Left Coast Voices

"I would hurl words into the darkness and wait for an echo. If an echo sounded, no matter how faintly, I would send other words to tell, to march, to fight." Richard Wright, American Hunger

Gas Prices: Who’s to Blame? – Roger Ingalls

Often, filling stations take the heat for high gas prices but, in reality, your local pit stop doesn’t make much money from the fuel they sell. They make pennies per gallon. Most of their revenue comes from junk food sold out of the attached convenient store. Yes, stations do raise prices minutes after crude oil goes up and then lower the price weeks after oil decreases so they do take a little advantage but that has always been the case. Gas stations are not to blame for the current high price of fuel.

Are oil producing companies or middle-east countries to blame for high gas prices? For the most part, they run their output and let the market dictate the prices. They may vary production levels a little but it hasn’t been a market-driver since the 1970s. Oil suppliers are not to blame.

How about oil refineries, are they the evil ones? Back in 2008, oil peaked at $147 a barrel and gas prices rose to about $4.30 a gallon. Now, in early 2012, gas prices are again hitting the $4.30 range but oil is trading at approximately $105 a barrel. Something seems fishy. Oil is 30% less now than in 2008 but current gas prices are the same. Also, we now use 17% less gas than we did in 2008; it doesn’t add up. Demand is down, crude oil prices are lower but fuel prices are higher!

US oil refineries are to blame for the current increase in gas prices. They created an artificial shortage by reducing their refining capacity to 85% of what it was in 2008. The refineries say they had to close down some refineries because the crude oil quality has made some of their production capacity obsolete. It is unbelievable that companies making record billions in profits cannot keep up with the required technology in their own industry. I believe this excuse is a flat-out market manipulating lie. These big companies are not that stupid; they know what kind of oil they’re getting years in advance.

When gas hits $8 per gallon in a year or two, you can blame deregulating legislation that now allows reckless speculation (futures trading of oil) and the elimination of alternative energy programs by Ronald Reagan in the 1980s. However, the current high price of gas falls squarely on shoulders of US oil refineries.

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4 thoughts on “Gas Prices: Who’s to Blame? – Roger Ingalls

  1. This morning on KALW I heard that gasoline in California is different than gas anywhere else because of stringent emission standards. The particular mix even changes from winter to summer because smog is worse in warmer weather. Right now is the time when we’re using up the winter formula and the summer formula isn’t out yet, which means there’s a temporary shortage. So I’m sure on a national level deregulation shoulders much of the blame. But apparently for those of us in CA, there are other mitigating factors as well. But that’s the price we pay for better air, and I’d say it’s worth it. When I first moved to California in 1980 I was only a few miles from Mt. Baldy but couldn’t even see it. I’m happy to spend more at the pumps for cleaner air.

    • Hi Tanya-
      Yes, it is true, there is a difference between winter and summer gas creating some shortage (and higher price) during the cross-over period but it’s usually just a small dump. In CA gas is higher because we pay more tax on it which is suppose to go to fixing roads but that’s been diverted to education for several years now. The majoity of the run-up in price is due to refinery shutdown unrelated to winter-summer cross-over. The Energy and Banking industries are #1 and #2 worldwide and can play these market games because there’s nothing powerful enough to stop them.
      Thanks for the comments-
      Roger.

      • Hi Tanya-
        It’s me again. I forgot to mention, I also enjoy the cleaner air and gas chemistry plays a small part in that but the advances in the automobile have been the bigger driver in clean air.
        Also, considering how precious liquid fuel (crude oil) really is, refined gas should be about $800 per gallon when compared to the power output of a human. Unfortunately, our economy is designed to run on gas priced at $2.25 per gallon. Our economic infrustructure is not equipped to handle the realities of the future unless something drastic happens to change it. But I’m optimistic…people do change.
        Thanks again-
        Roger.

  2. One of the reasons refinery are shutting down on the east coast is due to their age and there inability to refine cheaper non brent (sweet) oil and increased natural gas prices that have made then unprofitable. To quote the business week article I am getting my information from “companies have chosen to shut down a handful of larg refineries rather than continue to lose money on them.” The increases oil production we have had recently is a harder to refine “sour” oil that requires special equiptment, and there are insufficient pipeline to move sweet texas oil to east coast at resonable cost. In my opinion to blame refiners is unfair. The type of oil available is changing, and the refineries fight an uphill and expensive regulatory battle to make changes to there operations. It is like this imagine that you have a twenty year old cab that only runs on aviation fuel, the that the avaiation fuel gets scarce that you no longer can make any money drive people arround. You’d like to to swap in an engine that will run on regular gas, which is becoming more available but you have to post a notice to all of your neighbors to ask if it is ok, pay to right up reports on how you can do it safely, and be suited by people that do not like an old cab that smells of regular gas driving through there neighborhood. True you own other cabs that make money, but this one it a definate losing proposition. Wouldn’t you scrap the cab, the same way the oil refining companies are scraping the east coast refineries. I know I would.

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