Cost of Fuel and Price Gouging

This is a request to all who read this message. Gas prices are getting out of hand, we all know that. But over the past few days, there has been an extreme amount of profiteering.

These hikes are in two forms:

1. Across-the-board increases
2. Price Gouging (profiteering)

The first, we can't quite control as much as we should. But we can certainly speak our mind. I urge everyone to call, e-mail, and send letters to their state representatives regarding this. I'm not much for trying to organize an effort like this, but it's come time for someone to step up to the plate. With over 10k registered members, their friends, and their families, we should be able to get the word out somehow that something needs to be done. Something needs to be done quickly. Unusually high prices at the pump means less spending in other areas, and that spending is what keeps our country running. I've seen reports that our growth could be affected from 3%-4%. That doesn't sound like much, but it is a lot. This may have a direct effect on the stock market as well. Once again, please contact your state representatives and let them know that something needs to be done before gas prices rise above $3 a gallon.

The second (and really what is burning me up), is profiteering.

This is one of the most despicable and low acts I can think of. I am urging everyone to report any and all cases of profiteering you run across to your local authorities. I saw footage of gas stations in Atlanta with prices well over $5 per gallon, and some over $6 per gallon. Words cannot describe how that really fires me up.

I'm not going to spend all night on a tirade, and this is absolutely not meant to get into a political discussion, or even a discussion.

This is simply a way to gather people together in an effort to keep things under control. If you have any information on what to say to your representative, or other people that should be contacted regarding the rising price of gas/gallon, please post it here so others may use that information. If you see obvious cases of profiteering, whether it be fuel, water, building supplies, (anything), please inconspicuously report it to your local authorities immediately. If you have a camera, or camera phone, take a picture of it as proof.

Please do not post comments or discussion here, as I would like to reserve this thread for information regarding resources and contact info.

Thank you for your time.

Courtesy of Quickbeam

Don't know if this was posted yet - you can report suspected pricegouging at DOE.gov (Dept of Energy).

http://gaswatch.energy.gov/

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Admins/Moderators, would it be possible to get a sticky on this?

Here's a chart on a site with all sorts of useful information:

http://www.wtrg.com/gasoline/graphs/Mgtt_us.gif

I can't post it because it's copyrighted, but you will see the spike in October last year corrected itself, but the spike in April '05 (I don't remember what got it started) should have corrected and prices go back down under $2/gal. That hasn't happened, and by the way it looks, it may not.

The correct term is actually profiteering

Main Entry: prof·i·teer
Pronunciation: "prä-f&-'tir
Function: noun
: one who makes what is considered an unreasonable profit especially on the sale of essential goods during times of emergency
- profiteer intransitive verb

It used to be considered a treasonous action (and potentially carried a death penalty) during times of declared war... and aren't we at war right now?

Thank you for the clarification. I'll add that or edit where necessary.

And it's actually illegal. Taking advantage of something like this to raise your prices beyond reason is prosecuted! Some hotel owners will be severely fined or even brought up on criminal charges for price gouging during the initial evacuation of New Orleans. So it's not just a matter of being mad at people doing this, they police will definitely be interested.

My wife and I filled up 2 days ago prior to things spiraling out of control here. The price has gone up $.50 to $.75 a gallon already here.

My next tank will cost a lot more I'm afraid. I witnessed today the first lines at a gas station where they stretched out into the street. People are realizing that they are going to continue to go up. As far as I know there is no shortage here yet, just continually raising prices. I was too young to remember the last time there wasn't enough gas to go around.

My city is known for having the highest gas prices in the whole state, and it's not even a resort town or anything. And some stations raise the price higher than others, and eventually they all raise it. It's like a big monoploy, and well known.

My dad runs the fuel quality program, and right now he is busy working with the EPA since they lifted some restrictions on refineries. Now they can sell gas that doesn't meet pollution requirements so they can ramp up production more and keep gas flowing.. So we'll see what happens to prices across the board (#1).

(#2) is kind of hard to deal with, at least my city has tried and hasn't helped... I remeber after 911, gas in my town was ~6 a gallon for a while. Then it dropped eventually, and wasn't it like 98cents at one point! man that's crazy. I don't want to think back further at the prices!! I can't afford to drive much anywhere now. And price of products/anything that needs to be trucked in will go up too

my neighbor is a petroleum engineer specializing in refineries. He specializes in going into a refinery in trouble and doing what ever it takes to get it back up.

his opinion is damage is not that bad and it will take aprox. 3 weeks to get backup and running.

further there has been massive price gouging not just recently but for the last few years.

there is no shortage of oil! I cannot verify this but according to him, there is aprox. one year's supply of oil in storage in US.

you won't hear about this in the news, but profits at refineries have increase by at least a factor of 10X or more.

for example Exxon reported a tripling of net profit for last year. what they don't tell you is most of that extra profit came from refinery divisions. for a company size of exxon, refineries are a knat compare to rest of exxon. profits from refineries have to be massive to triple net for entire company.

currently there is further consolidation of petroleum industry going on by giants swollowing up more refineries. how would you like it if 2-3 major players owns 98%+ of all refinery capacity in US?

this is on top of all the huge mergers of Exxon/mobile, Texaco, Penzoil, Phillips etc that's been allow to merge.

say thanks to the Bush administration for allowing this to happen. the saying "you reap what you sow.." is coming home to roost.

It might benefit to limit political statements to the proper venue.

This is just my $.02 cy, this is not meant to be an attack on you, but I have heard these same sentiments spoken the last 4 days and I feel the urge to respond.

my neighbor is a petroleum engineer specializing in refineries. He specializes in going into a refinery in trouble and doing what ever it takes to get it back up. his opinion is damage is not that bad and it will take aprox. 3 weeks to get backup and running.

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Ok, so we were running all the refineries at 92% last week, we just lost 25% of them, looks like we are going to be 17% short on fuel before those three weeks are up and they are back on line. I see a problem here.

there is no shortage of oil! I cannot verify this but according to him, there is aprox. one year's supply of oil in storage in US.

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Excuse me??? Last I heard we had about 1 weeks worth of fuel stored. It is funny they talk about releasing the "reserve", sure that might help, but again we only stockpile about 1 weeks worth (at current consumption), we simply don't have the room to store more then that. Who would pay to house and hold all that fuel if we were to stockpile even more? It would just raise our costs more. The reserve was intended to be used for the military in the event of a war, not to keep the cost of fuel down for us. If I am wrong some one please set me straing with the facts to back it up.

you won't hear about this in the news, but profits at refineries have increase by at least a factor of 10X or more.

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Well they have gone up bay about 50% in the last year, they are public companies and it is public record, way more then they should and I do agree that there is gouging going on, but not at 1000%. Again the cost of 55 gallons of crude is $70, that's $1.27 per gallon to the oil companies, it cost about another $.75 to refine it and maybe another $.25 to get it to your local pump. That's already up to $2.27, so yes people are making a whooping 30% profit. Do you know the profit on a can of Pepsi? About 300%, not the small 30% like the oil companies make.

Please don't get me wrong, I do think they have a monopoly of sorts and I don't like it as much as the next guy, but it bothers me that people have a problem with companies making money. Again, why not complain about cable, soda, cell phones, electronics, real estate companies, I could go on and on.

And lastly I would rather have them raise the price of fuel $.75 to try to get people drive less and consume less so we literally don't run out before the refineries come back on line. That would really be bad. Think about it, would you rather have the option to buy at $5 a gallon, or have paid $3 last week but it is all gone now and no chance of getting any at any price? I have a brother in law that works for a fuel trucking company, he said they were not going to get any fuel for three days, and after that they have to truck it from either the East or West coast, instead of from a pipeline here in the Midwest. Again that costs a LOT more $.

Of course will we see prices come back down to what they were before this all happened, not likely, that to me is gouging and wrong and the part I really don't like.

Again I don't intend to offend anyone and I apologize ahead of time if I did, I am just speaking my mind.

Brock,

Think greed.. true the oil companies currently have the best excuse in the world right now to jack up prices further.

And yes in the short term there will be escalation due to capacity down for a few weeks.

but this gouging issue has been going on for over a year



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my neighbor said one year's worth of OIL not refined fuel storage in US. there are massive tank farms all over including storage facilities using massive underground caverans for storage.

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The 10X increase in net profits figures were related to me by my neighbor who is a refinery specialist. I have no reason to doublt valitity of his statements. I would more believe someone that does refineries for a living VS the news.

also your figures indicates gross profits. I'm referring to net profits.
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The oil campanies are posting record profits right now because they are not speding as much $ on looking for oil (it's not there to find) and their infrastructure is paid for.

Simple business.

in Okla and else where, wells are being uncapped from being sealed up with cost to remove from ground exceeds going price for crude.

huge difference when wells were capped at $12 barrel

Ok, its pathetic, I am fed up with it, but nothing I can do about it. I went to my dads tonight at 8:00PM. On my way out a Diamond Shamrock was at $2.79999999999($2.80). I stayed at my dads, watched the Astros game, then some Fox News. I left at 11:00pm, knowing I am going to gas up my car cause I know the prices are going to go up in the morning. I am going down the road, and passed the same Diamond Shamrock, and not but 3 hours later, the price has gone up to $2.8599999999999($2.86). The Shell right across the station jumped the same amount too. I can pretty much assure myself that both stations did not have a truck come in within the 3 hour alotted time, therefor they did not have to pay a dime to get more gas in their underground tanks. So, how come the prices went up!!??!! I cant stand it, and their is nothing I can do about it.

So, lets say that the hurricane did disrupt gas refining and their will be a shortage. Why should that cause the price hike?! Sure their wont be gas at stations, but they are not paying more for the gas they got! Oil has gone down in price the past day or two, therefor their is no reason for this other than greed(thats the obvious, I am aware of that). I just cant stand this. Its retarded.

Cameron

Welcome to capitalism. You don't like high prices? Try communism. Everyone gets some then...that is, if they're not already out by the time you get to the front of the several hour long line.

How about rising health care costs? Or rising college tuitions? We live in a world of ever rising costs. Whining to your congressman will do nothing...

If you're so convinced that the oil companies are raking in the bucks with their 'price gouging', buy some oil stocks. Put your money where your mouth is (pssst, don't even try the "I wouldn't want that dirty money" argument).

Mark

For those of you who are having difficulty grasping simple economics, here's a great explanation that I've pilfered from another forum I read:

"A common complaint, in the wake of Katrina, is why gas prices have been rising so sharply and quickly, when logically much of the gas being sold to us today was 'bought' at cheaper pre-Katrina rates.

This complaint is based on the idea that the fair price of something should be based entirely on the procurement cost. That is, people think it's fair if the refiner sells them cheap pre-Katrina gas until old stocks run out, then increase prices as more expensive stock comes in.

Unfortunately, this doesn't take into account the fact that the price of gasoline, and indeed the price of many commodities, cannot in a free market be set by procurement costs. Rather, the prices of many commodities react to sudden changes in supply by changing price instantly - both upwards and downwards. To see why, consider the following simple scenario.

Suppose you sell water in a desert town. Lots of other people sell water too. You all bought water very cheaply the last time the water wagon came through. Suddenly, you hear that the water wagon won't be coming for several weeks. What would happen to water prices? The price of water would immediately rise sharply to reflect the anticipated drop in supply. In fact, if you tried to be 'fair' and did not increase your prices, all that would happen is that people would buy all of your water and just resell it to your competitors or other people.

Suppose the opposite case exists. You and the other sellers of water bought water cheaply, but suddenly the government announces they are drilling a well for water. You can bet that the price of water would begin to drop sharply as the well comes on-line. In fact, once the well starts operations, you would be very lucky to convince anyone to pay a cent for your water (unless you bottle it and call it mineral water... but that's a story for another day).

Now, you can accept the truth of this and still argue that it's unfair that companies can profit just from being lucky enough to hold a lot of gas bought at the old prices. I agree that it seems unfair. However, if you tried to prevent the price of gas from rising to equate supply and demand, all you would be doing is introducing rationing. More than that, you would be preventing markets from reacting to expected developments in the future, reducing the ability of companies to put in place the changes necessary to efficiently meet them.

For example, laws that prevent 'profiteering' of this kind will likely only have the effect that they penalize companies from actually bothering to build up reserves of oil in case of emergencies. There is no incentive to build up a reserve if it is known that the government will simply appropriate the profits. And thus, instead of having a situation where in case of supply crunches, we can buy all the expensive gas we like, we will have a scenario where only a lucky few will be able to buy gas at cheap prices."

Thank you, RogueEconomist.

Mark

Minjin said:

If you're so convinced that the oil companies are raking in the bucks with their 'price gouging', buy some oil stocks. Put your money where your mouth is (pssst, don't even try the "I wouldn't want that dirty money" argument).

Mark

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get a grip on reality, if you don't think oil companies' net profits have not been going up in multiples.

and yes oil companies stock has been going up and up.

and yes like a lot of folks, wish I had a crystle ball to tell me which stock to purchase before all this happening.

cy said:

get a grip on reality, if you don't think oil companies' net profits have not been going up in multiples.

and yes oil companies stock has been going up and up.

and yes like a lot of folks, wish I had a crystle ball to tell me which stock to purchase before all this happening.

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When did I say they weren't making money? Of course their profits have increased. They're selling more oil every year. Consumers have driven the price higher with their demand. And the surplus on the supply side is razor thin. With profit margins a fairly fixed percentage, they're making more money. Where's my head scratching gremlin? The math looks pretty easy to me...

Mark

There is one thing we can all do. One thing that will help us AND help those in greater need. One thing.

It is going to be harder than calling on your representatives to "do something." It will require some sacrifice and introspection. It will require some personal responsibility. It may even require some loss of "freedom." Often the "right thing" and "effective thing" to do is not the easiest thing to do. But we can ALL do it. Suck it up and...


Use less fuel

Minjin said:

When did I say they weren't making money? Of course their profits have increased. They're selling more oil every year. Consumers have driven the price higher with their demand. And the surplus on the supply side is razor thin. With profit margins a fairly fixed percentage, they're making more money. Where's my head scratching gremlin? The math looks pretty easy to me...

Mark

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Minjin -

We don't see eye to eye on all subjects, yet I'm in agreement with you on this comment. We, the consumers, need to take a wee bit of responsibility here. WE are the demand. We pay whatever is asked because we have no viable alternatives. Neat? Not.

The gremlin you want is this one? :thinking: