Have I ever mentioned how stupid the local news (aka "Bleeding Heart or Scare People Needlessly Entertainment Program") is?
I had been batting around this post about gasoline prices, but didn't know what angle to take until I got stuck watching the Channel 12 entertainment program the other night. They got to the shocking - yes, shocking - report that gas prices were going up (complete with the requisite video of the price board of the highest priced gas station that they could find, and the artsy-fartsy shot of a customer hanging up the nozzle then a pan to see the final price).
The piece continued with some audio from some purported expert. His words kicked me - swiftly, I may add - towards my angle.
As happened in 1991 when gas prices hit the "OMG" $1.33 level when the first Gulf War started, and again in 2008 when gas first hit $4.00 a gallon, everybody has a finger to point. But I am still not sure that anybody has articulated a good reason.
Here are some "knowns"....
- The Persian Gulf has a lot of oil.
- Every time Iran, Afghanistan, Iraq, Syria, Saudi Arabia, United Arab Emirates, Oman, Yemen, etc., get their undies in a bundle, speculators drive up the price
- Every time speculators drive up the price of crude oil, the retail price of refined gasoline outpaces the increase in crude cost.
- The US and various other countries have some oil, but for political reasons that supply isn't going to increase any time soon.
- Most of the residents of (fill in the blank location) use cars and trucks out of necessity and either don't have access to public transportation, don't want to use it, or it is impractical.
- China's economy is growing, allowing their citizens to have more cars, increasing their dependence on gasoline.
So the US and its residents are beholden to the political whims of the Middle Eastern countries and China's demand. But nobody is discussing why the pace of retail gasoline prices increases seemingly logarithmically to each blip in the price of a barrel of crude.
Let's examine what goes into the cost of a gallon of gas (and this is not an all-inclusive list)...
- $X pays for the crude oil
- $X pays for the shipment to the US
- $X pays for labor to off-load at the refinery
- $X pays for processing
- To produce Ethanol, the cost is $X + $Y
- To produce the "summer blend" of Ethanol, the cost is $X + $Y + $Z
- $X pays for bulk delivery to various cities
- $X pays for storage facilities
- $X pays for the gas truck to fill-up
- $X pays for delivery to the gas stations
- $X pays for Federal taxes
- $X pays for State taxes
- $X pays for the retail mark-up
None of this work is free, and none comes without a profit margin. Every set of hands that touch the product adds their profit to the cost... which they should. Companies need to stay in business by having revenue exceed expenses. There are no non-profits in the oil-to-gasoline supply chain.
My point in the above exercise isn't to vilify anyone trying to make a buck... that's what America is all about. My question centers on why the pace of the increase is more dynamic in some areas of the country than others.
Back to the genius who was interviewed on Channel 12 about why gas prices are so high... Can you believe that he actually said that there are transportation costs with the fuel, and that taxes can vary from state to state? Can you believe that someone from Channel 12 actually thought that answer was quality enough for broadcast without any type of follow-up? He forgot to mention that SUVs get worse gas mileage.
There is a reason that this intrigues me, and it gets continually more frustrating to hear this time-wasting, elementary BS spouted by these programs posing as the evening news. It's kind of like with the first snowfall and each station has "team coverage" including one camera crew out at True Value looking at the shovel rack with one shovel left, another at the DPW yard listening to a garbage truck (with plow attached) idle, and a third at a gas station on Ryan Road with truck drivers telling us that they absolutely have to get to Bowling Green, KY by 4:00 AM and they hope the storm isn't too far south.
On Saturday, February 18 (the morning I left for my trip to New Orleans / Baton Rouge), I filled up the tank for $3.19/gallon. By noon the next day, I was in New Oleanas and gas was consistently $3.55/gallon.
One month later, gas here is $4.19/gallon. Today's average price in New Orleans? $3.76/gallon.
In one month, we pay a buck a gallon more, while New Orleans as gone up 21 cents.
Don't believe me? Check this out. Note also that the cost of crude oil today is - within a few cents - the SAME AS IT WAS on the day I left for vacation.
So the comments that Channel 12 aired last Friday about why gas prices are so high (transportation and state tax) was an absolute waste of time. Here are some real questions that I would like answered...
- If crude oil is the same price as five weeks ago, why am I paying a buck a gallon more in Milwaukee?
- If crude oil is the same price as five weeks ago, why are New Orleans residents paying $0.21/gallon more?
- Why are increases so much more drastic in some areas of the country than others?
- What really goes into the retail gasoline price when the cost of crude is stable?
Now, any "news" sources that can get real answers to those questions might get me to turn off The Simpsons at 10:00 on some nights.