This story is kind of interesting, because it’s the classic example of a story where the lede was chosen on sexiness, not because of what the story is really about. The hook is a “whodathunkit”.
Profit margins on gasoline sales are razor thin. Indeed, some gas stations are losing money on credit card sales, once the fees are factored in.
How do they stay in business? More and more a gas station’s bread and butter is, well, bread and butter — and the coffee and candy bars it sells in its convenience store. Most of these items generate much higher profits than gas…..
Jeff Lenard, spokesman for the National Association of Convenience Stores, estimates that gasoline accounts for 70 percent of a typical station’s revenues, but only 30 percent of its profits.
But to my mind, that’s not what this story is really about. What it’s really about is how our capitalist society is pitting corporate interests against entrepreneurs, a story that needs to be told more often. A lot of entrepreneurs are Republican voters, because they buy into the racism, the class warfare, and the anti-minimum wage mentality. But they are actually hurting their own interests with this voting habit, because the hyper-capitalism that claims to be “free market” (even though it’s about stomping out free entrance into the market and real competition) pits corporations against small businesses as much as against working people. And the whole issue with gas prices is a perfect example of that—rising prices are causing independently owned gas stations to lose business and therefore money.
Low profit margins are squeezing companies along the length of the gasoline supply chain, from the biggest refiners to the smallest corner stations. Contrary to popular belief, 95 percent of gas stations in the U.S. are independently owned: Their prices and procedures aren’t dictated by a major oil company, even if the station licenses that company’s name.
Selling gas is such a poor way to make money that a lot of convenience stores are getting out of the business altogether. Meanwhile, this happened today:
WASHINGTON (AP) — Top executives of the five biggest U.S. oil companies were pressed Tuesday to explain the soaring fuel prices amid huge industry profits and why they weren’t investing more to develop renewable energy source such as wind and solar.
The executives, peppered with questions from skeptical lawmakers, said they understood that high energy costs are hurting consumers, but deflected blame, arguing that their profits — $123 billion last year — were in line with other industries.
In other words, oil companies are sitting around raking in record profits, keeping oil prices high through an effective oligarchy that would be illegal in a sane society that actually valued having free markets, and they can do this because they have a distribution system where the middleman who actually sells the gas to the consumer can be squeezed until he’s selling their product at a loss. That’s what our “free market” has led to: Entrepreneurs who have been transformed through the power of corporate might into the same exploited labor, but without the option of forming a union.
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More. The corporate capitalism of the present day is all about making sure servitors never never turn into competitors. Since entrepreneurs make scarier potential competitors than working people do it makes sense that the corporate squeeze would be applied to them with even greater vigor.
Who is more to be feared, Lumpen Sixpak with no clue or the small shopkeeper with a stake in civil society?
It’s the German business model that scares them. Lots of small/medium firms with well-paid labor and no CEO parachutes.
The democrats are the party of business and the republicans are the party of big business.
Who represents the working class in America?
I don’t think oil companies are particularly keeping oil prices high; demand is just outstripping supply worldwide. They may be making unreasonable profits/rents off of producing and refining, but high prices are here to stay.
I’m curious, can anyone point me to an article, report or whistleblower that explains the oil companies profits while using some hard inside numbers? I remember when exxon posted a profit of 10 or 12 billion in a quarter I was shocked at the number but what does it really mean? Is exxon really gouging the market? Is it just too successful? Is demand coupled with speculation causing this? What is the proposed fix? I see all kinds of people saying they are making too much, that the gas we pay for at the pump is too high-priced and shouldnt be. Is that necessarily so?
Franchisees and others do usually get royally screwed by the parent company, check out the UPS store debacle, but what exactly should we propose? Businesses cant get into a contract with a willing participant if the terms are too much in the parent ocmpanies favor? Does the franchisee have no responsibility? Seems kind of like “predatory” loans. Does the homebuyer have no responsibility? Sorry for so many questions.
Maybe it’s my PMS, but I can’t seem to dredge up the sympathy for a bunch of racist, classist jerks who vote against their own interests in the name of said racism and classism. Plus, the ones who vote that way are the ones who, I would wager, generally would sell their children to BE the evil capitalists.
The greatest trick the Republicans have pulled is convincing people that they’re a lot closer to the top of the heap than they really are. The result is that when they propose a tax plan that benefits the top ten percent of wage earners, people making 80 grand a year think they’re helped by that, when they’re nowhere near the top 10%. They wind up getting hosed, and the uber-wealthy, the top one-tenth of one percent makes out like crazy bandits.
Nailed it. The WalMart supply chain philosphy in a nutshell. Squeeze your suppliers like a vice so that they wouldn’t even think of competing with you.
I’m in the computer industry and the profit has gone out of that too.
It used to be that we could make 15 or 20% on a full system with software and accessories and now we’re lucky to make 3% and have to pass all charges like shipping onto the client where we made enough to absorb that cost due to the profit margin.
Now companies like Dell and HP make the huge money and small shops like us have to rely on services and labor to make any money.
It will soon be only the bug boys left as Dell, HP and the others start doing their own local consulting and services and labor.
I don’t know how long it will last. Soon we may have to quit the business that gave us such a thrill and kept me busy for so many years.
entrepreneurs make scarier potential competitors than working people
Exactly. The “enemy” of the high-ups (economic, cultural, whatever, it all functions in pretty much the same way) is not those at the bottom, but those in the middle, because the middlers *might be* able to overtake the high-ups. Once you see that, it seems so obvious, but almost nobody realizes it. Why is that?
because it’s the classic example of a story where the lede was chosen on sexiness, not because of what the story is really about.
I’d say it was chosen more because “independent gas stations are being driven out of business by corporate price gouging” just isn’t a sentence you can write in an Associated Press news article.
“The corporate capitalism of the present day is all about making sure servitors never never turn into competitors.”
It’s not just energy cos., manufacturing, and other “industry” where these things occur.
In the world of computer software there’s a saying to the effect of “The purpose of Microsoft is to make sure that no other company ever becomes the next Microsoft…”
The myriad dead bodies of potential competitors they’ve left in their wake is testament to how well this philosophy works…for Microsoft…
Brian sez: The result is that when they propose a tax plan that benefits the top ten percent of wage earners, people making 80 grand a year think they’re helped by that, when they’re nowhere near the top 10%. They wind up getting hosed, and the uber-wealthy, the top one-tenth of one percent makes out like crazy bandits.
That’s a good point…and it also reinforces the mindset in many of those middle-class folks getting hosed that too much of their taxes are already going to the poor. When instead they’re shouldering the taxes of the rich. A one-two punch in keeping people down.
The rest of that Washington story also asked the oil execs why the tax subsidies they enjoy shouldn’t be cut in view of such record proftis
I’d never thought I’d come to the defense of a credit card company, but this line has always bugged me:
I don’t have a background in economics, but it seems to me that if it is really the case that a business loses money on credit card sales, the business need not offer credit card purchases. I certainly wouldn’t expect any store to keep restocking a item, however popular, if it sold for less than its cost.*
Alternatively, the business could raise prices across the board (my understanding is that credit card arrangements prohibit raising prices on only credit card purchases). It is possible (and economically expected) that a businessperson who is making a given average profit per sale before accepting credit card sales will adjust prices so that the combined profit on card and non-card sales yields (at least) the same average profit per sale as before. That means higher prices if total sales don’t increase and possibly lower prices if total sales do (because of the convenience of sales, or competitive advantage over non-card merchants).
Either way, the fees for credit card purchases are just another cost of doing business that must be accounted for when determining the price at which to sell goods and that are, eventually, passed on to the customer. The only people who have a legitimate complaint are the ones who carry cash to subsidize my card-paying ways.
This is NOT to defend the tactics employed by the credit card companies to set up card payment or the monopoly they currently have, and certainly not a defense of their myriad of other unsavory business practices. Just a pet peeve.
*assuming that it didn’t bring about other, profitable sales.
The only place I see regular white forks working in a gas station is Valero and sometimes Exxon. Conoco, Chevron, and Shell are all run by immigrants trying for a shot at a better life. I can see how the profits of individual retailers could be squeezed out as the price of supply rose.
I’guess they’re got to make that money out of the smokes and cold singles. How do gas stations stay alive in areas where they can’t sell the 40s and singles?
Gas at the pump is close to being a perfect commodity, where you have hundreds of readily available vendors selling essentially the same product. Like any commodity, this means that gas prices will be slashed to the point where the profits on gas are razor-thin. It’s always been this way; gas stations have almost never made any money on the gas they pump. That’s one reason that certain companies (shell, chevron) are trying to brand the gasoline they sell, so that consumers will pay a premium for it above and beyond the normal cost of gas.
Gas from the supplier side, however, has a really different model, because it’s a much scarcer resource. If the supply of gas outstripped demand, the way it does at the pump, there’d be hardly any profit b/c gas would be priced just above where it costs to get it out of the ground and process it. However, that’s not the situation; because demand is outstripping supply, the price of gas for the suppliers keeps rising, even though the cost to pull it out of the ground doesn’t. (This doesn’t factor in things like OPEC, who artificially constrain the market to keep gas prices high, but as I understand it the American gas companies don’t do that, though their prices are affected by this artificial scarcity.)
The obscene profits of the gas companies right now are the free market working as it should. Ditto the fact that gas stations are barely making profits. We’re seeing price cut into demand for American consumers for the first time ever in the last couple of months; perhaps as that trend continues we’ll reach equilibrium. However, with all the other nations ramping up their demand for gasoline, I doubt it.
What’s supposed to happen at this point is that rational companies will increase their capacity to produce gasoline until the price of getting it out of the ground is approximately equal to the price that they’re being paid for it. I think the reason we’re not seeing that as much is because a) the overhead for increasing capacity is so high that it would take a bigger increase in prices to make the decision to expand capacity economically feasible, b) regulations cut off some of the easier-to-get-at oil, by mostly c) the prices have risen so quickly, and the remaining oil so so hard to get at, that companies are slow to respond.
My economics is rusty, so if anyone wants to jump in and tell me where I’m wrong, please feel free to do so.
Also, because prices at the pump generally lag prices from the distributor by a day or two, gas stations tend to make more money when prices are falling and lose money when prices are rising. With the relentless rise in prices and consumers making more choices about where to fill up based on cheap gas, stations are the big losers.
Mine own theory is that the price for gas, and diesel at the pump right now is an attempt to get all the money that they can before the feds crack down on the free lunch.
This deliberate manipulation was amply demonstrated by the (very temporary) drop in prices just before the last round of federal elections, in a not-so-very-hidden plan to make the general public think that the Republicans shouldn’t be seen as *really* trying to screw the general public and that the “free market” would make sure that prices were kept in check.
And a solid portion of the electorate have actually bought into that hogwash. G/d help us.
It’s called a “Loss Leader”.
http://en.wikipedia.org/wiki/Loss_leader
This is not news. This is not big oil vs independent owner.
This is independent owner vs independent owner….
Gas Station #1 lowers it’s price so Station #2 follows suite. Each station wants to have a low gas price so they can rake in the profits off the twinkies and fountain drinks.
Recently I bought gas at a station where the credit card system at the pumps was out of order. I felt bad because the owner had to stop doing profitable work (car repair) to process my card. I asked him when the machines would be fixed and he said they weren’t broken, just outdated. The oil company makes the station pay for the upgrade to new pumps and he said the computer system alone cost $15K, so he didn’t see how he’d ever be able to afford it. They also have to pay for gas COD, so for a business running on a very thin margin that’s got to be a huge cash flow problem. He expected independent stations like his to be run out of business and the market just left to company-owned stations like Exxon. And yes, he was disgusted and through voting Republican.
This is one situation where exploitative corporate welfare policies are actually much more pernicious than traditional anti-union management shenanigans. If gas station owners were able to push back against the “petroligarchy” by refusing to sell gas, or taking over the Small Business Administration in a pro-environment, anti-megacorporation coalition, we’d have a hell of a better chance. As is, Amanda is exactly right– there’s this fiction that Republicans love small business, when in reality small business is what they call the wholly-owned subsidiaries they split off to avoid paying taxes.
Except that it’s not really a perfect ‘loss leader’ situation, because there is no real incentive for anyone to go in and buy a twinkie or a sixpack of beer or whatever. This is truer and truer as more gas stations offer pay-at-the-pump, which means you don’t even have to go inside and get tempted by the pickled pigs feet or whatever at the counter.
And of course in some parts of the country there is no incentive for corner stores to also offer gas. There’s a bodega on my block which offers the exact same goods and services as your typical suburban gas station, at the same prices, sans gas.
The loss leader idea works when you actually have a captive audience — for instance movie theaters, which turn little or no profit on the ticket sales and thus charge $5 for popcorn and sodas (which are almost all profit). Or at WalMart, because so many people in rural areas are forced to depend on them for necessities; you can offer ground beef or underwear or whatever at a loss, then tempt people with stupid junk that costs the same as it does everywhere else.
I was told just last week by my uncle who has worked for Exxon for about 30 years that back in the energy crisis days they had tankers full of crude just sitting around not being processed so that gas prices could go sky high at the pump. That the whole “energy crisis” was a lie to discredit Carter and rake in oodles of cash.
What I take from this is a lesson that oil companies probably learned a long time ago: You’ve got to keep a constant squeeze on gas station owners, otherwise, they’ll start competing for customers by lowering prices. When the station owners complain, they give them the b.s. about everyone knowing they’ve got to make their money selling Twinkies and newspapers.
Charlie and I went shopping recently in one of the more urban areas of Maine and within a 1/4 mile of an especially busy stretch loaded with mini-malls, fast foods, C-stores, etc, we saw 5 closed businesses- 2 of which were the small gas stations/ C stores you describe- the type that has been there forever.
And ALOT more houses for sale in the 20 mile drive to get there than there were in December…
Our favorite little Mom/Pop gas station/ convenience store, a stop every morning for coffee and gossip with the natives, is getting terribly crunched- having to raise prices on everything and cutting back where they can.
When they switched from real milk or cream for coffee for an awful fake powdered mess they make up themselves a gallon at a time in the back room, we said enough. We now go to the only other option for coffee, a newly opened general store without gas pumps. Their business over the past 3 months is booming, as their prices remain constant (so far) and the store keeps adding on.
It’s not supply and demand.
Oregon funds its roads by gas tax. People there have carpooled and found alternatives to driving to the point that the state is trying to find new ways to generate revenue.
Demand has fallen on a statewide level. You would think that would have some effect on gas prices–I mean, prices vary within just a few miles of an airport, so if a whole state changes its demand it should show, right? Lower demand = more supply = lower prices.
Wrong. Gas costs as much there as in California.
The separation of costs between drilling and distributing means the little guys are in the same place as the customers. The profit is all going to the oil companies–>and it always will, no matter how the price of gas changes.
It’s still not the free market working (except in how it trends toward monopolies). If the companies are making record profits, it’s b/c they are charging far more than they need to. They could charge less and make less profit.
Funny how when Clinton was in office and gas prices were breaking the $2 level and moving toward $3, Congress threatened to investigate the oil companies. Funny b/c the prices went down under that threat. With an oil man in office, oil companies know there will be no investigation into their price collusion and war profiteering.
Threaten to expose them and tax the shit out of their war profits? Watch those prices come tumbling down! Of course, it’ll be “blamed” on something else like rebuilt refineries or better practices for “summer gas” but it’s the threat of prosecution and money loss that will really do it.
Funny how when Clinton was in office and gas prices were breaking the $2 level and moving toward $3, Congress threatened to investigate the oil companies. Funny b/c the prices went down under that threat.
…
Threaten to expose them and tax the shit out of their war profits? Watch those prices come tumbling down! Of course, it’ll be “blamed” on something else like rebuilt refineries or better practices for “summer gas” but it’s the threat of prosecution and money loss that will really do it.
You just caused a major “click!” to go off in my mind. I remember gas prices going down during the Clinton administration, except that I was living in Louisiana, where people have a very hard time seeing the oil industry as the bad guys. The party-line on the ground was that we were experiencing a new oil boom, NOT that the industry was forced to lower prices for political reasons. After moving north and seeing the economy go to shit over the last 8 years, but continuing to hear how booming things were back home (despite seeing evidence to the contrary there), I was always very confused about all this.
Wow. My mind has just been B L O W N.
Excellent point Amanda. Our current capitalist systen is not about ‘free markets’ and ‘competition’ but about monopoly for a few corporations. Needs to be said and understood by all.
One of the things I realized a while back is the essential difference between the Canadian and American mindsets: Canadians are essentially pessimistic while Americans are ridiculously optimistic.
Canadians generally, even well off upper middle class, are willing to pay for social and welfare programs (and the slightly higher taxes resulting) because of the belief that it’s useful to have the safety net there because, at some point, you might need it (regardless of how much you make now).
Americans are willing to support ridiculous tax breaks for the rich because much of the middle class assumes that at some point they’ll be rich and so they won’t have to pay.
I don’t think it’s so much about pessimistic/optimistic outlook as the idea so common in America that you will eventually become fabulously wealthy with little or no actual effort or sacrifice on your part. We are fed this fiction intensely, from birth onwards. So even folks without much money tend to identify aspirationally, because they see themselves as eventually being more wealthy than they are now.
Even though of course not very many people are particularly upwardly mobile, and almost never in a very extreme sense. Most class mobility is incremental, like my grandfather the son of a prosperous farmer who managed to pull himself through ag college, who then had a son who managed to pull himself through grad school.
And of course nobody will entertain the idea that they may someday be worse off than they are now. Even though that’s actually the most common kind of social mobility. “I might need a safety net someday” is blasphemy in America.
Bernanke’s also late on his April Fool’s Day joke… the recession started a LOOOOONG time ago.
Opponox:
Forget “Someday”. I maintain that every person in the middle class has used that social safety net, or benefitted from having other people use it.
My perfectly middle class self, for instance, is on HUD to put myself through law school.
Opponox:
Forget “Someday”. I maintain that every person in the middle class has used that social safety net, or benefitted from having other people use it.
My perfectly middle class self, for instance, is on HUD to put myself through law school, because the parents realistically can’t afford to give me enough money to go to school, and I don’t have enough money between the husband and I to make ends perfectly meet.
Speaking of corporate rule, it turns out that the taxpayers will be paying for Bear Sterns’ bad judgement after all.
Privatize the profits, socialize the gains — it’s the (American) corporate way. Not too long now until all of those hedge fund managers paying 15% income tax are getting government handouts while their secretaries get miniscule unemployment payments that they have to pay a 30% rate on.
Antigone — oh, of course. The only way I had health insurance until just a couple years ago was via New York’s very generous “Family Health Plus” program. Not to mention all the aspects of the welfare system designed to help out ordinary middle class folks, like tax breaks for first-time home buyers.
But most people absolutely refuse to see themselves as ever needing to rely on “welfare” programs. Even when they themselves have, in the past, done so.
miniscule unemployment payments that they have to pay a 30% rate on.
Not to mention that said secretaries will be made to feel, while on Unemployment, that they are evil welfare queens. Even though Unemployment Insurance is money taken out of your paycheck each week, and not public money.
What amazes me is that no one seems to officially recognize that the oil companies are an oligopoly, and that they make more money by keeping refining capacity scarce. It’s the kind of thing that’s obvious to any first-year econ student, but it’s blasphemy to say it.
Here’s another piece of blasphemy: if you believe that the market (and supply and demand) truly set the price of gasoline, then another 50 cents a gallon in gas teaxes should have a negligible effect on prices at the pump. They’d just reallocate the revenues.
Interestingly, oil (thanks mostly to OPEC) is one of the few commodities in which the oligopolists don’t squeeze both the producers and the consumers. In my neck of the woods (dairy) pretty much all the small farmers (you know, the ones whose herds don’t keep having epidemics unless they’re treated with antibiotics, and that don’t produce concentrated lakes of manure) are getting run out of business by low milk prices, but the price of a gallon at the store keeps going up.
Lower demand = more supply = lower prices.
Well, yes, in a closed system.
As soon as everyone in South Asia, from Bangalore to Phnom Penh, has filled his tank (whether it takes 3 liters in the moto or 14 gal in the 1989 Camry) the pressure will be off suppliers and refineries.
But wait…What’s the sound I hear? Is that 1500 motorbikes sold yesterday in Mumbai alone? It’s the rattle and hum and chugging diesel of development.
Petroleum prices are never coming down again and the sooner your lifestyle gets in sync with that reality, the sooner you can move your attention to more productive things.
Like why it is that entrepreneurs in this country are convinced that Republican rule is good for them, and what we can do to change that misconception.
What’s supposed to happen at this point is that rational companies will increase their capacity to produce gasoline until the price of getting it out of the ground is approximately equal to the price that they’re being paid for it. I think the reason we’re not seeing that as much is because a) the overhead for increasing capacity is so high that it would take a bigger increase in prices to make the decision to expand capacity economically feasible, b) regulations cut off some of the easier-to-get-at oil, by mostly c) the prices have risen so quickly, and the remaining oil so so hard to get at, that companies are slow to respond.
I think it’s A and part of C. What’s left that isn’t under the Arabian Peninsula is very hard to get at and expensive to process.
If the regulatory environment were keeping oil companies from extracting a big enough field that they would be making money at $110 a barrel drilling that field, the regulatory environment would flex and the birds and polar bears would be SOL.
Obviously they are now, but for different reasons…
What I love is if some militiaman leaves the safety off his weapon near an Iraqi pipeline then the price of gas at the pump INSTANTLY goes up to reflect the worries of the market. Open an extra refinery or something like that and we are soothingly reassured that the price will go down in a few months when the older, higher-priced oil in the system works its way through.
What I would like to see investigated is the amount of bribery of the investigators. Why people believe on one hand that a drug dealer will bribe a cop to protect a $100k business but executives won’t bribe regulators in order to protect a $100B! business is beyond me.
PhoenixRising is right, though. Oil will never significantly come down again. Too much growth in India and China.
Carl Rennie, let’s stipulate for convenience’ sake that every single word you’ve said is true.
Then let’s congratulate you on having done a stellar, crystal-clear job of outlining the ways in which a “free market” may end up yielding less than optimal results for a great many people.
Demand could fall to zero in Oregon w/o making gas any cheaper there — Oregon is a small part of global demand. Gas (not counting taxes) should cost approximately the same to distributers the world over.
I’m not entirely sure what you’re arguing here, but I think this is only true for elastic goods, and the demand for gasoline is relatively inelastic. As I said before, we’re only barely starting to see prices affect demand. The margin on gas is so small that stations can’t absorb the tax by cutting the price. Remember, stations set the price to consumers, but they don’t set the price from distributers.
Additionally, with the price of oil climbing, there’s an incentive to speculate — to buy and hang on to it. I don’t think that’s responsible for most of the increase in gas prices, but it is responsible for some.
Ultimately, though, we’re facing a world that wants more and more oil even though there’s less and less readily accessible oil on the planet. Gas prices are going to come down a little, but in the long run they’re most likely up for good. We need to make changes as a society in the way we produce and consume energy or we are seriously screwed, and seriously screwing the poorest among us.
It may turn out that countries that have historically lacked cars turn out better than ours, because they haven’t invested trillions of dollars into making the car the only way to get around.
FWIW, I’m pretty much socialist, and I especially think that tax cut “incentives” to oil companies are a joke. I just don’t think demanding that oil companies lower their prices is going to make them do that when they can just as easily sell elsewhere for a lower but still higher-than-we’re-asking-for price.
This isn’t really the way it works — remember that oil is a traded commodity which fluctuates based on many factors other then supply and demand. In reality, there is an enormous potential supply of oil at the moment. However, other factors — regional instability, the falling dollar and rising euro, transportation concerns — have all contributed to oil trading at record values. What one has to remember is that oil trading at $75/brl costs the oil companies no more or less to extract and transport than oil trading at $110/brl: the difference is the profit shown by the company.
Beyond oil, one of the greatest problems we have seen over the past 25 years is the consolidation of corporations which have been empowered by reduced regulation to drive smaller businesses out of the market. This has meant less competition, less innovation, and fewer jobs. If you doubt this, look at broadband access Japan, France, Belgium all have competing 100Mb/s services for residents — in America the big telecom companies have lobbied to pass regulations which allow competition for such services. The same can be said for cellular services. The problem is that one innovation leads to new markets and more innovations creating more jobs and opportunities. Monopolies are inherently opposed to innovation, as they have no need to adapt to competition or create new products: they simply focus on becoming more efficient — usually by reducing workforce and benefits. This is one of dark endgames of the ‘free market’ — that eventually capitalism ceases to create any social value and simply becomes a parasite which actively opposes any progress.
I’m sorry, but whether oil costs $50 a barrel or $100, the profit margins on gasoline will be razor thin, not because of oil companies, but because of competition among gas stations.
There are a whole lot of stations that are really close to each other, they all put gas prices on big signs, and that puts an incredible downward force on price. Also, the fact that they’re selling high profit items at these stores like beer and cigarettes provides a high incentive for them to slash prices on gas because if you stop there for gas, you’ll pick up other stuff while you’re there.
And anyway, if these people are losing business because of high gas prices, doesn’t that mean people are driving less? I thought Al Gore said that was a good thing.
Seriously, gas prices going up is a major problem because most goods are moved in trucks and higher costs in energy creates inflation across other categories, but recent indicators of inflation show that that pressure is decreasing, because inflated housing prices were also contributing to the problem.
But if it creates difficulties for gas stations, that’s a side effect of people driving less, which is an incentive many people have wanted to see built into the price of gas for a long time.
In any case, oil prices are controlled not by oil companies but by a cartel of oil-producing nations.
an incredible downward force on price
That’s where you lost me. Sorry.
The last time I saw an “incredibly downward force on price” at the pump, it was the middle of the Clinton Administration.
Downward to the cost from the supplier. The reason gas stations make no money on gas has very little to do with oil companies and a lot to do with the 30 gas stations within a square mile of each other.
Right, and the problem is that with ever-climbing gas prices, people are much less inclined to buy these goods. I’d imagine that’s the real squeeze, in addition to the fact that consumers are going to pay a lot more attention to a $0.10 price difference when the overall price is up 100% from a couple of years back. When filling your tank is $70 instead of $40 like in 2003, you’re not going to feel like dropping $2 on sugar water.
That’s not why gas stations are losing money (see above). And yes, it’s a good thing that people are driving less.
What frustrates me is how poor our non-driving infrastructure is. Even with gas as expensive as it is now, it’s still cheaper, faster, and more convenient for me to drive for any of my long trips than to take the train. I like taking the train, but it’s hard to justify the extra expense.
Additionally, there’s not a lot that America as a country can do to exert economic pressure on the price of gas through strictly regulatory means. We don’t have gas reserves in our country anymore, at least not reserves substantial enough to impact the price, so it’s not like we can pull a Hugo Chavez and nationalize the gas industry. We can’t play hardball with other countries by threatening to not buy gas, because we need it so badly.
In fact, naive reasoning would lead us to the following plan to keep gas prices low:
1) find a country with large gas reserves that’s weak, hated by its neighbors, and not aligned with the US
2) invade it
3) occupy it and use its gas reserves to influence the world market.
Hence, the mess we’re in now.
And these differ from one another how? In Arabia the Saud family owns the oilfields and the nation. (Meaning that while they may appoint commoners to run petroleum ministries, they still find it advisable to supply said commoners with familial minders who’ll keep ‘em under observation.) Vice President Cheney holds a secret meeting (about which the details have yet to be divulged) at which a collection of energy execs divvy up the oilfields of Iraq.
Oilmen from Texas and not medieval courtiers may be wearing the pointy-toed shoes, but the underlying pattern is the same. The world started to open up when a division appeared between the power of the sword and the power of the purse; now that that division’s starting to close, the world’s starting to close in on itself as well. And people know it. You may be able to convince people that what they’re experiencing is ordained by the market or by God, but you won’t be able to convince them that their experiences are void.
And these differ from one another how? In Arabia the Saud family owns the oilfields and the nation. (Meaning that while they may appoint commoners to run petroleum ministries, they still find it advisable to supply said commoners with familial minders who’ll keep ‘em under observation.) Vice President Cheney holds a secret meeting (about which the details have yet to be divulged) at which a collection of energy execs divvy up the oilfields of Iraq.
Oilmen from Texas and not medieval courtiers may be wearing the pointy-toed shoes, but the pattern is the same. The world started to open up when a division appeared between the power of the sword and the power of the purse; now that that division’s starting to close, the world’s starting to close as well. And people know it. You may be able to convince people that what they’re experiencing is ordained by the market or by God, but you won’t be able to convince them that their experiences are void.
I had to laugh. I had a meeting with the accountant. He started out by pointing out that we are in the ‘top 1%’ in America.
I was gaberflasted and asked for more information and what planet he was talking about. He said that ‘according to the latest information that he had’ we were in the top 1%.
I asked to see this information. The date on the figures was from 1996!
Not wanting to burst his bubble I agreed. (and immediately wondered how he could be so wrong and be an accountant)
In the car on the way home I said that ‘We’d probably be the top earners based on the 1897 economy’ to which we had a good laugh.
There is no way that we are even in the top 20% now. Hell, there are people that ‘make’ over 10 million a day!
I wanted to find out what the income breakdown was for this year, or last but can’t find it. Anyone got a link or site to check out. I mean, not that I want to piss of the accountant but now I’m curious as to how far off his ‘latest information’ is. Well, unless my wife has another job that she isn’t telling me about…
American corporations are subject to American regulation. Foreign countries, not so much. Unless you’d advocate imposing it by military force.
Corporations can be enormously damaging, and an unregulated free market is an extremely dangerous thing for those not in control of it. I just don’t think that the oil market is a very good example of corporate malfeasance; the current oil problems come from increased demand and exhaustion of easy oil, combined with a huge dose of international politics. The solutions aren’t as simple as reigning in the corporations, because the corporations are simply not under our control.
That’s saying that cheap gas even is the desired solution. Cheap gas is what got us into this problem in the first place; we’ve spent the last 50 years building a country on the assumption that gas would be close to free forever. Now that it’s coming to an end, we’re left in a very bad way. Making gas cheaper, even if it were possible, isn’t going to fix that problem.
Wikipedia has numbers for 2006. If you earn about 250k/yr for your household, then you’re in the top 1.5% of earners.
I remember in high school, working at a pizza joint when one of the workers was fired.
Wait for it…
For giving away a 32 ounce coke.
Why?
Because he said that he made ‘chicken shit’ on the pizza and sandwiches but ‘fucked them in the ass’ over the beverages. Giving away a coke of that size was ’stealing’ and anyone caught stealing would be fired on the spot.
Strange…
Movie theaters make their profit off the outrageously priced popcorn, drinks and candy. (They probably lose money on the nacho’s due to health claims. BLEECH)
At the pizza joint, I took to trying to sell as much ‘pop’ as I could and the biggest that I could.
Oh, the owner? Yes. Interesting cretin. A fundamentalist something or other. Would always come in and ‘pick up’ pizzas for the various church functions. I’m sure that he was remunerated by the church for what he ‘picked up’.
I was fired from that job. It was my day off. My grandfathers funeral was that day. He called in and said that I had to work because someone called in sick and I was ‘chosen to work’. I said that it was my day off and I had a funeral to go to. He snapped ‘I own your ass and you either work NOW or you’re fired’. I said ‘I quit’. He said the asshole-ish ‘You can’t quit. I fired you!’ Whatever.
Nice ‘christian’ man…
But that was my first experience with the concept of ‘loss leaders’.
Under the current administration American corporations are subject to regulation superintended, ultimately, by a President who is an ex-oilman, if not a terribly successful one, and by a Vice-President who’s hand-in-glove with the energy interests and who’s still on the payroll of a major contracting firm (though he’s going to have to wait ’till he’s out of office to collect his boodle). IOW, what we’re seeing now is the clearest imaginable illustration of what happens when a skulk of foxes inherits a henhouse. I’d be willing to be subject to regulation too, if I could be sure that the people who were regulating me were my own true loyal thanes. That would not be such an unpleasant prospect.
Now, now. That was their idea, not mine…and come to think of it, we didn’t even come out of the deal with cheaper gas. So I guess we’re just effed over all the way ’round.
Does this show what I think it does?
http://upload.wikimedia.org/wikipedia/en/e/e0/Income_Education_91_to_03.jpg
Heck-of-a-job Bush-tard…
Not even in the top 5%. Guess I better sell the Bentley…
Haw haw…
And that ‘House in the Hamptons’…
Now wondering what drugs the guy was on…
Exactly the reasons why we routinely wait until the movies are out on DVD and rent, PinkyLeftBrain- then if we especially like, we’ll buy the DVD. I think the last movie I saw in a theater was HP 3…
why the hell do most people think they are middle class???
how does one DEFINE middle class anymore,anyway???
but, from where i am sitting, there is VERY little middle class, and it keeps shrinking… shrinking…
gone.
Who represents the working class in America?
The Mexican Government.
Few listen, though.
just don’t think that the oil market is a very good example of corporate malfeasance; the current oil problems come from increased demand and exhaustion of easy oil, combined with a huge dose of international politics.
Which explains the enormous profit margins of domestic oil companies.
Wait, no, it doesn’t do that at all.
It’s funny how this explosion of oil profits is not only not trickling down to the pump owners, it’s also not trickling down to the refinery engineers/R&D people, and as a result a LOT of people who struggle through engineering curricula are struggling to find jobs to pay off student loans.
Refinery engineering still has one of the highest GPA bars of any job you can get with an engineering degree.
Yes, it does. They’re in partial control of a resource which hasn’t gotten any more expensive to produce but has become much more in demand. That means that the price gets set higher. They could set the price lower, I suppose, but if they do that then you run into shortages. This is extremely iintroductory economics.
The fact that large chunks of the world oil resources are controlled by governments that would like to see higher oil prices doesn’t help, but again, that’s not the companies’ fault. Yeah, their profits may be grotesque, but that’s just how private control (or even public control) over a limited resource works. It’s not like there are vast stores of oil that Exxon is sitting on to drive the price up.
We already pay taxes to subsidize oil companies. Why don’t we cut out the intermediate and just run an oil company that is owned by the taxpayers?
If you hadn’t just clarified that you were talking about the GOP it wouldn’t have been obvious, unfortunately.
You know, prices would go down if we allowed more drilling. Since Congress won’t allow it, it seems Congress ought to be asking about its role in the crisis.