricanes have damaged offshore drilling platforms, coastal refineries and shipping ports that receive oil tankers. If a tanker itself is lost or damaged, or leaks its oil into the ocean, that will put a dent in the market as well.


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You Americans have the cheapest gas prices in the world, so stop complaining.

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our economy relies on cheap gas. When gas is cheap people spend more on crap they don't need, and when gas is high people begin buying more essential items. Also people travel less so that hurts tourism.

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Quote:

The Time Trust said:
You Americans have the cheapest gas prices in the world, so stop complaining.




You're kidding right?

Arabs pay 10-15 cents a gallon.

Pariah #487798 2005-04-10 3:53 PM
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Wether it be taxes, oil companies or what, the fact that Americans continue to buy fuel inefficient cars and SUVs signals to the market that they can raise prices and taxes 'till thier hearts are content and we'll whine, but we'll still pay it.


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wannabuyamonkey #487799 2005-04-11 12:30 AM
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20 bucks a tank?!? Try 30 and that's WITH gas in the tank for a friggin Corsica! AND that's in the suburbs.

GAH! I filled the tank on Friday and there was no WAY I ws driving down to Aurora (72 miles south of me) to hang out with my friend, AND pay jacked up toll prices because I don't have an I-Pass yet.

No, I haven't paid 20 bucks for a tank in years.

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It's a rented tux ok? I'm not going comando in another man's fatigues.
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i believe my mom's pay 40 twice a week to fill h er volvo. not very happy bout that.


And, to be fair, one of my favorite friends there is blind and I take every opportunity available to make fun of that and we're still friends. That guy never fit there. He never got the spirit of the RKMBs. We're gonna keep an eye on the obits, see if he finally left or if he really did have a heart attack.
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sneaky bunny #487801 2005-04-11 4:44 AM
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Oil is supposed to spike to $100.00 a barrel soon which'll mean $4.00/gallon gasoline.

Good.

Maybe those gluttons in their military vehicles, which they desperately need in order to carry their 2 bags of groceries from the market to their home, will put more thought into what is essential and what is just wasteful.


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That's it, I'm definately buying a motorcycle.

What I want real info on is why the prices of postage stamps and movie tickets have to be so fucking high/frequently increased. I've gone to see three movies in theaters in the last four years because of it.


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This is one of the few reasons I like taking the bus.
$35 dollars a month and it goes everywhere I need to go.


November 6th, 2012: Americas new Independence Day.
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the bus goes shit nowhere regarding where I go


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"I am convinced that this world is of no importance, and that the only people who care about dates are imbeciles and Spanish teachers." -- Jean Arp, 1921

"If Jesus came back and saw what people are doing in his name, he would never never stop throwing up." - Max von Sydow, "Hannah and Her Sisters"
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I live in a college town so most the people here are too poor to have a car.


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rex #487806 2005-04-11 5:12 AM
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I live in a military town so most people have dead parents.


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"I am convinced that this world is of no importance, and that the only people who care about dates are imbeciles and Spanish teachers." -- Jean Arp, 1921

"If Jesus came back and saw what people are doing in his name, he would never never stop throwing up." - Max von Sydow, "Hannah and Her Sisters"
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I'm going to visit Chernobyl someday soon. Hopefully the radiation will screw with my genetics and give me the ability to teleport like Nightcrawler.


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Quote:

rex said:
This is one of the few reasons I like taking the bus.
$35 dollars a month and it goes everywhere I need to go.



I'm seriously considering switching to bus as my form of transportation.

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Its probably more where you live. For some reason its really cheap here.


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It's actually $32/month here.

My gas rides on $2.54/gallon.

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Quote:

rex said:
I live in a college town so most the people here are too poor to have a car.




That's interesting. Whenever I head back to Ithaca, New York, it seems like every student is driving an SUV.

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Quote:

rex said:
This is one of the few reasons I like taking the bus.
$35 dollars a month and it goes everywhere I need to go.




Unfortunatly that only works if you live in an area where they have a real public transportation system. Up by my house we have busses, but you can't get everywhere with them. I know I've tried before. Which is why I have to have a car. No car, no work/job, church, etc.


It's a rented tux ok? I'm not going comando in another man's fatigues.
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Quote:

Paul Mandral said:
Oil is supposed to spike to $100.00 a barrel soon which'll mean $4.00/gallon gasoline.

Good.

Maybe those gluttons in their military vehicles, which they desperately need in order to carry their 2 bags of groceries from the market to their home, will put more thought into what is essential and what is just wasteful.




What do you drive and what milage do you get?


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Truth be told, since I own and drive a motor-bike, the prices don't effect me as much as they do other people. It still ticks me off though. Just thought I'd say that.

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I recently read that oil production is in its peak, and it will only get lower and lower from now on. OPEC is pumping as much as they can. To get oil from tar sand (in Alaska and Canada), you'll need nuclear power. So by all means, consider more efficient cars and alternative fuels.


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Quote:

wannabuyamonkey said:
Quote:

Paul Mandral said:
Oil is supposed to spike to $100.00 a barrel soon which'll mean $4.00/gallon gasoline.

Good.

Maybe those gluttons in their military vehicles, which they desperately need in order to carry their 2 bags of groceries from the market to their home, will put more thought into what is essential and what is just wasteful.




What do you drive and what milage do you get?




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I wonder what the effect a world-wide terrorist strike against oil refineries and oilfields would have on the world economy. A new depression, maybe?


"Batman is only meaningful as an answer to a world which in its basics is chaotic and in the hands of the wrong people, where no justice can be found. I think it's very suitable to our perception of the world's condition today... Batman embodies the will to resist evil" -Frank Miller

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"To crush your enemies, see them driven before you, and hear the lamentations of their women!"
-Conan the Barbarian

"Well, yeah."
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That's a distinct possibility.I wonder how today's world would handle it(not that I want something like that to happen just so I would know)?


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Quote:

Captain Sweden said:
I wonder what the effect a world-wide terrorist strike against oil refineries and oilfields would have on the world economy. A new depression, maybe?




A large chunk of the US economies' troubles over the last five years was due to 9/11, and the fact they attacked the US's major financial markets. So, yeah, that's possible.

OTOH, we've been led to believe that a big chunk of the backing for the terrorists comes from the oil shieks. So that could be a major "bite the hand that feeds you" scenario.

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I saw this report about gas prices on the PBS program NOW, back on Friday, Nov 11th.

( transcript: )
http://www.pbs.org/now/transcript/transcriptNOW145_full.html


What was in the program is an argument based on the opinion of multiple oil-industry insiders that the larger oil corporations conspired to drive up prices, largely by purchasing and/or leveraging out the smaller gas companies that were keeping the price down.

The report cites several internal oil corporation memos, that leveraging out smaller oil companies was an objective, to raise prices and maximize profits.

You can also order the program on DVD.




I'm not a big fan of NOW, but I felt this was a good story.

Another good story in their archives from a few weeks ago is one on the rising cost of homes, and the housing boom/bubble. ( HERE , from August 26, 2005 )

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The Real Gas Price Gouger

    how come no one gets upset about the 50-70 cents (or more) per gallon in taxes imposed by government?

    Federal (18.4 cents per gallon), state (35-50 cents per gallon), and local motor fuels taxes (anywhere from 5-10 cents or more per gallon) account for at least one-third of the per-gallon cost of gasoline -- an outrageous levy in both absolute terms and as a percentage of the purchase price of the item being taxed. Imagine, for instance, if you had to fork over 50 cents in taxes for every $1 or so of groceries you purchased.

    And gasoline is no less an "essential" than food for most people.

    These taxes are also viciously regressive -- that is, they take more as a percentage of disposal income from the least able to pay. After all, most of us have no choice about driving, regardless of our income. People in areas outside of major cities (where there is no public transport system) especially. The "rich" (a frequent whipping boy of class warfare types) may be able to afford the exactions without it affecting their day to day lives. But what of the person of modest means?

    Let's assume a gas tax (all levels) of 50 cents per gallon. (A lowball figure, by the way; in some states, e.g. Connecticut and New York, combined motor fuels taxes imposed by all levels of government can push $1 per gallon or even more.) A purchase of 15 gallons of fuel (the amount it takes to fill the typical new car's tank) would entail $7.50 in taxes alone. Most people burn a tank of fuel per week (at least), so that means $30 per month down the rathole, just for gas taxes -- or $360 per year.

    How many people do you know who can afford to lose nearly $400 annually without it affecting their budgets?

    And yet, they (our friends in government) hunger for even more.

    Since 1997, 14 state legislatures have voted to raise their state gas taxes a total of 17 times; these increases ranged from 1 cent per gallon in North Dakota to 6 cents a gallon in Ohio. Many local (county/city) governments around the country tack on "inspection fees" and other nit-picky taxes -- including a "seawall tax" in Mississippi and a "special petroleum tax" in Tennessee. (Click here for more details.)

    There is talk of adding a nickel (or more) to the federal gas tax, too. Some lawmakers want another 50 cents per gallon (or even more than that).

    And yet, no one complains much about this endless, brazen highway robbery -- which comes after, let us not forget, federal and state income taxes which together snatch anywhere from 15-40 cents of every dollar we earn right off the bat. So with the change left over, we're compelled to pay yet again -- and then again. And at confiscatory rates, too.

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State's Price Controls on Gasoline Are Said To Have Cost Consumers

    Hawaii is about to scrap its effort to legislate away high gasoline prices, after the state's "gas cap" law failed to lower prices at the pump and led to claims that the regulation cost drivers tens of millions of dollars since it went into effect in September.

    "It's farcical, to be honest," the president of a gas station chain on the islands, Richard Parry, said in an interview yesterday. "Everyone sort of says, 'This obviously hasn't worked.'"

    In a vote earlier this month, only one of Hawaii's 51 state representatives voted to retain the cap. Even the state senator who led the drive to institute the cap last year has endorsed the idea of suspending the cap indefinitely, though he has also proposed modifying the price controls so they would only kick in under certain conditions.

    A study released in February by the state's Department of Business, Economic Development, and Tourism concluded that the caps cost consumers as much as $55 million.

    Mr. Parry said the caps encourage wholesalers to hike gas prices. "It's a natural business decision that if you're not sure if you can make money when the prices go down, I better make money when the prices go up," he said. "What happened is the market basically follows the cap. A bunch of independent decision-makers come up with the same logical choice."


    Mr. Parry said he was sympathetic to the lawmakers' desire to see lower gas prices, but didn't think they could fend off the economic forces at work. "You can't pick a piece of the market and regulate only that," he said. Mr. Hamilton contends that the gas cap may not have failed at all, but may have headed off even greater increases in price.

    The cost of diesel fuel, which is not covered by the cap, jumped in Hawaii by about 70 cents since last year, he noted. "It's not been in effect long enough to tell what it's done," said the analyst, who works with independent station owners often at odds with the oil companies.

    Hawaii's house has voted to address the price concerns by lowering gas taxes by 8 cents a gallon, but proponents of the gas cap have not given up on it altogether. The latest proposal from the state senator who initiated the legislation, Ron Menor, calls for adding Singapore's wholesale spot prices to the three mainland prices already included.

    The most expensive price would be dropped from the average in order to weed out local disruptions like hurricanes in the gulf. The cap, which already includes local adjustments for the costs of transporting fuel among Hawaii's six main islands, would be triggered only if prices exceed the "fair price" target over a two-week period.

    Mr. Parry said the escalating complexity of the caps and targets will only bring more volatility in what has traditionally been a stable market

    "It's artificially trying to emulate a free market and there's just no way government can effectively do that. We've proven that in the last six months," he said.

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Ready for another energy crisis?

    Soaring demand is pumping gas prices sky-high and has left America poised for a major fuel crisis this summer, watchdogs said yesterday.

    An industry expert warned any supply breakdown could trigger shortages more drastic than the aftermath of last year's devastating hurricane season, which crippled Gulf Coast pipelines and caused prices at New York pumps to approach $4 a gallon.

    "All that has to happen is another Katrina-like event, or political factors in the Middle East, and we are looking at major, major disruption," said Robert Sinclair, a spokesman for AAA's Automobile Club of New York.

    Oil markets are already jittery following terrorist attacks on oil facilities in Nigeria and rising tensions over Iran's nuclear program.

    Both countries are major oil producers.

    U.S. Energy Department forecasters warned that fuel costs - nudging toward $3 a gallon in New York - would climb an additional 10 to 15 cents by Memorial Day, one of the year's busiest driving weekends.

    Last week, it already cost motorists 40% more to fill up their tanks than it did the same time last year.

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Quote:

the G-man said:
Ready for another energy crisis?

    Soaring demand is pumping gas prices sky-high and has left America poised for a major fuel crisis this summer, watchdogs said yesterday.

    An industry expert warned any supply breakdown could trigger shortages more drastic than the aftermath of last year's devastating hurricane season, which crippled Gulf Coast pipelines and caused prices at New York pumps to approach $4 a gallon.

    "All that has to happen is another Katrina-like event, or political factors in the Middle East, and we are looking at major, major disruption," said Robert Sinclair, a spokesman for AAA's Automobile Club of New York.

    Oil markets are already jittery following terrorist attacks on oil facilities in Nigeria and rising tensions over Iran's nuclear program.

    Both countries are major oil producers.

    U.S. Energy Department forecasters warned that fuel costs - nudging toward $3 a gallon in New York - would climb an additional 10 to 15 cents by Memorial Day, one of the year's busiest driving weekends.

    Last week, it already cost motorists 40% more to fill up their tanks than it did the same time last year.





I don't think any discussion of any energy crisis can be conducted without examining and considering the record profits oil companies have experienced in the last year.


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That's it! I'm buying a bicycle! I live in the Midwest, where gas prices don't seem to be quite as bad (compared to the coasts) and it's supposed to be up to $3 a gallon this summer. No way! I'll either be biking it or taking the heel-toe express. And start petitioning that we get better public transportation!

I don't drive a gas guzzler or anything, but it's still too expensive to be filling up my car every few weeks!


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sweetmarlene said:
That's it! I'm buying a bicycle! I live in the Midwest, where gas prices don't seem to be quite as bad (compared to the coasts)




I saw $2.89 per gallon yesterday.


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Yeah, it's $2.80 today. A friend of mine just spent $35 filling up her tank. Granted, she drives a Jeep, but still...


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This is very unsettling. I guess, as in a lot of occasions here on Earth, the words STAY TUNED apply...


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I don't drive a gas guzzler either. 95 Honda Civic. I can get roughly 300 miles on a tankful, based on my usual city/highway driving. But still, I feel it if I have to spend $20 per week to fill up.

If I have to feel the pinch, why don't the oil companies feel that same pinch? If gas prices continue to soar all the while their profits do likewise, they're going to price the American consumer out of being able to afford to spend money in a fashion that puts $ back into the American economy.


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If the demand for gas is still going up despite the price hikes, is it really the oil companies' who are to blame for their profits. They have to make a profit in order to keep running. If they sell more every year, they're going to make more profits, period. Simple math. I have yet to see anyone show that the oil companies are the ones driving up the cost themselves. It's mainly the market setting the price.


whomod said: I generally don't like it when people decide to play by the rules against people who don't play by the rules.
It tends to put you immediately at a disadvantage and IMO is a sign of true weakness.
This is true both in politics and on the internet."

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Gas was 25 cents a gallon in 1957, the year I was born. I vividly remember being 4 years old, and my dad taking me to the gas station to fill the tank of his Cadillac before a trip to Atlantic City, NJ....and it cost about $3.00!!! My father handed me the money to give to the Service station attendant.


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Quote:

thedoctor said:
If the demand for gas is still going up despite the price hikes, is it really the oil companies' who are to blame for their profits. They have to make a profit in order to keep running. If they sell more every year, they're going to make more profits, period. Simple math. I have yet to see anyone show that the oil companies are the ones driving up the cost themselves. It's mainly the market setting the price.




This is a good point.

In the article I posted earlier, one of the parts I did not include, was a guy from Yonkers complaining how he had "no choice" but to drive his car to and from work.

I could be wrong, but back when I lived near NYC, pretty much every suburb had decent public transportation: the train, the bus, etc. In fact, when I lived on Long Island, and commuted into the city, I NEVER took a car into work.

So I don't have a lot of sympathy for some of these people.

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