High Petrol/Gas Prices Coming - Don't Blame Big Oil
Why Are Gas Prices so High in the Summer?
Summer is Coming and So Are High Gas Prices in the U.S. Every summer in the U.S. since 1990, U.S. consumers have seen substantial increases in the cost of gasoline (petrol in Eurospeak, benzine in Russia). Soon, those of you in the U.S. will be deluged with explanations for the high prices and most of them will be lies and bullshit that they have been telling us for close to 20 years.
You see we have been slowly reconditioned to believe that a bunch of fat, white guys smoking cigars in tall buildings hate us, hate the environment, hate clean water, and love dirty air. They have only one thing on their minds and that is to make money off of you poor working class serfs by selling Dirty, Dirty oil. Don't believe me, check out a Sonic the Hedgehog cartoon or better yet, Captain (full of shit) Planet.
It amazes me every year when I see people bitching at the lowly convenience store clerk about the price of gasoline as if that poor bastard is any better off than the rest of us. Newsflash! They don't give him free gasoline because he works there and he has to drive to work just like the rest of you. Leave the guy/gal alone.
The Real Deal
Of course, you know you can count on me to tell it like it is (or at least how I believe it to be).
Let's discuss why you are going to pay more at the pump this summer. It isn't a prediction, it is a fact and the reasons might surprise you.
Why is this important? It's wonderful info that you can amaze your friends and colleagues with, show them how smart you are, make you feel like those last 16 hours on Steemit was somehow a good use of your time, or maybe it will just save some hard-working clerk/manager at a gas station from hearing a bunch of idiots ranting about gas prices.
I don't know, you be the judge how you might use this. In fact, you can stop reading now and go straight to the "upvote" button and I won't mind at all. In fact, I won't really even know if you read this, but if you write a good enough comment, you get an upvote on it from me. Easy money on a comment post. Just saying...
Brass Tacks
"Brass Tacks is a colorful euphemism and I'm not positive where it comes from, but it basically means, "Shut up Jerry and get to the point."
The reason that your local television news channel talking head will tell you're paying more is going to sound like this: (in their best, "I'm an expert" voice) - "With the increase in summer travel and people enjoying their vacations, there will be a strain on supply, which drives the prices up due to increased demand and our reliance on imported energy."
Honestly, they say that every year and it is nearly complete bullshit. I think they even believe it because most of them just read a script. They don't know energy markets or economics. Talking heads...
The Real Top 5 Reasons Americans Will Pay More at the Pump in Summer
Drum Roll please.
The EPA thinks they are protecting you from SMOG. I say "thinks" because there is not a single ounce of evidence to support better air quality due to their "Summer Fuel" regulations. But Jerry, what is Summer Fuel? Good question. In their infinite wisdom, the EPA decided that during summer with "increased traffic" that we needed to change the fuel mixture for better air quality. So, you are actually using a different fuel than in the winter AND its more expensive to produce AND a bunch of other things I will get to soon. I promise.
Refinery shut downs immediately before Summer. Why on Earth would a refinery shut down just before Summer, Jerry? See number 1. Because nobody at the EPA understands manufacturing apparently, the refineries in the U.S. have to shut down to revamp for "Summer Fuel".
Designer Fuel Mixes. What is "designer" fuel? Nearly every metropolitan area in the U.S. has its very own customized gasoline mixture for the summer. It is made up "just right" to fit each city's needs. Think "the little bear's porridge" in Goldie Locks. For example, the cities of St. Louis, Missouri and Kansas City, Missouri which are only a few hours from each other, use completely different fuel. Those smart EPA guys, yep.
Worse Gas Mileage. What? How is it possible that my car is less efficient in the summer? Oh, one small detail about the summer mix that nobody told you about is that it is markedly less efficient than the normal/Winter mix. Therefore, you go to the gas station more often to buy more expensive fuel, which is what ACTUALLY increases the demand and not your vacation. Note to Americans: You don't go on vacation anymore and when you do, it is often in the winter. Yes, your kids are out of school, but you're still plugging away to pay off credit card debt from Christmas.
Supply Bottlenecks. This works in conjunction with #1 and #3. Since there are so many different fuel mixtures, any problems in the supply chain can have seriously adverse effects on prices. If one refinery has a problem, it isn't like another can pick up the slack or market share. Why? Because they aren't even making the same product. Apparently the EPA guys missed the class on economies of scale. Slackers.
Where Does the Money Go?
So Jerry, if I can't abuse the convenience store clerk, who should I abuse? I would say nobody, but this is too great an opportunity. Blame your elected officials namely your Federal and State elected officials and then blame yourself for putting the same assholes in office for a lifetime. The entities that make the most off EVERY single gallon of gasoline in the U.S. are our State and Federal Governments. They didn't explore, develop, harvest, transport, refine, transport again, market or sell any of it, but they are the big winners. But my taxes help me. Yeah right, your taxes paid for bombing a bunch of 3rd world nations to ensure that we have plenty of... Yep, Oil.
Here is the breakdown of who makes what off a single gallon of gasoline in the U.S.
Price Breakdown - Source
I love how they lump "OIL" into one big category. That's like lumping farmers, Monsanto, grain elevator workers, truck drivers, food processing plants, transport, more food producing plants, and more transport into one category before it gets to your local bakery which refines it, markets it and then sells it. This is another part of the preconditioning we get. There a literally hundreds of business and thousands of people that make up the "Crude Oil" segment of this chart.
No single piece of the supply chain makes as much revenue as taxes do. Now, if one company owns several pieces of the chain, then maybe on the whole they do make more. However, that is the exception and not the norm. But wait, it's BIG OIL. Newsflash! Big oil died a long time ago with the nationalization of oil by producing countries - See Saudi Arabia, Russia, Venezuela, Iran, etc. I know - Greenpeace didn't tell you. Imagine that. Either did the EPA or Captain Planet.
Taxes - A Closer Look
Price of 1 gallon of gasoline averaged by country - Source
Taxes by State in the U.S. - Source
As you can see from the two charts above, taxes vary slightly from state to state and by "slightly" I mean ridiculously. In fact, the California figure isn't currently accurate anymore because they added 12 more cents in October of 2017. Congratulations Golden Staters, you're number 1 now.
The average for all states, which the Energy Information Agency (EIA) loves to show all over their website is 18.4 cents and 24.4 cents per gallon for unleaded and diesel respectively for the federal government with a State government average of 28.31 and 29.33 cents per gallon. Now look at the chart and see the non-averaged numbers by state. Nothing deceptive there, right?
However, there is some good news for Americans. If you noticed the first chart, you will see that U.S. citizens still pay WAY less than Europeans for a gallon of gas. Any guesses as to why there is a big price difference especially since Norway is an oil and gas exporter (meaning they produce more than they can use)? If you guessed TAXES, then winner, winner, chicken dinner for you!
I won't give you all the figures for European taxes, but the "model of efficiency, engineering and all things that are great and golden", Germany, has a $6.14 per gallon tax for gasoline! Why would Germany do that to their own people? Where does that money go? Well, the short answer is because Germany, like most of the EU, hates the poor and doesn't want them to drive cars. They tell you its for the environment while they drive around in gas chugging SUV's full of who...Politicians.
Long story short. It's good to be in an oil producing country like the U.S. or Russia. They have cheap gasoline. I won't get into the Russian oil/gas tax system here either because it took me 60 pages of my Master's thesis to show how it wasn't efficient either (just in case you thought I was going to tell you Russia is the greatest).
Concluding Remarks for Those Who are Still Awake
- Most of you are getting screwed by your government's tax and environmental systems.
- They have convinced many of you that it is the fault of fat, homophobic, racist, cigar smoking, white MEN who hate clean air and water and want you to starve while living in pollution.
- Oil companies and every part of the oil/petrol/gasoline supply chain operate on small margins because of extreme levels of competition. The people in every facet of this business work very hard and most are incredibly smart, normal people like you and me. Ask a drill worker about "slinging chain" for 8 or 10 hours and their answer will change your perception about the people who make up this industry.
- The U.S. uses a bad system that creates Summer/Winter fuels that are different. The winter blend is more efficient and BETTER for your vehicle. It is also cheaper. Then they blame YOU for going on vacation when the average American takes less than a week vacation ALL year and usually around Christmas (Winter for you non-Christians).
- Despite its problems, the U.S. tax system is still superior to Europe's system for petrol and most things in general because Europe hates poor people and is pretty much screwed.
How Can You Help
You can send BTC, Ether, SBD or Steem to me. Haha. Just kidding.
Just be nice to those folks carving out a life at a gas station this summer. If you want to go above and beyond, then vote out the asshats in Washington (I don't care which party). Most of them have been there for more than 2 terms. We need new non-corrupted blood. Oh and by the way - that gas station is only making 5 to 15 cents of each gallon.
Other than that, you are now smarter than you were 15 minutes ago and GI Joe said, "Knowing is half the battle". Words to live by.
Sunset with an oil rig - I'm trying to change your perception
Want to know more? Good information -
U.S. Government Energy Information Agency - EIA
International Energy Agency - IEA
British Petroleum - BP
North Dakota State University
How Stuff Works - Cool site
Great Stats
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Images are mine or from Pixabay.com
Charts/Graphs are sourced.
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i wonder why the west have so much oil reserve but they still not contented so they want the oil from the middle east, to get it they have to create a chaos over there that way they can dig and suck out all of it now they getting more thirsty they want oil from Syria, if Russia and Iran failed to protect Syria they gonna be the next target from the west and we gonna see that oil sucking straw they use. But nowadays there's a lot of alternative energy rather than oil, we've seen China is diverting into electric transportation, we can see solar panel in the middle east, they all turn to green, because they were competing how to manufacture a solar panel and wind turbine in cheapest cost, nowadays it's a game changer and they need to keep up from the from technology explosion.
Thanks for commenting and providing such a detailed post. I agree that Russia and Iran need to help protect Syria and I totally disagree with Western intervention in other countries.
However, I think you are mistaken about some of your ideas on other issues.
First -
China uses coal fired plants for most of its energy needs. Renewable energy in China is a ridiculously low percentage of their total primary energy sources (TPES) and that even includes hydro. They import HUGE amounts of natural gas from Turkmenistan, Qatar, SE Asia and Russia.
2nd point -
Solar and Wind energy is not cheaper than coal, gas, nuclear for creating electricity. Yes, it is renewable, but it is not cheaper and in fact cost significantly more in most countries. Furthermore, it can't maintain what is called "baseload" capacity so other more reliable forms of generating electricity have to be maintained (usually coal, gas and nuclear).
The "technology explosion" that you describe isn't an explosion at all. We have had windmills since before electricity and we have had solar panels since the late 60's. The improvements have come in the ability to store and transport (over electric lines) electricity more efficiently than before. I love Renewables, but we are still 100 plus years away from abandoning fossil fuels despite what the Greenies like to tell us. See my post to learn a little more about it - Renewable Energy Myths
Thanks again for stopping by and commenting. It is great to meet you here and I hope to see you more often. You have a new follower in me. ;)
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Yes gas prices here in the U.S. will be up for summer.
It's time to put a fresh set of Urillium cells in the old hoverboard.
Best idea yet, McFly! ;)
Interesting — although not all that surprising — information! People who yell at store clerks over the price of ANYthing need to have their heads examined... even if they claim to be "just venting."
I kept waiting for one element to show up in your article (but maybe that's for another post altogether!), which is the reality that gas/petrol is not really a "product," it's a "commodity." As such, isn't the price somewhat subject to fluctuations that have little to do with market forces (supply, demand, cost to actually get the stuff out of the ground) and a lot to do with trading on Wall Street?
I'm trying to remember when it was, but there was a period (maybe 15? 20? years ago) where Southwest Airlines was kicking the collective airline industry's butt because they had a large stake invested in aviation fuel futures... and they were flying on $1.70/gal fuel when everyone else was paying $4.00 spot price.
Anyway, a great educational article!
=^..^=
You are correct about the commodity issue and futures trading really sets the price, but it can't manipulate demand globally. It is a whole other article with a bunch of complexities, but suffice it to say that more money is being made in the oil futures market than anywhere else. The difference is that there is always a loser too so theoretically it should balance out. The churn ratio (the amount of times a barrel of oil is sold before it gets to the actual purchaser ) for oil is over a thousand (maybe more). Natural gas has a churn ratio in the hundreds in the U.S., but in Europe it is only about 12 - 15. The real reason Europe hates the Russians. lol The bankers can't make money off of it.
Aha! So that’s where the fat old cigar smoking white men come in!
They are more like decrepit old men with that "old man stink" if you ask me. lol The financial markets like to be able to play with other people's commodities so they can make money for nothing (and get their chicks for free - old song line). Of course, this industry is even bigger with lots of working slobs just like me also, but I am afforded a few caricatures, right? ;)
When you get right down to it...aren’t we all caricatures to some extent? 😄
@energyaddict22 - A very detailed informative post, obviously you are on top of this subject in a big-picture way. I would like to give some brief comments from another related perspective.
I know the average consumer loves low oil and gas prices, and why not? However, I worked in the oil and gas industry for many years. Not as some cigar smoking executive in Houston, but as a technician / consultant in exploration. The guys that actually put their boots on, go into remote, nasty areas, do the hard work and find the oil and gas. Hands-on, blistering sun or freezing snow kind of thing.
In 2014 the price of oil started to collapse. It was devastating for the exploration industry. At the worst point, up to 90% of exploration projects were cancelled or put on hold. The subsequent knock-on affected millions of people around the world. Workers, suppliers, support staff etc. And their families. Unemployment, personal financial collapse and suicides followed.
Of course, to maintain their margins, the oil companies had to cut exploration of new reserves before production. But the government kept getting their free taxes, didn't they? So I agree with your post - don't put all the blame for any high prices on the oil company. Blame governments. Maybe if they had cut their tax and royalty rates, my side of the industry, exploration, could have been helped.
So before anyone complains about the prices going up again, think about the millions of people around the world who need a higher price in order to work and provide for their families. Well, that's my 2 cents, thank you!
You are spot on and I note that emphatically in my post that MOST people in the industry are REAL hard working folks with a ton of expertise. I work in the oil and gas sector in Russia as a consultant (economics and investor relations issues mostly) and the people I work with are everyday folks. When oil prices are higher, it benefits global GDP and the percentage increases to U.S. consumers a much smaller than the percentage increase in price per barrel. The U.S. tax system focuses on consumers instead of extraction, which I think is flawed. Most countries tax based on extraction (in Russia, it is called the Mineral Extraction Tax - MET). In this way, taxes are collected based on using national resources that belong to the people of that nation.
Side note, while exploration has slowed here and Russia, it is stilling growing. Plenty of opportunities in the sector here. ;)
Good reply, thank you. yes Russia has need to keep going, so important for their economy. I've worked all over, but never in Russia. Maybe I will have to try to search some Russian companies in my sector. Cheers!
I stopped reading when you wrote this.
Just kidding.
Now, don't you think that the international panorama will affect the price of gasoline in the United States? that is, the Venezuelan oil industry is collapsing and possible sanctions against Iran in the near future is in the air.
There is plenty of supply waiting to fill any gaps. OPEC has been trying to slow/cap production and the Russians have slowed some of their producers also in order to keep the price where it is. If there is an interruption, they will fill it to keep equilibrium. The goal for them is to keep the U.S. shale industry waiting for prices to hit $100 again. At that point the U.S. starts producing large amounts profitably and again we go back down to equilibrium. Iran has buyers that don't abide by sanctions anyways so they won't affect the market. Sorry. long answer. Thanks for a great question. I appreciate it.
I should be surprised more people don't know this, but am not. They have to do something with all that corn they are not refining into super sugar syrup to fatten up the citizens, so why not put it in the gas (I probably have the reasons backwards).
When I was a young man and gas stations actually had full service pumps and mechanic garages, I worked at several of them. Small mom and pop places that had bought into the franchises. Back then, the owners were lucky to make more than .01/.02 per gallon. They made most of their money on the extras like oil, candy, cigarettes etc, and the mechanical jobs.
The EPA is a weird animal. It is kind of a government agency, but not in the sense that they have oversight. Kind of like the Federal Reserve. The ties between many who have headed up the EPA and the lobby groups is about what you would expect.
For those who really want to go down this rabbit hole, study the economics of the U.S. during the 70's. Opec trying to get a fair shake on their oil, and the Federal Reserve combating this at the citizens expense by purposely creating double digit inflation so they got paid relatively the same or less for their oil. By the time Carter appointed Volcker so many people were in over their heads borrowing, which handed much of the farming industry to the likes of Monsanto once Volcker began destroying the money supply (deflation).
Yes, monetary policy is a huge rabbit hole. It is like trying to juggle jello - shit is falling all over the floor while the jugglers are telling you how smart and talented they are. The problem with ethanol is that it costs more to make it than gasoline and it doesn't burn as efficiently. Iowa and Federal government have been subsidizing it for years through various programs, but it isn't getting any more profitable. We keep hoping for some breakthrough in the concept, but it just hasn't happened and we've been trying for 1/2 a century. The EPA has too much power at the Federal level and state's have to meet the Federal minimums. Of course, then they can tack on more regulation if they choose. California does this and with the most commuters using vehicles per capita than anywhere else in the world, one would think they would be experts on the matter. Unfortunately, they are all about rainbows, unicorns, and keeping the Grand Ol' Party in power than they are about real solutions. Lastly, you bring up yet another reason that Carter was probably the worst President ever (if we blame him for all the bad shit in late 70's).
It’s never the little guys - like store clerks - who are cleaning up in any industry. This is a very informative article. But let’s face it: the fact still remains that a tiny percentage of the population holds most of the wealth. That’s true in the oil industry as well. But of course most of the folks involved in it are not the fat cats.
Getting down to brass tacks is an interesting phrase, the derivation of which is not truly known. However it appears to have come from Texas in the late 1800s. Also the first big source of American crude oil mining, where many a fortune was made. How cool is that? I love when tiny details weave together like this. Please tell me you did it on purpose!
Thanks for commenting. Going backward through your post. I certainly wish I did! However, couldn't puzzle it out and didn't want to take more time to look it up. I agree that too small a group holds too much wealth, but taxation and redistribution hasn't improved that situation and I would argue that it has actually contributed to the disparity. Great points by you as always.
It really is ridiculous. But instead of educating themselves and actually doing something about it, most people just want to bitch at the first person they can find to blame, which in this case, is the last person that has anything to do with the situation (i.e the lowly gas station clerk!).
The politics behind it all are so convoluted, too. I could go on a tirade but I'll just agree that yes, we need fresh blood in office. I'd say it'd be better to just get rid of politicians in general, but then we would have a ton of asshats causing anarchy... and that would just suck, too.
Great post though - I hope people actually read it and learn something. Or at the very least, redirect their bitching this summer.
Now, I am off to go look at properties in Venezuala. 😎
Thanks for stopping by and reading, then commenting. ;) While you're shopping for property in Venezuela, I will take a 3 bedroom with a deck near a lake. Must have wifi.
I'll keep an eye out lol
This post got me thinking about the Iraqi dinar a few years back. My sister-in-law held tens of millions, and she gave us some, acting like she had just given us a winning lottery ticket.
At the time, one of the biggest things about it was the oil industry. One of the arguments was they held oil, we'd run out, need it from them, and BOOM! Everybody holding IQD would be rich. I haven't looked into it in a while, but I'm sure the proponents are still singing this song.
Everytime the gas prices hiked, there was always buzz that this was it, here we go, the exchange rate is going to right itself. Not to mention, they expected this overnight. Sooooooo many people believed it, and it was scary to see how many people put everything they had into accumulating it then getting so excited when gas prices would shoot up.
This has been going on for YEARS. I wouldn't be surprised in the least if it happens again this time. If I were still following it, I'd just direct them to this post so they could learn for themselves. 😉
this is one great post!! thanks..
Just for you since we were discussing markets the other day. ;)
much appreciated and good work!!