Friday, March 21, 2008

Dr. Strangecrude or How I Learned to Stop Worrying and Love the Barrel

I find myself here often. I almost promised myself that I'd stop, but I feel it's necessary. Every time I see gas prices rising, I cringe. I cringe because I know in my heart of hearts that, in short order, I will soon start receiving forwarded e-mails and MySpace bulletins promising to put my father's company out of business and to, once again, make the world safe for SUVs. [Look at me and my split infinitives!]

I just had a customer pick up some tune-up parts for an older Ford escort. I was in the back of the store pulling his parts, when I overheard him making an aside to my worthy constituent in regards to the fuel efficiency of his car and how it saves him from giving, and I quote, 'another gah'damn dime to those bastard oil companies.' Yes it is true that ExxonMobil increased their profits by about 8% last year. Sure, you're right in thinking that that's about $40.6 billion dollars. Sounds like the Devil to dare they make money in a capitalist society. How dare they provide secure jobs for hundreds of thousands of people, domestically. How dare they turn a profit that is securely in the middle of the national corporate average! How dare they make drastically lower profits, percentage-wise, than banks, insurance companies, and pharmaceutical operations, who turn an average 22% profit...wait, what? So can we suffice to say that companies who have the most revenue deserve to make the most profit? The way I feel, and this is just rational-old-me talking, is that as long as the profit margins stay the same, it seems to me that, it just means they are doing more business than most companies. [src]

So let's now take a look at why the price of gas at the pump is what it is. When I was a kid, way before I was driving, but after I was old enough to care, I remember seeing signs that read $0.99/gal. Now according to actual data that I can get my hands on, gas, when I was about 10 years old, was going for $1.337/gal. [How leet is that?] Then, closer to my 20th birthday it was about $2.080/gal. So when you look at that, you can see that the price of gas increased about $0.75 cents in 10 years. Then, between 2004 and today, average price $3.272 as of February 15th, it's increased about $1.20. That looks like damning evidence of price gouging. If I were ignorant to the economy, I'd tend to agree, but, unfortunately for my reader(s), I am not. Using the Bureau of Labor Statistics own Inflation Calculator, one can easily see that something that cost $1.337 in 1994; say, one gallon of gasoline, would cost, adjusted for inflation, $1.70 in 2004. So the price, in unchanging cents went up about $0.38/gal.

At this point, you're probably asking, 'Well who gives a flying Dutchman about the price of gas in 2004? This is 2008! What does 2004 have to do with the price of tea in China?!' If I had to respond to a question like that, I'd probably start by commenting on your over use of idiomatic expressions, and then I'd say, 'I'm gonna get to it, keep your panties on. Yeesh, I was just trying to give a frame of reference.' Now that you know my techniques, I'll just say that, adjusted for inflation, the price of gas increased about $0.94/gal in those four years. So what does that mean? That means that if our currency stopped inflating domestically in 2004, gas would cost about $2.33/gal today, but that doesn't really explain why ExxonMobil has maintained a consistent ~8% profit throughout the 90's up to the current day. Are you wondering, then, why the price has increased so abruptly? I will do my best to explain.

If you take into consideration, what happened to gasoline and our country in those fourteen years; the vogue of Global Warming culture, the international political climate, and the concept of supply and demand as it applies to finite resources, not to mention new refining processes that are more expensive, but yield higher amounts of the petroleum distillates that we use the most, i.e. gasoline, kerosene, lubricant base stock, diesel, you'd be saying that we were lucky that the price of gas hasn't hit $9.999/gal.

Now if all of this wasn't enough to justify a measly $0.94 increase, there's also the little issue of our currency. Now inflation and currency value are correlated, but are two totally different concepts. The value of our currency on the international market is based largely on confidence and speculation. Upon the introduction of the Euro, it was trading at about e0.80 to the dollar. Today it's trading ~e1.60 to the dollar. We are trillions of deflated American dollars in debt to the Chinese, we're extending ourselves into war after war, our housing and employment numbers are spiraling clockwise, and we've got a guy in the Oval Office who couldn't impress a deaf/mute convention with his eloquent speaking. On top of that, we're exploring and touting conservation methods (e85 ethanol) that would make us less dependant on our foreign oil suppliers, without taking into consideration the logistical impossibility it would be to implement that system on a large scale.

So I guess what I am trying to get at is that since 1994, the only thing discussed above that has remained constant is ExxonMobil's profit margin, and it was all no thanks to our government, OPEC, and Al Gore.

As for why boycotting a specific brand does nothing to change the way that company does business, it's much simpler. When you go to a Mobil station, you're may not actually be buying gas from a ExxonMobil refinery, you're buying gasoline from the nearest refinery. Gasoline is delivered on trucks, which are expensive to run, so the local Getty station buys gas from the local Valero refinery, which keeps a tank of Getty's additive package on hand, mixes raw gasoline with the additive into a truck, drives to the Getty and you're none the wiser. So when you boycott ExxonMobil, the only person who is harmed by it is the guy working 90hrs/wk on the pump, the franchise owner, and their families. At one point, I'd even seen chain-mail that suggested boycotting gasoline all together on a certain day. This is just ridiculous considering that if the entire population of the US bought half as much gas on Monday, they'd just buy twice as much on Tuesday.

So spread THIS around. Let this little blog post spread viral across the land. Then I might be able to sell some adspace on this blog.

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