Price Gouging? You be the judge..

This is my first attempt at "crunching the numbers" so im sure i messed up somewhere. Please let me know what you think

For me, the question lies in the numbers. ill do my best to be thorough, so let me know if i missed anything

Big Oil

May of 2008 - average barrel of oil: $117.40
( Source )


Lets break each barrel down

A barrel of oil yields these refined products (percent of barrel):

47% gasoline for use in automobiles
23% heating oil and diesel fuel

18% other products, which includes petrochemical feedstock—products derived from petroleum principally for the manufacturing of chemicals, synthetic rubber and plastics

10% jet fuel
4% propane
3% asphalt

(Percentages equal more than 100 because of an approximately 5% processing gain from refining.)

Source



Which is better represented by:

We can see how many gallons of each "fuel" is contained within each barrel (rough estimates, again, vary by refining gains/losses)



Since "other" encompasses a wide variety of things (crayons, wax, plastic bags, etc)
We'll concentrate only on fuel


Lets use some recent data and a picture or two:


Source




gasoline and diesel - the two heavy hitters per each barrel of crude oil



GASOLINE

taxes = 37 cents per gallon
Distribution = 19 cents per gallon
Refining = 37 cents per gallon
Crude = $2.83 per gallon
__________________________
$3.76 cost (usually lose 1c per gallon in each major oil company)




DIESEL

taxes= 43 cents a gallon
distribution = 22 cents per gallon
refining = 93 cents per gallon
crude = 2.84 per gallon
____________________________
$4.42 per gallon


So - lets recap so far.

Already - we are up to

4.42 per gallon of diesel - and you can get 9.21 gallons per barrel. So $40.71 per barrel for diesel




+ 3.76 per gallon of gasoline - and you can get 19.15 gallons of gasoline per barrel - So $72.00 for gasoline per barrel

72+40.71 = $112.71 (getting very close to that cost of a barrel)
and we have expended roughly 70% of the barrel on diesel and gasoline.

30 % to go for each barrel, and we are 96% of the way there for the cost of the barrel

JET FUEL

Average = $4.09 per gallon ( Source )

3.82 gallons of jet fuel per barrel = $15.62 per barrel


LPG fuels cost (roughly) half that of gasoline. ( Source )

So if gasoline is 3.76 a gallon, we'll call LPG fuels 1.88 per gallon
for a total of

1.72 x 1.88 = $3.23 per barrel of oil


HEATING OIL

even at a "low cost" for heating homes, as most oil companies put it, it still costs ~ $3.00 a gallon for heating oil ( Source )


so 1.75 x 3.00 = $5.25 per barrel of oil from heating oil



Heavy fuel oil
A little trickier to figure, but there is actually a scary technique involved (you divide the USD per metric ton of the fuel oil, by 6.66 , and you get price per barrel for Heavy fuel oil)

which in this case is rounded off to $50 for arguments sake

(its actually higher, but these figures only go as far as 2006)

Source




So - a final recap:

Gasonline - $72 per barrel
Diesel - $40.71 per barrel
Jet Fuel - $15.62 per barrel
LPG - $3.23 per barrel
Heating Oil - $5.25 per barrel
Heavy Fuel Oil - $60 per barrel


So - if i am doing this right ( ) that comes to $196.81 per barrel, and we still have 7.27 gallons of "other product" (or roughly 10% of the barrel of crude oil) to go.

Other product encompasses many things (like garbage bags, wax, crayons, etc) so ill do the oil companies a favor and just exclude this all together, cause i dont feel like finding out what "other" encompasses entirely.

196.81 dollars per barrel is a 67.7% markup of 117.40

and we havent even used the entire barrel yet.

So - after we expend the cost of each product from every barrel, we are left with $79.41 per barrel.

The united states (in 2007) consumed 7.5 billion barrels of oil.

$595,575,000,000 (billions....with a B) is what you get when you take the "overage" (79.41) times 7.5 billion barrels.

Now, of course, not all of that is profit. You have to pay your employees' hourly wages, the salaries, donations, investments, etc etc etc

and some estimated figures still put the profits for 2007 in the billions of dollars

Chevon 18.7 billion (profit)

Exxon Mobil surpasses 40 billion (profit)

Those are just the two biggest, there are more (my eyes hurt...)

Thats two companies, profiting 58.7 billion dollars, on one year, beacuse we're paying record prices at the pump.



What is their excuse for this?
They claim that thier % profit is "in line" with other businesses.
Story here


lets not forget that oil companies get tax subsidies, as well.
interesting article snippet

lawmakers were far less sympathetic to the executives.

Markey hammered Exxon's Simon over the company's investment in renewable energy. "Why is Exxon Mobil resisting the renewable energy revolution?" asked Markey.

Simon said Exxon has given $100 million to Stanford to study renewables. "$100 million?" said Markey. "But you made $40 billion last year."

Full Story


So are their "profits" in line with other companies?

Sure.

Until you consider their tax incentives, breaks, and write-offs.

And what about all this money that they're supposedly investing in new technologies since God knows when? (or atleast so they claim)

Well, two comments on that.

1.) - read the snippet above. They invest 100 million, but still profit 40 billion. By the way - a lot of tier investments are tax write offs under the 'renewable energies' tax code.

2.) - Why hasnt gas changed - at all - in the last 10-30 years? The same gas i pump in my car today - is the same gas i pumped 10 years ago. If billions gets invested, where's the results?

if you took the amount of money that big oil 'claims' to invest in new technology for better energies, and invested it into Cancer, or AIDS research, im sure we'd have a cure by now.




My overall opinion.

They will not lower prices by drilling domestically. They already have a surplus as it is, read the other articles here, and it'll show you that they are at 100% capacity in all refineries, and set on the rest of it.

Absolutely appauling.

They make 40 billion in one year, and im paying 4.00 a gallon, which they blame on saudi arabia

usually - in business, when "cost goes up" and "price goes up" then you still have "the same exact profits"


not in this case.
40 billion profit is a record for any company.
and 4 dollar a gallon is a record for this nation.

But what can i do about it besides post this column?

I'd write my congressman, though he'd probably laugh at me while he's opening his 'incentive check' for exxon mobil.

I hope you find these facts interesting. I put a lot of work into it - and had to re-do it after the 'draft' option failed me again.

I eagerly await your comments

What I understand about Oil is that currently to produce a barrel of oil in locations that are easy to access e.g. OPEC nations it about $10.00, while even for the more difficult areas you are looking at $40.00 - 50.00 per barrel

So yes I would say there is price gouging???

i wonder who's actually getting the money - wouldn't be surprised if this was a hidden 'war tax', considering the timing of the price hike.

so, other than bringing on the hydrogen economy, no matter how wasteful, what can be done?

Here is another great reference website to see how you're getting screwed from big government and big oil on gas prices. Prepare to be bent over the trunk of your car - yet again.



Here's a few more "non-gasoline" examples. Everything im about to list is made from the SAME barrel of oil. Oil has seen now a 245% increase in price since 2001. *(disclaimer: my apologies if my calculations are slightly off)*


Crayola Crayons 64 color box set apply the same "% increase" from gasoline and these babies would be going for $15.00 instead of $4.39


Trash bags $19.00 for 100 count box of bags. Seems very close to their price in 2001 (just going off of a mental note here) im sure they've gone up slightly, as everything in existance does, but 245% ? Cmon now.



Ice Cube Trays 2 pack for $1.24. Once again - no sharp spike. If 1.24 is the 245% increase over the original price in 2001, then that means the original price was somewhere around 17 cents each.


Its probably beneficial to just visit the link at the very top of this post for further examples.

I could be wrong - but it would seem to me if the cost of your raw materials goes up, then so would the cost of everything you use the raw materials to make. If you choose to increase the cost of your most popular product (gasoline) simply because you know people will still pay for it, and you choose to leave alone evertyhing else you make (in terms of price) that falls right into the category of price gouging.

[edit on 7/17/2008 by Andrew E. Wiggin]