Let me start off by saying I am not an expert on business or economics. What I present here is a compilation of expert opinions and facts I have culled from the Internet. I have included citations so you can fact check for yourself.
We are being duped – by the oil companies, the refineries, our government and even your local gas station. The Points I am trying to convey are this:
- There is no gas shortage, supplies are kept artificially low by sending more and more refined gas overseas
- Since high exports aren’t allowing U.S. domestic supply to grow, therefore causing the illusion that there is a domestic shortage, when in fact they went from shipping 200,000 refined barrels a day to foreign countries in 2010 to 600,000 barrels in 2011, with 2012 to young to have any data. We use over 28% less gasoline today than we did a year ago1, yet there is an artificial shortage. A staggering 47% decline!
- More drilling will not bring down prices, it will provide more crude for the refineries to sell off shore
- The Keystone pipeline will not have an effect on gas prices, the Canadian oil will be refined here and shipped off shore
- The price at the pump is not controlled by OPEC crude prices, but by our own refineries, although the news media, supporting big oil, would have you believe it is.
- Gas refineries work in collusion, price fixing in defiance of fair business practices (every notice that all brands go up the same amount the same day)
- Your local station scams you by raising the price at the pump every day even though they did not receive a new delivery (new delivery is the only way they experience a change in cost)
- A temporary rise in gas and diesel is an excuse for products in stores to effect a price increase that is permanent, when gas prices fall, consumer goods never go back.
- The Federal government is not here to help you
I guess the real thing that bothers me is the apathy of my fellow Americans. All of this information is just a Google away, and a lot of information on the subject is written by experts close to the business, yet we just grumble about the soaking we are getting, cut back on entertainment first, then necessities, and keep getting our pockets emptied.
The gasoline and diesel industry is out of control, and we – we the American public – facilitate them. We need to stand up and fight. We are being duped by an industry that is a monopoly – something the government would never allow any other industry to do. If you don’t buy their gas and diesel, what is your real alternative. Sure, the first argument to come out against my accusation is going to be “sure there’s competition, look at all the different brands!”. I again point out that they all are within pennies of each other and rise and fall in unison. These prices are controlled by the refineries, and they work in collusion. Even the cell phone and the Electric industries are competitive, but our government has allowed this monopoly in the fuels industry to thrive.
NO SHORTAGE OF GAS OR DIESEL
The United States has an abundance of gasoline and diesel. We have so much in fact, our refineries continue to export record amounts. (Data, www.eia.gov)
The country exported 430,000 more barrels of gasoline a day than it imported in September, according to the U.S. Energy Information Administration. That is about twice the amount at the start of the year, and experts and industry insiders say the trend is here to stay. 4
The United States began exporting gas in late 2008. For decades prior, starting in 1960, the country used all the gas it produced here plus had to import gas from places in Europe.4
But demand for gas has dropped nearly 10% in recent years. It went from a peak of 9.6 million barrels a day in 2007 to 8.8 million barrels today, according to the EIA. 4
So, the question we should be asking is twofold: First, if Production is up and demand is down, why are we getting scalped at the pump? Second, why are we allowing this to happen? The argument of nonintervention into free trade is bogus in this instance, since we have no other reasonable alternative, and therefore are a captive consumer2.
But US motorist’s demand for gas has dropped nearly 10% in recent years. It went from a peak of 9.6 million barrels a day in 2007 to 8.8 million barrels today, according to the EIA2.
“But it may be bewildering for American drivers, who could experience record high gas prices [this] year even though U.S. demand could hit the lowest level in a decade” said Tom Kloza, chief oil analyst at the Oil Price Information Service2.
We know supply and demand are supposed to dictate the rise and fall of prices, over and above the cost of manufacture and delivery. Supply and demand should also be the barometer on the price at the pump. The lower the supply the higher the price, and it is working that way, after a fashion. The problem is that the reason supply is low is because refiners are keeping it there deliberately while sending more and more refined oil overseas.
Refiners have been shipping historically high amounts of refined products out of the U.S., much of which is bound for Europe or Asia. Since diesel demand is high from Europe, where a majority of vehicles burn the heavier fuel, refiners can make a few extra dollars from each barrel by shipping it across the Atlantic. Meanwhile, domestic supply of diesel fuel currently sits nearly 11 percent below where it was [in 2010], or some 19 million barrels lower3.
It is a certain fact that U.S. refiners are continuing to increase exports of refined products overseas, and this is not only keeping domestic supplies at levels below their expected demands, but it’s also supporting high prices at the pumps.
The bottom line is this: historically high exports aren’t allowing U.S. domestic supply to grow and are certainly a part of the culprit behind high gasoline and diesel prices. So for those motorists out there rounding up reasons why prices are high can certainly add products being exported to their laundry list of reasons why motor fuel prices remain seasonally high. Keep in mind refinery maintenance season is right around the corner, and if these export rates remain high, we could see even more pressure on gasoline prices, perhaps pushing the fragile U.S. economy closer to the brink of another downturn3.
The oil industry maintains the exports are necessary because domestic demand is weak. The industry says if refiners could not send American-made gasoline to China, India, Europe, and South America, the refineries would have to close as several have already done on the East Coast. Yet, other energy observers say exporting gasoline at a time of rising prices is sort of like “throwing flammable liquid on a fire”3.
THE FEDERAL GOVERNMENT
Year after year, administration after administration, the feds have ignored the plight of the American Gas customer. That is, except on election year, where they are magically able to influence the prices.
The current administration is no exception. Obama, while saying he is addressing the issue, used the speech to subtly reassure the oil industry that he would not upset the status quo. Except, now he is becoming concerned, because historically, high prices at the pump help induce a recession. Just what he needs to happen in an election year.
WHOSE FAULT: DEMOCRAT OR REPUBLICAN, LIBERAL OR CONSERVATIVE?
Surprisingly, with the exception of the fact that I blame us, the apathetic public, it is really both parties fault for different reasons.
The liberals the democrats , and the media relentlessly expounds that drilling for oil in the United States won’t have much affect on U.S. gas prices, because petroleum prices are set in global markets. Furthermore, they cite the damage to the environment as a reason not to pursue any more drilling. On a case by case basis they block drilling to save “something”. They further believe that domestic oil production or U.S. access to Canadian petroleum won’t change or dependence on global pricing, or the pace of economic recovery and unemployment. While some of this may be true, it does not address the real issue and they are not willing to discuss it on that basis.
On the other hand, Republicans, always supportive of big business, continue the mantra “free enterprise”. While I believe completely in free enterprise, I also believe in mechanisms that prevent monopolies, and I believe the oil business, or at the very least, the American refineries are a monopoly on gas and diesel fuels. We must recognize that possibility, and the fact that our elected officials are puppets to either big business, special interests or environmentalists.
The average middle class American now spends in excess of 8% of their income on gasoline. Not only does the higher price affect the family budget adversely for transportation, but it forces up prices on food, clothing and other necessities, stretching budgets to the brink. Single handedly, the refining industry can force the US economy into another recession. Since a recession-like economy initiates hiring freezes, layoffs and wage freezes, the poor and middle class take the brunt of it. Recovery is stymied when consumer goods prices are increased to cover additional transportation costs, and never go back down when the gas prices do.
We are going to continue to experience rising prices at the fuel pumps until we rise up and take matters into our own hands as our forefathers taught us. This can be done at each election cycle. We have elections in the near future, pick your candidates carefully. Make sure that the new round of elected officials, including the next president, understand the need to reign in the regulators, the environmentalists, and the special interests and put the needs of the American people above their selfish whims.
1 http://www.oftwominds.com/blogfeb12/gasoline-tanking02-12.html (you can verify these figures at the government website www.eia.gov)