Monday, May 12, 2008

Getting Greased

Well, here in Northern Virginia we're nearly at the dreaded $4.00/gallon benchmark for gasoline: yesterday a station near Manassas was posting unleaded super for $3.99.9/gallon. I know that my readers in Europe, who have been paying well more than $4.00/gallon for years, aren't impressed...but for those of us who can still remember filling up the tank for $5.00...and getting all the fluids checked, the tires inflated, and the windshield washed...and getting change...it's a bit of a kick to the psychological groin.

The "best" part of the whole oil price mess is that no one really knows why gasoline prices are so high. I listened to an NPR report about two weeks ago in which a sober-sounding talking head windily explained that there really wasn't a good reason. His bottom line: it was all psychology.

Heck, I've been saying that for years about economics in general.

But it isn't really all psychology. The oil companies will tell you that it's not their fault, because most of the cost of a gallon of gas is the cost of the crude oil from which it's refined (i.e., blame the greedy Arabs and Venezuelans, not us, even though our profits are at absolute historic highs). The gas station operators will tell you it's not their fault, because their profit on a gallon of gas is mere pennies, and they make their money from high-priced repairs and the snacks sold at the station checkout. So who is responsible, anyhow?

Last Friday I read another article in the Washington Post that really ground my gears: "Oil Lobby Reaches Out to Citizens Peeved at the Pump." Yes, rather than doing something to lower the price of gas, the oil lobby is spending - sit down, now - "less than $100 million per year" to convince you and I that we're not being screwed at the pump. Bill Replogle, an advertising executive, was quoted in the article as saying that, "A typical issues ad-spend in D.C. might be $2 million to $3 million for a significant campaign...This dwarfs that, and many national ad buys."

So the next time you spend $4.00 per gallon to fill the tank of your family car, you can take solace from the expensive, full-page newspaper ads that explain why the oil industry is innocent.

Maybe you can believe it. I don't.

I'll be doing some heavy research over the next few weeks to try and figure this mess out. If I can make any sense of it, I'll let you know. But I'm not holding my breath, and you probably shouldn't hold yours.

Just rely on those full-page oil lobby ads, as you rely on your faith in the tooth fairy, Santa Claus, and the Easter Bunny.

And imagine what you could do with "less than $100 million."

Have a good day. More thoughts tomorrow.

Bilbo

4 comments:

The Mistress of the Dark said...

Having worked for a small local oil company I can tell you, it's not the stations fault. The gas companies sell to their branded dealers with a nifty profit margin per gallon and I'm sure its the same way everywhere. The station owners make squat. Sheetz makes nothing on gas that's why they really push toward food etc.

Remember a mere 10 years ago when gas was a mere 89cents per gallon. Why don't we thank the current admin, whose mama has a lot of shares in Exxon Mobil for this.

John A Hill said...

While I certainly agree that the price of gas is outrageous, I laugh at the people that complain about it at the counter while adding their $.99 16 oz. (about .5 liters) bottle of water to their purchase. They never stop to think that they are paying nearly $8/per gallon for the water they are about to drink.

Mike said...

Al lot of the high cost of gas in Europe is taxes. They have always been higher than the US but that's also why there are some better roads over there. (in some places)

Serena said...

I'll be interested in hearing your conclusions once you've mulled it all over. I'd like to know why the price is so high. All I know is that I paid $3.89 per gallon last week. And I imagine I'll pay more next week. I won't hold my breath, though; I don't look good blue.:)