I vainly attempted to relay the economics of the gas/oil industry, with failing results. After all my wasted time, the "price fixing", "we need price controls" posts continued to show up, much to my frustration.
I was so glad to find this article today.....please read it, and for those of you "conspiracy" believers, ADMIT DEFEAT...
BLACK-GOLD BLUES
More to gas prices
than cost of oil
Industry analysts list factors fueling increases at the pump
--------------------------------------------------------------------------------
By Jon Dougherty
As Americans face the prospect of paying more per gallon of gas this summer than at any other time in U.S. history, oil and gas companies and industry analysts are scrambling to explain why the prices are rising, why they are rising so quickly and what factors have led to the current price increases.
In the past, analysts say, the price consumers pay at the pumps has largely been tied to the availability of foreign oil supplies, especially as the United States, over the past decade, has become increasingly reliant on the Organization of Petroleum Exporting Countries cartel and other suppliers for the majority of its oil.
As recently as last year, OPEC -- after enduring years of lower oil prices due to a worldwide glut -- began cutting production, which led to tighter supplies and higher prices. Though the cartel had agreed to boost production by last fall, OPEC ministers announced earlier this year that they would again cut production to boost prices.
Analysts say the cost of crude oil represents the single largest price-controlling factor in a gallon of gasoline. Oil companies and government analysts say taxes amount to about 29 percent of a price of a gallon of gas -- including federal, state and local levies.
And even though prices are on the rise now, the profit oil companies are making per gallon of gas has not risen as dramatically as some would think. Before the current price increases, the average profit per gallon made by oil companies was 7.5 cents -- a figure that has not risen much in the past several weeks, despite the spike in prices to over two dollars a gallon in parts of the country, including California and Illinois.
Another factor affecting prices is supply and demand. Traditionally, demand for gasoline falls during the winter months but rises in the summer, as more Americans take to the roads for vacations.
Oil companies have said that because of tight supplies through the winter and because many refineries did not produce gasoline but instead produced heating oil, gasoline reserves were allowed to plummet to all-time lows, thus boosting the price for the available fuel at precisely the time the demand begins to rise.
Who holds the cards?
At the current time, the OPEC nations -- Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela -- produce about 40 percent of the world's oil. In total, the cartel countries hold about 70 percent of the world's known reserves.
While the Bush administration has pledged to decrease U.S. reliance on foreign suppliers, the task cannot be accomplished overnight. Besides political considerations, oil reserves must be found and then the infrastructure to pump it and distribute it must be built. Also, U.S. refineries -- most of which are currently running at capacity -- must either expand to handle the new load, or companies must build new refineries, which takes years.
With U.S. domestic production capacity reduced, no major new oil finds to exploit and an almost non-existent oil-exploration industry, there is no reason to believe, analysts have said, that the United States will be able to ease its reliance on foreign suppliers anytime soon.
However, some analysts have said that rather than rely on OPEC's "charity," the U.S. may do well to begin securing its oil supplies from non-OPEC members who may be charging lower per-barrel prices, such as Mexico and Nigeria.
Even so, if the U.S. manages to find cheaper oil prices on the world market, the average price per barrel is expected to rise over the next six months.
Average prices in April hovered around $26.50 per barrel; by September, analysts are predicting oil prices will rise to over $30 a barrel. The Department of Energy, however, predicts that prices per barrel of oil will only average about $24 by the end of 2001 (in 1999 dollars).
The breakdown of costs
The cost to produce and deliver gasoline to consumers includes the cost of crude oil to refiners, refinery processing costs, marketing and distribution costs and, finally, the retail station costs and taxes, said a primer published by DOE.
The prices paid by consumers at the pump reflect these costs, as well as the profits (and sometimes losses) of refiners, marketers, distributors and retail station owners.
In 2000, when the price of crude oil averaged $28.36 per barrel, crude oil accounted for about 46 percent of the cost of a gallon of regular-grade gasoline. In comparison, the average price for crude oil in 1999 was $17.46 per barrel, and it composed 37 percent of the cost of a gallon of regular gasoline. The share of the retail price of regular-grade gasoline that crude oil costs represent varies somewhat over time and among regions, DOE said.
Federal excise taxes are 18.4 cents per gallon, and state excise taxes average 19.96 cents per gallon.
Refining costs and profits comprise about 14 percent of the retail price of gasoline. This component varies from region to region due to the different formulations required in different parts of the country.
Distribution, marketing and retail station costs and profits combined make up 12 percent of the cost of a gallon of gasoline. Approximately one-third of service station outlets today are company-owned stations, meaning they are owned or leased by a major oil company and operated by its employees, DOE said.
According to the Energy Information Agency, the reason why prices at the pumps are higher in some regions has to do with their distance from Gulf of Mexico ports along the U.S. coast. Nearly half of the gasoline produced in the U.S. is produced in the Gulf coast region, the area where prices are historically the lowest. That explains why prices are often higher in the upper Midwest, West and Northeast.
In response to the spiraling prices, some consumers and advocacy groups have suggested boycotting the major oil companies in lieu of purchasing gas from more competitive, often locally owned stations that tend to charge lower prices in order to compete
[This message has been edited by ironlock (edited 05-08-2001).]
I was so glad to find this article today.....please read it, and for those of you "conspiracy" believers, ADMIT DEFEAT...
BLACK-GOLD BLUES
More to gas prices
than cost of oil
Industry analysts list factors fueling increases at the pump
--------------------------------------------------------------------------------
By Jon Dougherty
As Americans face the prospect of paying more per gallon of gas this summer than at any other time in U.S. history, oil and gas companies and industry analysts are scrambling to explain why the prices are rising, why they are rising so quickly and what factors have led to the current price increases.
In the past, analysts say, the price consumers pay at the pumps has largely been tied to the availability of foreign oil supplies, especially as the United States, over the past decade, has become increasingly reliant on the Organization of Petroleum Exporting Countries cartel and other suppliers for the majority of its oil.
As recently as last year, OPEC -- after enduring years of lower oil prices due to a worldwide glut -- began cutting production, which led to tighter supplies and higher prices. Though the cartel had agreed to boost production by last fall, OPEC ministers announced earlier this year that they would again cut production to boost prices.
Analysts say the cost of crude oil represents the single largest price-controlling factor in a gallon of gasoline. Oil companies and government analysts say taxes amount to about 29 percent of a price of a gallon of gas -- including federal, state and local levies.
And even though prices are on the rise now, the profit oil companies are making per gallon of gas has not risen as dramatically as some would think. Before the current price increases, the average profit per gallon made by oil companies was 7.5 cents -- a figure that has not risen much in the past several weeks, despite the spike in prices to over two dollars a gallon in parts of the country, including California and Illinois.
Another factor affecting prices is supply and demand. Traditionally, demand for gasoline falls during the winter months but rises in the summer, as more Americans take to the roads for vacations.
Oil companies have said that because of tight supplies through the winter and because many refineries did not produce gasoline but instead produced heating oil, gasoline reserves were allowed to plummet to all-time lows, thus boosting the price for the available fuel at precisely the time the demand begins to rise.
Who holds the cards?
At the current time, the OPEC nations -- Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela -- produce about 40 percent of the world's oil. In total, the cartel countries hold about 70 percent of the world's known reserves.
While the Bush administration has pledged to decrease U.S. reliance on foreign suppliers, the task cannot be accomplished overnight. Besides political considerations, oil reserves must be found and then the infrastructure to pump it and distribute it must be built. Also, U.S. refineries -- most of which are currently running at capacity -- must either expand to handle the new load, or companies must build new refineries, which takes years.
With U.S. domestic production capacity reduced, no major new oil finds to exploit and an almost non-existent oil-exploration industry, there is no reason to believe, analysts have said, that the United States will be able to ease its reliance on foreign suppliers anytime soon.
However, some analysts have said that rather than rely on OPEC's "charity," the U.S. may do well to begin securing its oil supplies from non-OPEC members who may be charging lower per-barrel prices, such as Mexico and Nigeria.
Even so, if the U.S. manages to find cheaper oil prices on the world market, the average price per barrel is expected to rise over the next six months.
Average prices in April hovered around $26.50 per barrel; by September, analysts are predicting oil prices will rise to over $30 a barrel. The Department of Energy, however, predicts that prices per barrel of oil will only average about $24 by the end of 2001 (in 1999 dollars).
The breakdown of costs
The cost to produce and deliver gasoline to consumers includes the cost of crude oil to refiners, refinery processing costs, marketing and distribution costs and, finally, the retail station costs and taxes, said a primer published by DOE.
The prices paid by consumers at the pump reflect these costs, as well as the profits (and sometimes losses) of refiners, marketers, distributors and retail station owners.
In 2000, when the price of crude oil averaged $28.36 per barrel, crude oil accounted for about 46 percent of the cost of a gallon of regular-grade gasoline. In comparison, the average price for crude oil in 1999 was $17.46 per barrel, and it composed 37 percent of the cost of a gallon of regular gasoline. The share of the retail price of regular-grade gasoline that crude oil costs represent varies somewhat over time and among regions, DOE said.
Federal excise taxes are 18.4 cents per gallon, and state excise taxes average 19.96 cents per gallon.
Refining costs and profits comprise about 14 percent of the retail price of gasoline. This component varies from region to region due to the different formulations required in different parts of the country.
Distribution, marketing and retail station costs and profits combined make up 12 percent of the cost of a gallon of gasoline. Approximately one-third of service station outlets today are company-owned stations, meaning they are owned or leased by a major oil company and operated by its employees, DOE said.
According to the Energy Information Agency, the reason why prices at the pumps are higher in some regions has to do with their distance from Gulf of Mexico ports along the U.S. coast. Nearly half of the gasoline produced in the U.S. is produced in the Gulf coast region, the area where prices are historically the lowest. That explains why prices are often higher in the upper Midwest, West and Northeast.
In response to the spiraling prices, some consumers and advocacy groups have suggested boycotting the major oil companies in lieu of purchasing gas from more competitive, often locally owned stations that tend to charge lower prices in order to compete
[This message has been edited by ironlock (edited 05-08-2001).]
