I gripe about the price of gasoline quite a bit, don't I? It may have something to with the fact that I spend more money on gasoline in a month than on electricity, water, heat, and cable combined. I spend more money on gasoline in a month than on food. And it just really gripes me to give so much of my money to these price-gouging, profit-hoarding oil companies, especially when I see what I saw yesterday.
We drove from Indiana to Ohio to see my family and take my pug (whom I miss terribly still) to live with my father. When I left work on Saturday evening in Indiana, I paid $2.919 per gallon of gasoline to fill up the car. It seemed like a bargain to get it for less than $3. When I left Ohio on Sunday to return home to Indiana, I filled up in Ohio for $2.559 per gallon. That's a difference of thirty-six cents a gallon, at gas stations less than two-hundred miles apart. When I arrived back home in Indiana, the price had dropped two cents to $2.899.
I want to know two things:
1- How do they justify such disparity in pricing?The oil industry has a stranglehold on the American motorist! You can tell me that the local station doesn't make anything on selling the gasoline itself, but that just means that it's not just the consumer being plundered, but also the retailer, and it's the supplier -- the oil companies -- doing the plundering! Time for another Boston Tea Party?
2- When will the madness end?
Joe
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2 comments:
I empathize with you on the fuel price issue. It hits us all hard, and the hardest hit are those who must drive long distances, or for our jobs. I have been resisting the urge to post a comment to your fuel related writings, but today I have given-in to that urge.
You wrote some weeks ago about the amount of profit realized by companies like Exxon/Mobil. I am concerned that the general public is falling victim to the slant provided by the media on this issue.
While it is true that Exxon/Mobile has realized great profit, I think it is important to remember that this is exactly why the company is in business. And there are many, many, many people who make a living and increase their own wealth because Exxon/ Mobil makes a profit.
Let’s consider a few things:
1. Exxon/Mobil is a global company. It makes its profits from sales throughout the world, not just in the U.S.
2. China and India are becoming HUGE consumers of oil. The amount of oil used worldwide increases daily. The amount used by those two countries is increasing much more than most others.
3. The amount of profit any company earns should be proportionate to the amount of product it sells. Sell more product, make more money.
4. The amount of profit earned by Exxon/Mobil per unit of sale is quite small when compared to the amount of profit most companies earn on their products. Most companies earn more per each sale than oil companies do.
5. Demand for a product usually results in an increase in price for that product. If 1000 people want a Cabbage Patch Doll, but only 10 are available, suddenly the price for Cabbage Patch Dolls goes way up.
Exxon/Mobil is making huge profits, not because it is ripping-off the American Public, but because they are selling HUGE amounts of product and because people want that product more and more each day.
Back to today’s entry: you asked, “How do they justify such disparity in pricing?” I believe you were referring to prices at the pumps. I suspect that you mean the gas-station owners when you say “they”. If so, I would suggest that the disparity in price is proof positive that the free enterprise system is working. The gas-station owners set their own price, based on a variety of factors that affect their business and their store. Such factors are bound to vary from store to store, and such variations should be reflected in the price at the pump. I would suggest that the difference in pricing is a good thing, not a bad one.
You also asked, “When will the madness end?”. Well, I’m not sure about the term “madness”, but I would suggest that we as consumers are significantly responsible for the increase in fuel price. As I noted in point 5, above, the demand for fuel plays an important part in the price of fuel. As long as demand is high, the prices are likely to remain high. This is because a high demand can easily out-pace the available product, and drive the price of the product higher.
My suggestion is that we should be thankful that Exxon/Mobil is doing well, and that we should all start driving less. Let Exxon/Mobil earn its profit from China and India. Then we can invest in Exxon/Mobil stock, and earn a part of that profit for ourselves.
Thanks for your comments. My point is this: gasoline, like natural gas and electricity, is a natural resource. Granted the crude is drilled and refined by a company that has made a major investment in their product, but that product has become a necessity the way we live today. I'm all for allowing the oil companies to make a profit. However, I believe that profit has gone beyond reason and become price gouging. The oil companies try to tell us that they have to raise the cost of gasoline to the consumer because their costs have increased. How, then, can they be making record profits for two quarters in a row? It just doesn't pass muster with me.
Joe
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