Why Are Gasoline & Home Heating Fuels So Expensive?

CoalBin wrote:At one time coal companies were considered evil

An often overlooked factor in the rise of oil prices is the *major* decline in the value of our dollar. We buy oil in the open market with US dollars, which since 2001 have become worth-less. To make it politically viable, we financed 'the war on terror' without raising taxes (or instituting a draft). We print money, sell treasuries(deficit spending) and drop interest rates at the first sign of a hiccup. Charting our deficit or the decline of the dollar vs. the Euro ( /USDEUR ) makes it painfully clear where we are heading.

I'm glad I heat with coal !!!

What are you talking about...."we financed 'the war on terror' without raising taxes ..."
What about all the money just pouring in from Iraq's ability to finance its own rebuilding???
(oh...I forgot....the only money pouring is that which is pouring out of the US Taxpayer's pocket into the vaults of Haliburton & Big Oil....Sorry for the confusion)

I'm glad I heat with coal too!! (Inow if I could just get my car to run on it)

Play nice now, boys.

One idea I tried to impress upon my daughter was to make sure you explore and learn about both sides of a topic before you take sides, and don't take what you read in a newspaper article or heard from what's-his-name as the whole truth. With the Internet (thanks to ALGORE for inventing it), research is very easy. Of course all the radical thinkers are spewing forth on websites as well.

I have opinions on this topic as well, but I chose to remain relatively quite at this time.

Regardless the cause of high gasoline & home heating fuels, I think we can all agree that high energy prices are hurting this country very badly. How about this as a stop-gap, partial solution:
Since the US based oil companys are swimming in cash right now, how about if they voluntarily agree to cut fuel prices ( & thus lower their wind-fall profits a bit) as their patriotic way of saying..." We are Americans too, & want to do our part in helping our country in this time of war. We therefore, hereby agree to reduce fuel prices to a point where we can maintain a healthy profit for our investors, but assist our fellow countrymen in their time of need."

I'm keeping the TV & radio news shows tuned in to catch this historic announcement....Should be on any day now....right?

How about Federal,State, and local government lowering taxes,or better yet,eliminate taxes on oil and gas so they can show the American people that they care about the Economy and the people.
Thats the one I'll be waiting for. How long do you think we will have to wait for that to happen?

I've got a theory on the strength of the economy, at least locally where I live.

We've had leash laws around here for at least 20 years, yet my town still has a paid, full time dog catcher. Taxes are too high when we can still afford to have a full time dog catcher.

Next, when Starbucks is still in business, then the economy is good. When people can afford to spend 5 bucks on a cup of coffee, instead of making one at home for a quarter, then there is still plenty of money around.

The living standards we enjoy today are very much higher than that of our parents, and yet, most people can't see it. Why don't we have kids offering to mow our lawns anymore? Because they're lazy? How about because their parents give them enough money that they don't need to get side jobs to make a little cash. How many people do you know who have cleaning ladies? Middle class to lower middle class people have cleaning ladies, lawn services, etc. By definition, middle class people don't have domestic help, so how to explain it?

It is incredible how the price of gas can skyrocket, yet there isn't much complaining. Now I said "much". Who would have thought that the price of fuel could double, and almost triple, and the economy is still growing? Amazing. But it is starting to pinch a bit.

On a side note, saw Joe Kennedy on tv last night talking about home heating oil. He's still getting a cut rate from Uncle Hugo. You want to talk about criminal, there is real, honest to goodness poverty in Venezuela, the kind we can't imagine of in this country, and he's giving his country's oil away to the richest country in the world. And to top it off, Kennedy, protector of the little guy, is being used like a 2 dollar 'ho, and he doesn't even know it. Or worse yet, doesn't care.

There is an enlightening book written in the past two years called "Oil on the Brain" or something like that. It explains the process, profits and history in laymens terms of the business of exploration, drilling, importation,......and the list goes on.
I suggest you guys might want to get it from the Library and read it instead ofwatching TV because its better than the current programming.
This is a good read on what REALLY goes on and why!
drujinin

PS
Don't name call and argue with the people on this board, remember your UNITY is what will overcome the EVIL of the World!

The only thing I don't understand is this......

We're (the public American consumer) are told the reason that gas prices are so high is because the price of oil (the barrel) has gone up. The refineries are simply passing on the higher price hike to the consumer.

Okaaaay....

If the refineries buy the oil at a higher price......and their production costs are still relatively the same over the past few years (Lean/APICS/and Six Sigma will improve things gradually)....why are the oil companies rolling in the LARGEST net profits (we're talking BILLIONS $$$) in history???? If our costs went up proportionally to their costs, than their profits shouldn't be soooooo dramatically higher.

Point #2. Home heating oil.
Homes don't heat with crude. Homes heat with home heating oil. And automobile gas is just a small percentage by-product in the refining process per barrel. Sooooo, if oil supply were perilously stretched and/or barrel prices were soooo high (doubled or more), why hasn't home heating oil jumped 100-150% commensurate with the price of gas???

Maybe our military is getting a huge portion of the supply at discounted prices....that would explain the limited supply excuse (and for good reason - our troops need the diesel/JP8)...but not the insane oil company profits.

Raymond, the outgoing CEO of ExxonMobil—the biggest of the giant oil monopolies—was paid a reported $51 million in 2005. This is roughly $141,000 per day for every day of the year, or around $6,000 per hour—if you include the hours he was asleep.

ExxonMobil could afford Raymond’s exorbitant salary. Last year, it reported profits of over $36 billion—the largest profits for any company in the history of the world. Raymond received a $400 million retirement package this year.

The top three U.S. oil companies—ExxonMobil, ChevronTexaco and ConocoPhillips—reported combined first quarter 2006 profits of more than $14 billion, yet another record. All three are products of recent mergers that have consolidated control of the U.S. oil industry in a handful of huge corporations. These companies have great power to fix and raise prices. Their immense economic and therefore political power insulates them from having to worry about consequences for their blatantly monopolistic practices.

http://www.opensecrets.org/industries/indus.asp?Ind=E01

Gary,

Point #1, the oil companies own the oil, so when the price goes up, they make more money. Example, if a barrel of oil costs them $20 to get out of the ground, and they sell it for $50, they make $30, sell it for $90 and they make $70. Quite obvious, right?

Of course, when the price goes down, like in the late '80s, to $10 a barrel, then the lose money. It doesn't matter what it costs them, all that matters is what their product is worth. It's been mentioned here before, the profit margin on gasoline is in the order of 8-9%. Sell $100 of gas, and they make 8-9 bucks. Microsoft, for example, without having to invest billions of dollars in depreciable assets, has a profit margin on the order of 20%. Sell $100 of product, make 20 bucks.

Again, who's the robber baron?

Point #2, I believe (may not be correct, but I think it is) that there is not necessarily a fixed amount of gas, diesel, kerosene, etc in a barrel of oil. Meaning, that they can change refining processes to get different products in different amounts from a barrel of oil. I believe the refiners can get more diesel from a barrel of oil if that's what they want, or less diesel and more gasoline, for example. During the 1st gulf war, Navy ships needed much more jp-5 than they did dfm, (diesel fuel, marine) and the refineries in Oman had to call in extra ships to take away all the extra dfm, as they couldn't store any more on site, before they could get us the jp-5 for the carriers.

Heating oil has doubled, you're just not starting at the right time. The last time I bought diesel for my boat was 2005, and the most I ever paid was $1.70, and the usual price was 1.40. Now diesel is $3.00. Diesel is heating oil, more or less. And it's doubled. Gas has actually gone up less, percentage wise, than the other fuels. When we see $4.00 gallon gas, then it's doubled.

".....Microsoft, for example, without having to invest billions of dollars in depreciable assets, has a profit margin on the order of 20%. Sell $100 of product, make 20 bucks.

Again, who's the robber baron?....."


The difference is that we Americans have a choice not to buy Microsoft products. They have plenty of competition &, unlike "Big Oil", we dont need their products for our very survival. (I can get to work without a Microsoft product.....I can keep my children from freeezing to death in their beds without Microsoft products)
Maybe corporate greed will push us hard enough that it will become a popular idea to just nationlaize the oil industry & throw the greedy bums out!

Ive been watching this thread for a while now and almost replied a couple of times. But seeing how the emotions were flying I figured I would wait for a bit before posting anything.

I am not up on current events, economics, the science of oil production or refining, nor do I really pretend to understand anything about why the prices are so high (which I think was the original point of this thread).

Having said that, I feel we tend to complain about everything in this country instead of counting our blessings and appreciating our extreme fortune to be living in this country. Even though our capitalist way doesn't always meet the needs of the little guy, we generally do OK, or better than OK.

Our lifestyles are full of gadgets, toys, and generally packed to the gills with stuff (not that I am not one of the worst offenders!) When it comes to the essentials there are very few exceptions to the statement that everyone can re-prioritize and afford to eat, stay warm and live.

So what we are talking about here I think is that we are jealous of those who appear to be doing better than we are and furthermore we don't like it one bit! That is a slippery slope in my opinion because where does it ever end, and how are we ever going to be happy?

I think the simple answer is that prices are high because they can be, and those that control the prices need to maintain there lifestyles of the rich and famous, well in my humble opinion they can keep it. I'm happy with my life and am grateful for what I have. In the final analysis maybe more of that would make this world a better and friendlier place to live.

Devil5052 wrote:The difference is that we Americans have a choice not to buy Microsoft products. They have plenty of competition &, unlike "Big Oil", we dont need their products for our very survival.

At the moment you have a choice but that may change in the future as MS products become more ingrained in our lives. Choosing a OS other the Windows really limits whats available to you, not trying to start a OS war but that is just a fact. If you want to analogize it to gasoline its like saying we have this other gas but you can't drive in 40 of the 50 states with it.

Islander wrote:Gary,

Point #1, the oil companies own the oil, so when the price goes up, they make more money. Example, if a barrel of oil costs them $20 to get out of the ground, and they sell it for $50, they make $30, sell it for $90 and they make $70. Quite obvious, right?

Of course, when the price goes down, like in the late '80s, to $10 a barrel, then the lose money. It doesn't matter what it costs them, all that matters is what their product is worth. It's been mentioned here before, the profit margin on gasoline is in the order of 8-9%. Sell $100 of gas, and they make 8-9 bucks. Microsoft, for example, without having to invest billions of dollars in depreciable assets, has a profit margin on the order of 20%. Sell $100 of product, make 20 bucks.

Again, who's the robber baron?

Point #2, I believe (may not be correct, but I think it is) that there is not necessarily a fixed amount of gas, diesel, kerosene, etc in a barrel of oil. Meaning, that they can change refining processes to get different products in different amounts from a barrel of oil. I believe the refiners can get more diesel from a barrel of oil if that's what they want, or less diesel and more gasoline, for example. During the 1st gulf war, Navy ships needed much more jp-5 than they did dfm, (diesel fuel, marine) and the refineries in Oman had to call in extra ships to take away all the extra dfm, as they couldn't store any more on site, before they could get us the jp-5 for the carriers.

Heating oil has doubled, you're just not starting at the right time. The last time I bought diesel for my boat was 2005, and the most I ever paid was $1.70, and the usual price was 1.40. Now diesel is $3.00. Diesel is heating oil, more or less. And it's doubled. Gas has actually gone up less, percentage wise, than the other fuels. When we see $4.00 gallon gas, then it's doubled.

You are right about part 2. They can get pretty much whatever they want out of a barrel of oil. The diagram showing the different temps at which different elements are distilled out is the old method. Now they crack the larger crued molecules down into whatever they want. I don't know how they do it but it is possible. I believe the way they do it now also produces bigger yields than straight distillation. That is also why diesel is no longer mearly a by product because if they don"t want to make it they will turn it into gasoline or something else.

Matthaus wrote:Ive been watching this thread for a while now and almost replied a couple of times. But seeing how the emotions were flying I figured I would wait for a bit before posting anything.

I am not up on current events, economics, the science of oil production or refining, nor do I really pretend to understand anything about why the prices are so high (which I think was the original point of this thread).

Having said that, I feel we tend to complain about everything in this country instead of counting our blessings and appreciating our extreme fortune to be living in this country. Even though our capitalist way doesn't always meet the needs of the little guy, we generally do OK, or better than OK.

Our lifestyles are full of gadgets, toys, and generally packed to the gills with stuff (not that I am not one of the worst offenders!) When it comes to the essentials there are very few exceptions to the statement that everyone can re-prioritize and afford to eat, stay warm and live.

So what we are talking about here I think is that we are jealous of those who appear to be doing better than we are and furthermore we don't like it one bit! That is a slippery slope in my opinion because where does it ever end, and how are we ever going to be happy?

I think the simple answer is that prices are high because they can be, and those that control the prices need to maintain there lifestyles of the rich and famous, well in my humble opinion they can keep it. I'm happy with my life and am grateful for what I have. In the final analysis maybe more of that would make this world a better and friendlier place to live.

I agree.

There is in fact a fairly constant percentage limit of what products can be had from a barrel of crude. A 44 gallon barrel of crude can deliver about 20 gallons of gasoline at best. There are similar limits on the lighter and heavier distilled products.

coaledsweat wrote:There is in fact a fairly constant percentage limit of what products can be had from a barrel of crude. A 44 gallon barrel of crude can deliver about 20 gallons of gasoline at best. There are similar limits on the lighter and heavier distilled products.

Guess I should have researched before opening my mouth. There are practical limits to each product you can get out of a barrel. Here is a interesting site http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/refinery.html
From the few places I looked they get anywhere from 20% to 50 some % gasoline out of a barrel.
There are many factors that create the differnce in yield two of them where the oil came from and where it is being refined.