Myth: Gasoline is high-priced
When gasoline in the United States crossed the one dollar per gallon retail price there was a general public resentment of the oil companies. Gasoline was "too high priced."
Reality:
In the 1990s in the U.S. the basic cost of gasoline (before taxes) was less in terms of inflation adjusted dollars than anytime in the past 40 years. In fact, it was nearly as cheap as anytime in the history of the oil industry. It was also historically inexpensive in terms of how long the average wage earner had to work to buy a gallon of gasoline.
The cost of gasoline at the pump is the basic cost of exploring for, drilling, producing, refining, and marketing the gasoline together with the taxes which are placed on this commodity. Lesser costs are the cost of transporting and storing the gasoline enroute to the service station. Profit margins are spread all through this system, and are generally in line with average market returns on investment. The biggest single cost in the final price of gasoline at the service station is taxes. Gasoline is a favorite source of revenue for government. In 1993, for example, U.S. President Clinton signed a bill which increased the U.S. federal gasoline tax by 4.3 cents. This was not dedicated for the purpose of road building and maintenance, but went into the general U.S. Treasury, and was stated to be for the good cause of reducing the annual government deficit, which end result has since seemed rather elusive in practice. States and cities also impose gasoline taxes. In the United States, federal and state gasoline taxes on the average are in total equal to more than the basic cost of the gasoline at the refinery.
Based on constant 1967 dollars, exclusive of taxes, the retail price of gasoline in the U.S. in 1920 was 49 cents, in 1930 it was 39 cents, in 1950 it was 37 cents, in 1970 it was 30 cents, in 1974 it was 40 cents. The price in 1995 was 67.7 cents a gallon.(19) But this 1995 price is for a much improved quality of gasoline with additives for better engine performance, and also for reduction of air pollutants. The price is also for unleaded gasoline which was not available in 1974, and which costs more to produce than does leaded gasoline. This record of price stability is in marked contrast to the large increase in prices of virtually all other consumer items. The oil companies have done a remarkable job in supplying the world's largest consumer of gasoline, the U.S. citizen, with inexpensive high-quality gasoline without restrictions as to quantity.
However, because gasoline price touches so many people, the political posturing over gasoline prices in order to gain voter favor seems to be a continuing phenomenon. In the U.S. in the spring of 1996, gasoline prices rose about 10 to 15 cents per gallon. This was due to the fact it had been an exceptionally long, hard winter, and refineries had delayed their shift of refinery output emphasis from fuel oil to gasoline. There were also weather related problems in the North Sea and Mexico which interrupted oil shipments, and the world oil price rose from about $17 a barrel to $25. U.S. oil companies have no control over the price of world oil, from which now comes more than half the U.S. oil supply.
But both major U.S. political parties tried to make campaign advantage of the situation. The administration announced that the Justice Department would immediately look into the matter of a possible price conspiracy among the oil companies. The opposition in the Congress said it would try to repeal the 4.3 cent gasoline tax increase which the administration had pushed through in 1993. The media interviewed motorists at the filling stations who by and large were of the view that the oil companies were greedy, which view was widely echoed by cartoons, editorials, and radio and TV commentators.
Some of the media, however, had more informed observations. The syndicated columnist, Mike Royko, viewing oil prices both historically and currently, wrote some very direct comments about the 1996 oil price situation:
"What I didn't hear any reporter say was: 'Of course, in this country, we pay far less for gasoline than they do in Canada, Europe, or just about any other developed nation.'
"Nor did they point out that when you factor in inflation that the price of gas is less than it was 40 years ago.
"If the broadcast hysterics took note of these few simple facts, there wouldn't be any talk of a gas pump crisis...
"If CNN insists, every half hour, that helpless American motorists might suddenly be sputtering to a stop on the shoulder of the road, is the White House or Congress going to deny that we are suddenly fuel-starved? Is any self-respecting politician going to stand up and say: 'Hey, what's the fuss? You want to see high gas prices, go to Canada or Europe. What are you network magpies chirping about?'
"Of course not. When the nation's broadcast babblers, from whom the majority of Americans get their news, say we have a crisis, it's time for the political speech writers to crank out something, even if it is something stupid.
"That stupidity includes the instant-investigation into the vague possibility that the oil companies have somehow conspired to pick our pockets.
"All that the investigation will show is that if there was a conspiracy, they've somehow conspired to give us the world's cheapest fuel for our cars."(21)
In terms of oil, American's live in a "fuel's paradise." A British observer on the scene has written, "...by European standards petrol [gasoline] is almost given away in the United States..."(28)It should be noted that in other countries, the retail cost of gasoline without tax is about the same as in the U.S. That gasoline costs more than five dollars a gallon in some nations is due chiefly to taxes, and to a lesser extent to retailer's profit, which commonly is higher than in the United States. Also, in some countries the gasoline distribution system is less efficient than in the U.S. and it costs more to transport the gasoline to the retail outlets
Copyright 1997, Walter L. Youngquist -- Posted with permissionfrom GeoDestinies, by Walter Youngquist PhD & Chair Emeritus,Department of Geology, University of Oregon;National Book Company, 1997; ISBN 0894202995
Reality:
In the 1990s in the U.S. the basic cost of gasoline (before taxes) was less in terms of inflation adjusted dollars than anytime in the past 40 years. In fact, it was nearly as cheap as anytime in the history of the oil industry. It was also historically inexpensive in terms of how long the average wage earner had to work to buy a gallon of gasoline.
The cost of gasoline at the pump is the basic cost of exploring for, drilling, producing, refining, and marketing the gasoline together with the taxes which are placed on this commodity. Lesser costs are the cost of transporting and storing the gasoline enroute to the service station. Profit margins are spread all through this system, and are generally in line with average market returns on investment. The biggest single cost in the final price of gasoline at the service station is taxes. Gasoline is a favorite source of revenue for government. In 1993, for example, U.S. President Clinton signed a bill which increased the U.S. federal gasoline tax by 4.3 cents. This was not dedicated for the purpose of road building and maintenance, but went into the general U.S. Treasury, and was stated to be for the good cause of reducing the annual government deficit, which end result has since seemed rather elusive in practice. States and cities also impose gasoline taxes. In the United States, federal and state gasoline taxes on the average are in total equal to more than the basic cost of the gasoline at the refinery.
Based on constant 1967 dollars, exclusive of taxes, the retail price of gasoline in the U.S. in 1920 was 49 cents, in 1930 it was 39 cents, in 1950 it was 37 cents, in 1970 it was 30 cents, in 1974 it was 40 cents. The price in 1995 was 67.7 cents a gallon.(19) But this 1995 price is for a much improved quality of gasoline with additives for better engine performance, and also for reduction of air pollutants. The price is also for unleaded gasoline which was not available in 1974, and which costs more to produce than does leaded gasoline. This record of price stability is in marked contrast to the large increase in prices of virtually all other consumer items. The oil companies have done a remarkable job in supplying the world's largest consumer of gasoline, the U.S. citizen, with inexpensive high-quality gasoline without restrictions as to quantity.
However, because gasoline price touches so many people, the political posturing over gasoline prices in order to gain voter favor seems to be a continuing phenomenon. In the U.S. in the spring of 1996, gasoline prices rose about 10 to 15 cents per gallon. This was due to the fact it had been an exceptionally long, hard winter, and refineries had delayed their shift of refinery output emphasis from fuel oil to gasoline. There were also weather related problems in the North Sea and Mexico which interrupted oil shipments, and the world oil price rose from about $17 a barrel to $25. U.S. oil companies have no control over the price of world oil, from which now comes more than half the U.S. oil supply.
But both major U.S. political parties tried to make campaign advantage of the situation. The administration announced that the Justice Department would immediately look into the matter of a possible price conspiracy among the oil companies. The opposition in the Congress said it would try to repeal the 4.3 cent gasoline tax increase which the administration had pushed through in 1993. The media interviewed motorists at the filling stations who by and large were of the view that the oil companies were greedy, which view was widely echoed by cartoons, editorials, and radio and TV commentators.
Some of the media, however, had more informed observations. The syndicated columnist, Mike Royko, viewing oil prices both historically and currently, wrote some very direct comments about the 1996 oil price situation:
"What I didn't hear any reporter say was: 'Of course, in this country, we pay far less for gasoline than they do in Canada, Europe, or just about any other developed nation.'
"Nor did they point out that when you factor in inflation that the price of gas is less than it was 40 years ago.
"If the broadcast hysterics took note of these few simple facts, there wouldn't be any talk of a gas pump crisis...
"If CNN insists, every half hour, that helpless American motorists might suddenly be sputtering to a stop on the shoulder of the road, is the White House or Congress going to deny that we are suddenly fuel-starved? Is any self-respecting politician going to stand up and say: 'Hey, what's the fuss? You want to see high gas prices, go to Canada or Europe. What are you network magpies chirping about?'
"Of course not. When the nation's broadcast babblers, from whom the majority of Americans get their news, say we have a crisis, it's time for the political speech writers to crank out something, even if it is something stupid.
"That stupidity includes the instant-investigation into the vague possibility that the oil companies have somehow conspired to pick our pockets.
"All that the investigation will show is that if there was a conspiracy, they've somehow conspired to give us the world's cheapest fuel for our cars."(21)
In terms of oil, American's live in a "fuel's paradise." A British observer on the scene has written, "...by European standards petrol [gasoline] is almost given away in the United States..."(28)It should be noted that in other countries, the retail cost of gasoline without tax is about the same as in the U.S. That gasoline costs more than five dollars a gallon in some nations is due chiefly to taxes, and to a lesser extent to retailer's profit, which commonly is higher than in the United States. Also, in some countries the gasoline distribution system is less efficient than in the U.S. and it costs more to transport the gasoline to the retail outlets
Copyright 1997, Walter L. Youngquist -- Posted with permissionfrom GeoDestinies, by Walter Youngquist PhD & Chair Emeritus,Department of Geology, University of Oregon;National Book Company, 1997; ISBN 0894202995
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