Gouging by gas refineries costs consumers an extra 50¢ a gallon
UCAN News
Gouging by gas refineries costs consumers an extra 50¢ a gallon
(click here to find Cheap Gas)
Editor's Note: This article was posted Friday, March 9, 2006.
For up-to-the-minute San Diego averages see www.fueltracker.com
Gouging is at the refinery level ...
Recent events show that the price refineries are charging for gasoline has little to to do with the price of oil.
Last year on this day, San Diego gasoline cost $2.58 a gallon. The price of oil on the NYMEX was $60.15 per barrel (source). Today the average price of gasoline is $3.066, and the price of NYMEX oil is $60.05
Today's average price of $3.066 represents a 20¢ jump in 7 days. The new price sets an all time-record high for the month of March in San Diego County.
What these numbers mean is that while the price of oil is the same as last year, we are paying about 50¢ more per gallon for gasoline. Someone is making a lot of money.
Don't blame the dealers - they're getting gouged, too.
The morning of Friday, March 9, started with dreadful news to many independent station owners who were forced to charge a price of $3.13 a gallon retail just to break even. Many stations in UCAN's authoritative gas survey raised prices by as much as 15¢ in the last 24 hours. In fact, many local dealers are losing money on every gallon of gas they sell. (source)
As the spot market closed for the weekend, UCAN's estimated dealer break-even dropped to $3.09 a gallon - three cents higher than the average retail price in San Diego, which suggests that gas prices will continue to climb throughout the weekend. Most gas station dealers are lucky to make 5¢ per gallon profit on the gasoline they sell, so consumers who are able to find stations that are still selling gasoline for less than $3 a gallon are actually buying their gas at below wholesale cost.
Big Oil's Big Lie.
Today, the North County Times quoted an oil industry lobbyists as saying:
"California's gasoline demand has gone up "50 percent in the last 20 years," while the number of refineries in the state dropped from 32 to 14. "With our supply and demand so finely balanced, it doesn't take very much to see pretty dramatic changes in pricing,"
This statement, by Mr. Tupper Hull of of the powerful oil lobbying group, WiSPA, the Western States Petroleum Association, is extremely deceptive. Yes, California has fewer refineries, but it is because the oil industry has aggressively shut them down and consolidated its operations. Fewer refineries mean less competition. The result is a dysfunctional market where seven refining operations control 91.5% of the gasoline sold in the state. This is too much gasoline in the hands of too few companies.
According to UCAN's gasoline analyst Charles Langley, "Refineries have a year to prepare for the inevitable spring shortages. If they were aggressively trying to compete and get new customers, they would make certain that they would have enough inventory at this time of year to undercut the competition. Unfortunately they've learned that it is more profitable to keep supplies tight than to compete. " Today's high prices are another example of how dysfunctional California's gasoline markets have become.
How profitable are higher gas prices for Big Oil?
As we observed at the beginning of this post, the cost of oil right now is almost identical to the cost of oil last year, yet motorists are being charged an extra 48¢ a gallon for their gasoline. As we also observed, the retailer is making almost zero profit on gasoline right now.
What that means is that as of today, California refineries may well be making an extra 50¢ more per gallon of pure profit on their gasoline today than they were on this day last year (see California Energy Commission Tables of refinery Margins).
Let's break down the costs in a gallon of gasoline:
Cost of oil, per gallon = $1.43
Taxes & fees = 58¢
Dealer markup = 5¢
Refining & distribution = $1.00
Today's retail price = $3.06
What is Big Oil costing you ?
If you buy 20 gallons of gasoline at today's price, you will pay $20 more than you did last year even though the price of oil is the same as it was last year. All of that $20 is going straight into the refineries' pockets. If you buy a tank a week at these prices, the refinery's cut of your purchase is nearly $1,000 extra a year compared to last year.
What can consumers do?
1) Sign up for a free copy of UCAN's gasoline-saving guide (available to members and San Diego residents only)
2) Write your elected officials in the California Assembly and Senate. Let them know that this isn't a problem about a lack of refining capacity, rather, it is a lack of competition that is pushing prices higher.
3) Use our Cheap Gas Locator at www.fueltracker.com
4) Consider joining UCAN. We are the only consumer group in San Diego that is passionately engaged in local energy issues.
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gas prices
Let's doit.
let the british show you how
http://news.bbc.co.uk/2/hi/uk_news/920679.stm
this new story is a reminder of the british method of 'protesting' to obscene prices, and in uk, they are paying $8 + a gallon..
yes its drastic, but man people felt this... real fast.. friends of mine living there ( i left years ago ). It took less than a week for the country to realise how knife edge modern societies are..
anyway, I dont advocate chaos, but an interesting approach from one of the pillars of modern economics and democracy.
Boycot?
I hear that all gasoline comes from a central source and that a boycot of major oil companies just hurts the retailer who is suffereing enough as you state higher up on this page. I believe in doing things that are effective. Is a boycot truly effective when most gas comes from the few refineries we have? I would appreciate any comments folks have on the real impact of and effectiveness of a boycot.
Boycotting the "Oilygarchy."
The most effective thing consumers can due is to protect themselves by buying less gas, and by complaining to their elected officials by telephone or with hand-written letters that are not computer generated.
UCAN conducted an intensive study of boycott possibilities in 1999. The problem with gasoline is that we can't do without it. We can live without grapes, so a grape boycot is easy, but for many of us, not using gasoline is not an option. To compound the problem, even though Californians rank among the top ten states in fuel efficiency for vehicles, the state as a whole is using more gasoline due to population growth.
One rather silly idea was for a national "Gas-Out" where consumers would stop buying gasoline for one day. (see Snopes at http://www.snopes.com/politics/gasoline/gasout.asp ).
Probably the most effective boycott idea is a so-called "rolling boycott" (suggested below) that would target a specific brand of gasoline until that brand lowers the price, then target another brand. The problem with such a boycott is that it would require at least five years of trench warfare style organizing in 20 California cities with millions of dollars in funding for media relations.
What's more, the most obvious target, Exxon, is, in the state of California, a separate company from Exxon/Mobil. "Exxon," without the "Mobil" actually competes with Mobil dealers. Exxon without the Mobil is one of the more effective price-cutters in the market and it existed in California before the merger of Exxon and Mobil, but due to anti-trust issues involving the Shell/Texaco merger, is a separtae company in California.
In addition, of all oil companies, Exxon/Mobil has the smallest market share in California. This means that an Exxon/Mobil boycott will A) Target the wrong company about half the time, and B) Target the brand of gasoline that the fewest people in California use.
The second problem with a rolling boycott is that inevitably, as soon as the boycott gets traction on the Internet, mischief makers begin announcing different plans with different schedules for the boycott.
A third problem is that one of the most effective targets for a boycott would be Arco. Arco has the market power to move prices up or down, and when Arco moves, the rest of the indusrty has to follow. Of course Arco almost always offeres the cheapest brand-name gasoline available, which means that for a boycott to be truly effective, it would require asking consumers to buy more expensive gasoline.
The ugly truth is that until our political leaders force the Big Oil companies to compete with each other, and take measures to ensure that the market can't be gamed, we will continue to pay the highest gas prices in the nation. Right now the best way to spur change is to fax, call or write our elected officials, and to protect ourselves by using less fuel.
Charles Langley
Gasoline Analyst & Publisher, UCAN Watchdog
gas prices
It is time to let the government and big oil know that consumers have had enough of market manipulation and gouging. Since the govt will not step in to control the oil companies and regulate their disgusting practices, we need to act. A regional or nationwide boycott of the largest oil companies might make them stand up and take notice. The proposal is simple. Start by boycotting the largest gas company (Exxon-Mobil) for 4 weeks. If prices have not come down, continue to boycott them and then add another to the list, Shell Oil would be a good second candidte. You can bet the government will get involved then. If not, continue, company by company, til someone gets the message. I suggest the boycott start on a specific date, such as March 20-
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