Gas & guns
- Thread starter wingman
- Start date
It never ceases to amaze me the level of ignorance that can be displayed by otherwise rational human beings. I've seen this same argument played out on other boards and it is absolutely mind-boggling that some people can think the way they do and still tie their shoes by themselves.
For a quick primer in the laws of supply and demand, visit Ebay. The more people who bid on an item, the higher the price goes. I'm sure many of those who list items for sale wind up "gouging" the buyers because they made an "enormous" profit. Of course, they're just decent Americans trying to make a buck, not some greedy corporation.
Second, I want anybody to define "greed" for me. My favorite is "wanting more than you need". Who decides what I need? How much profit is "fair"? There isn't one person on this board who wouldn't say "yes" instantly if I offered a million dollars cash for the soiled underwear they had on. Would that be a fair profit?
How can people blame domestic oil companies when 80% of our oil is imported? Do you think a group with a 20% market share really controls the price of a commodity?
Now for some math. Let's say crude is $60 a barrel. That's $1.09 for a gallon of crude. Since only about 70% of that can be converted to gasoline, that means it costs refineries about $1.56 just to buy the materials required to produce one gallon of gasoline. Now, add the cost of transporting that crude around the world, the cost of actually refining it into gasoline, and the cost of distributing it across the country. Now add the federal and state taxes on each gallon. It's not very hard to see how gas is over $3 a gallon when more than $2 is just taxes and raw materials.
Please, before you start blaming Big Oil for everything take five minutes to allow your brain to ponder the facts.
For a quick primer in the laws of supply and demand, visit Ebay. The more people who bid on an item, the higher the price goes. I'm sure many of those who list items for sale wind up "gouging" the buyers because they made an "enormous" profit. Of course, they're just decent Americans trying to make a buck, not some greedy corporation.
Second, I want anybody to define "greed" for me. My favorite is "wanting more than you need". Who decides what I need? How much profit is "fair"? There isn't one person on this board who wouldn't say "yes" instantly if I offered a million dollars cash for the soiled underwear they had on. Would that be a fair profit?
How can people blame domestic oil companies when 80% of our oil is imported? Do you think a group with a 20% market share really controls the price of a commodity?
Now for some math. Let's say crude is $60 a barrel. That's $1.09 for a gallon of crude. Since only about 70% of that can be converted to gasoline, that means it costs refineries about $1.56 just to buy the materials required to produce one gallon of gasoline. Now, add the cost of transporting that crude around the world, the cost of actually refining it into gasoline, and the cost of distributing it across the country. Now add the federal and state taxes on each gallon. It's not very hard to see how gas is over $3 a gallon when more than $2 is just taxes and raw materials.
Please, before you start blaming Big Oil for everything take five minutes to allow your brain to ponder the facts.
CarbineCaleb
New member
JATerpack: Your post is full of sarcasm and putdowns, but little in the way of new information. If you read the posts in the thread, your main point, that crude makes up most of the cost of oil was made back near the beginning. There are a lot of other points made here as well, but no reason for me to waste bandwidth by reiterating. I'll just ask you to read the thread before going off on people. Maybe then *you* will learn something.
I read every single post in the thread specifically to see if anybody had done the math. Mentioning the cost of the crude only goes so far. My whole point was that there are a lot of other expenses beside the crude. When you add it all up, the oil companies can hardly be accused of gouging anybody. It's just easy for people to point a finger at them so they have somebody to blame.
As for the sarcasm and putdowns, well that's just me being me. I make no apologies for being who I am, and I certainly don't feel alone here after having read many of the posts.
As for the sarcasm and putdowns, well that's just me being me. I make no apologies for being who I am, and I certainly don't feel alone here after having read many of the posts.
CarbineCaleb
New member
That's all already been described as well.
Well, what you say you already read, is that Exxon Mobil topped the Fortune 500 Net Earnings (not costs) charts for the last two years running, that oil has had average net earnings increases of 40% and for independent distributors, 200%.
On top of that, but what hasn't really come out in the thread much is the instant response by retailers to any news that may justify a cost increase - often by exhorbitant amounts - and I'd say 20% per day is pretty exhorbitant.
Your post makes it sound like all these folks are just misunderstood, and are just ekeing out a living. That view is in direct opposition to the facts I just listed though.
A fallback point of yours might be, ok, well, maybe they are charging a lot, but noone is forcing anyone to buy it. If you are as smart as you say you are, you will realize that it's not practical to boycott the use of fuel. Not for commercial trains, buses, trucks, nor private citizens. There is very little choice here - both people and businesses are over the barrel. The cost of transportation is a ubiquitous influence in modern life - that's why it's important.
I don't think we are nearly there yet, but it won't take that long ($3.00? $3.50? $4.00?) before this begins to have some real effects on the economy as a whole as well as on the lives of private citizens. When we get there, if the reason is that certain folks want sustained earnings gains of 40% annually (or better as we've seen) I won't want to hear that someone is just "charging what people will pay"... and there are not a few people who agree with that, I'll wager.
Philosophically, governments try to aid business, because broadly speaking, what is good for business is good for the people. That general correspondence isn't *enforced* by any law of either physics or economics though. Wanting what's best for the people and the country is not "ignorant".
I work in the pharmaceutical industry. Sooner or later, there are going to have to be adjustments in the way that healthcare is priced (beyond charging what people are willing to pay). Why? because the percentage of all expenditures that are devoted to it keep increasing - sooner or later, there won't be anything left to spend on anything else. Like oil, heathcare expenses are a ubiquitous and powerful influence on business and private citizens. Like oil, these costs can't trivially be reduced by decreasing consumption arbitrarily. Like oil, healthcare expenditures can easily go well beyond healthy levels for an economy or a society. The reason is that there isn't the elasticity for demand to fall arbitrarily to "follow" increases in pricing. We don't have the flexibility to go without transportation or healthcare. So you can get pathological behavior. Even though I am in the pharma industry, I see that, and I know that a day of reckoning is inevitable, and I don't oppose it. If people say we need to do something about healthcare costs, I don't rail at them and call those people ignorant or naive' or socialists. I say they're right - to argue otherwise is either a matter of ignorance or dishonesty.
No that has been one of my main points all along. No one forced you to depend on your vehicle. You built up that dependency. You more than likely could have bought a house within walking or biking distance. You don't really need to travel 100's of miles on vacations and such. Driving is a luxury, not an entitlement.
I think the Amish make a great point that a car is not required to live.
CarbineCaleb
New member
No one has forced me to use electricity or go to the doctor either. I am just one of those naive ignorant people who does.
It seems a lot of folks slept through economics and thoroughly don't understand human behavior (which economics studies). I am really happy about the gas prices right now and can't wait for them to hit $4.00 a gallon locally. Not because I am an tree hugger, but because it takes a crisis to get anything done on anything whether it is government or private individuals (more so with government).
For 30 years we've had no energy policy. We haven't done a lot of drilling which wouldn't do any good anyway. Poking holes in ANWR won't do much good if we cannot process the crude oil we get from it. We don't have enough refineries so no matter how much crude is sitting in tankers off-shore, we can only refine it so fast. More refineries increases supply and thus lowers prices.
Since cars aren't the only thing that uses petroleum, we need to look at electric generation in the US too. Coal is fine and the powder river mine is producing enough for at least a hundred years, but it takes a lot of petroluem to mine the coal. We should at least consider nuclear energy.
In the mean time, I have put it into perspective and the price increase doesn't hurt as much financially as it does psychologically. Yeah- 3.00 a gallon seems like a lot to pay, but it means I pay an extra 20 per fillup over what I was paying a month ago. So I buy two less bricks of ammo, or a case less of beer. I can make up both pretty easily by homebrewing and reloading (though the .22 I'll still buy).
Steel should get expensive and it is likely that we'll see an overall jump of less than 10 percent on all products, but living debt free means that you can absorb these costs and still go dove hunting on Saturday if you're in the Texas Central Zone!!!
For 30 years we've had no energy policy. We haven't done a lot of drilling which wouldn't do any good anyway. Poking holes in ANWR won't do much good if we cannot process the crude oil we get from it. We don't have enough refineries so no matter how much crude is sitting in tankers off-shore, we can only refine it so fast. More refineries increases supply and thus lowers prices.
Since cars aren't the only thing that uses petroleum, we need to look at electric generation in the US too. Coal is fine and the powder river mine is producing enough for at least a hundred years, but it takes a lot of petroluem to mine the coal. We should at least consider nuclear energy.
In the mean time, I have put it into perspective and the price increase doesn't hurt as much financially as it does psychologically. Yeah- 3.00 a gallon seems like a lot to pay, but it means I pay an extra 20 per fillup over what I was paying a month ago. So I buy two less bricks of ammo, or a case less of beer. I can make up both pretty easily by homebrewing and reloading (though the .22 I'll still buy).
Steel should get expensive and it is likely that we'll see an overall jump of less than 10 percent on all products, but living debt free means that you can absorb these costs and still go dove hunting on Saturday if you're in the Texas Central Zone!!!
CarbineCaleb, percentages are nice, and I'm certain oil companies are making money, but that doesn't make it gouging or "unfair" profit. It costs them over $2 a gallon to produce the gas. Then the feds and the states easily take that up to $2.50. A little profit for the refinery, a little for the wholesaler, and a little for the station. Seriously, what is considered "fair"? Why is it that a rare baseball card can sell for $100,000 because so many want it and there aren't that many, but if gas becomes rare and people want it the price isn't allowed to go up? Nobody has yet explained how making $.10 on a gallon of gas is excessive profit. Even more important, nobody has explained why I should be mad at Exxon when OPEC sets the price of oil. If all the US oil producers got together and decided to sell their oil for $30 a barrel instead of the $60 a barrel for the imported stuff it wouldn't amount to a hill of beans. Since the US producers only account for 20% of our consumption the average price for a barrel of oil would only drop to $54. That's a difference of less than $.15 at the pump. I doubt US producers can sell their oil for just $30 a barrel and still pay their bills so the price at the pump would change even less.
Mastrogiacomo
New member
The gas prices will hurt my range trips, no doubt. I earn only $27,000 a year as a federal employee and give some of that to my parents, of course my bills: rent, car, insurance, etc. I obviously live with them because I can't afford to have my own place. I can't afford what I'm paying now - more than $3 for gas. No more guns till the bills are paid and the gas comes under control. 
CarbineCaleb
New member
Well, of course each person is saying different things but I am certainly not saying that gas prices cannot go up. I realize that they need to make money, and if their costs go up, they need to pass them on to the consumer.
But... and here's where we see things differently - you think a guy charging a $100,000 for a baseball card to one sap is the same thing as an oil company charging $3.00 a gallon to 280 million people. No, that's not the same. The first difference is, the guy can without any hardship simply not purchase the card. The second difference is, not only is one person forced to pay whatever they ask, but *every* person is forced to pay what they ask. Despite the suggestion, I don't think that everyone can live like the Amish tomorrow. Even if some dope pays $100,000,000 for a baseball card, it doesn't hurt the nation - it doesn't affect the economy as a whole.
You seem to like economics - well even aside from the cars issue - how are *all* goods moved around this country? Trucks primarily, trains second, and planes third, all of which run on some petroleum distillate - diesel, jetfuel, gasoline. That means that as gas prices go up, not only will people be paying more at the pump for gas, they'll be paying more everywhere else for virtually everything else they buy. If you can see a way that isn't required by basic business accounting feel free to enlighten me.
So, I'll try again - if these guys were making reasonable profits - fine, if they were making exhorbitant profits, but not being a drag on the entire nation, I'd say - yeah, but who cares? But they are doubling and tripling profits and they are affecting the whole nation, so I care.
I understand your point. But what I want to know is how does the 10 or 15 cents they make off each gallon create a hardship? Even if they cut their profit margin in half it'd only save us 5 or 10 cents a gallon. How is that going to help? Is the difference between $3 and $3.20 really going to help? Everybody keeps trying to convince me that it's Big Oil causing the high prices, but the facts don't back that up. Sure, they make billions a year, but it's not like they're clearing a dollar for every gallon they sell. I'd be willing to bet that the federal government makes more money off a gallon of gas than the company that produced it. In fact, I wouldn't be surprised if the feds make more than the refinery, wholesaler, and retailer combined. I know most gas stations only make 5 cents or so on each gallon they sell.
The ironic thing is, as we explore and produce more of our own oil Big Oil's profits will go up even as the pump price drops.
CarbineCaleb
New member
Ok, I'll meet you halfway here - I have also been saying that I don't think we're at that point yet (where the overhead constitutes a critical drag on the economy)...
It is true as you say that if the margins are currently a small percentage of the total price, then cutting them would have limited benefits.
I am basically projecting forward, and saying hey - at 40-200% growth rates, things will get ugly real fast if this continues (that geometric progression gets ugly pretty quickly)... So if they ease up a little, and don't expect *profit growth* to remain at these levels year after year then they can keep their riches.
It is true as you say that if the margins are currently a small percentage of the total price, then cutting them would have limited benefits.
I am basically projecting forward, and saying hey - at 40-200% growth rates, things will get ugly real fast if this continues (that geometric progression gets ugly pretty quickly)... So if they ease up a little, and don't expect *profit growth* to remain at these levels year after year then they can keep their riches.
Nope, just threw it out as an example off the top of my head on how environmentalists can prevent things from being done.
Right now, I don't see any point in continuing the argument until:
1) Someone shows me some hard figures on how much costs and profits are at each step of the process
2) Someone shows me what normal figures would be
3) Defines 'gouging' past 'big oil making money'
4) Drop emotions from arguments. Sorry it is going to cut into shooting, but if you can't afford to fill up the car, not getting to the range every week is the least of your concerns.
5) Using laws of economics, shows how the change in price was not due to the lack of supply in the future, and simply due to 'gouging' by whatever definition they came up with
EDIT: One last thing. This thing smells to me like the whole Microsoft deal. Someone has a product, the entire nation starts using it, suddenly it is available, and someone decides they are making too much money on it, so they take them to court and win. When no one forced them to buy the product in the first place.
I think we've reached an agreement here. If the price starts going up because they are increasing their margin, then I'll be right there with you complaining. For now the price is rising because of market forces and OPEC.
On a related note, I'm very much in support of getting us off our oil addiction. I don't want to do it for some eco-weenie reason, I want to do it for spite. If we can produce all the oil we need domesticly, then those scum in the OPEC countries won't be getting any of our money to use against us. If the terrorists think we're screwing them now, wait till they see what it's like to have absolutely nothing.
Yep, and selling at $2.00 a gallon when it costs them $3.00 to fill up sure will keep the gas staion employees employed.
Furthermore, when there is no gas, do the employees still get paid? It's not their fault they can't work.
And I still am interested in my questions. I have yet to be proved that any price gouging exists.