Real Price of Oil

Cecil's Columns/Staff Reports
1

Sheesh Cecil,

In your Sept. 15, 2006 article on the price of oil, you say:
“gas prices a generation from now, maybe sooner, will make the cost of a fill-up today look amusingly cheap.”

I guess everybody is allowed to speculate, but there doesn’t seem to be much evidence from past history to suggest that this is so if you are adjusting properly for inflation.

I remember the old Purple Martin filled her up for $0.30 per gallon back in 1972, and then for the staggering price of $1.00 per gallon after the oil embargo in 1973. But of course you could get bannanas for 3 cents a pound back then too. How do this year’s prices of $3.00 per gallon stack up against the 1972-73 prices AFTER you account for inflation (as all good journalists should do)? I’d guess right about in the middle.

As always,
Sheik Yabooti

2

Welcome to the SDMB.

A link to the column you’re commenting on is appreciated. Providing one can be as simple as pasting the URL into your post. Like so: http://www.straightdope.com/columns/060915.html

3

This web site chart shows that the 2005 average inflation-adjusted price is at its highest level since the 1981 spike. Current prices are at about the same level ($2.50/gal). Compared to the pre-1973 embargo price, that’s up a little over a third.

However, Cecil’s comment must be viewed in light of the fact that older people ALWAYS discount inflation when talking about the “good-old-days.” To say that inflation (which has as a large component energy prices) will mean higher prices anyway is saying nothing but exactly what Cecil was saying. :slight_smile:

4

in your column.

First, as I understand it, there are only five gasoline refineries in the United States (there are plenty of chemical refineries). I also believe these operate at a very high percentage of their capacity. They are either owned or controlled by the big oil companies and because of this and other factors, there is virtually no competition in the oil industry. Where is their incentive to explore, open up new fields, and increase the supply of oil??? Where is their incentive to build new refineries? Anything they did would only serve to reduce their profits. The Feds allowed Exxon and Mobil to merge so that “they could better compete in the world market.” If you believe this, you’ve been smoking too much straight dope. If anything, they did it to eliminate the last bit of competition. They bought off Congress and have become a defacto partner with Opec. Again, where are they opening up new field??? Seems the Chinese are going to start drilling off Cuba and they will be doing slant wells directly into fields owned, but not utilitzed by US companies. (Yes, environmentalists have been a thorn in their side, but come on, do you believe they couldn’t overcome that if they wanted to?)

Next thing you might want to ponder. THe increasing demand from the Chinese is serving to drive up the cost significantly. If you go down to Wal-Mart, Best Buy or Home DEpot, you will find that most of the things Americans buy are made in China. We are driving their economy! The money you are saving at Wal-Mart, you are more than paying for at the pump and increased prices for energy at every level of the food chain.

What would happen if the US struck a deal with Mexico (which has more oil than God) to develop their resources in exchange for a sweet deal on crude? What would happen to the immigration problem, which costs us a fortune to police (and jail and prosecute and defend), if Mexico suddenly had an economy? How flexible might China become on issues like Iran and North Korea, if they thought we had them by the cajones?

US energy policy combined with the environmental policy sucks, and it ain’t all Bush’s fault.

The Iraq war was the first move to prevent any Arab power from gaining nuclear weapons. There are alot of reasons for the war there, but one of them is that we now have defacto control of an oil producing country, should Iran and Hugo Chavez decide to play dirty in their attempts to get nuclear weapons. (YEs, Chavez wants nukes)

5

Sickly Shut-in, on the one hand your theory that the oil companies are colluding to reduce the supply of oil is plausible and makes sense. In fact, I agree that that is what is pretty much happening.

However, it isn’t necessarily in the best of everyone’s interests that we get the oil out of the ground as fast as we can.

I just wish that the money coming from metering out this finite resource (and in our effective market system, all metering is done by setting prices and collecting money) wouldn’t go into fat cat pockets, but rather toward the common good.

That’s where the crime is.

6

Regarding your other points, Sickly Shut-in

Your argument that we should wish for China’s economy to not develop so that we could have more oil for ourselves… is selfish, in the least, and likely not even correct if our one goal were our own well-being.

Regarding developing oil in Mexico… I know zero about this, but why wouldn’t Mexico be developing it already? What, they’re too lazy?

it’s a dirty joke, get it? no, i don’t think they’re lazy and that’s the point.

As for the Iraq war preventing arabs from getting nuclear weapons… Iraq’s program was a joke, and I’m pretty sure all we’ve done is given the countries whose programs are less so, such as Iran, more spirit. Lastly, don’t get me wrong, but you’re a retard when you say that owning Iraq supplies us with sufficient oil to easily wistand emposing tough sanctions on Iran and Venezuala. We import something like 12m barrels, while Iraq can only churn out 2. Iran produces 4 and Venezuala 2.9. Besides, are you actually saying that a sovereign Iraq would cut us off because we cut off Iran? Their bittery enemy? Or that they would refuse food, medicine, and bribes for the sake of an ally? Wtf are you smoking? Hippies are idiots when they say that’s why america invaded, and you’re just as bad (or nah, just a tad more ridiculous) when arguing for the war. The irony is that people like you make the idiot hippies right.

7

*er, i should have stated export numbers, rather than production numbers. To america’s 11.8m imports, are Iraq’s 1.5m, Iran’s 2.6m, and Venezuala’s 2.4m exports(as of '4). Mexico, though, does seem to export 1.8. I wonder, though, into whose hands that money is going. I wouldn’t be surprised if it were the damn American companies again. Yeah, I’d be pissed off if it weren’t being directed into their economy (and god knows American executives don’t buy many things made in Mexico).

However, if we merely started to develop the oil in Mexico or anywhere, it would drive down the price. Afterward, sanctions on an oil-producing country would raise the price just as they would have before. They might raise it to the same, or even lower, price that it was at before the development. But no one will care, it’ll hurt the same. You would have to develop a large amount of capacity and then purposefully not turn it on, saving it for an emergency. But I think that in the eyes of Americans and the whole world you’d then become about as popular as OPEC.

Why not just build up oil reserves to last us a decade? If people were honestly worried about such things, they’d be taking the more sane approaches (or at least pursuing them in parallel).

8

You may call it selfish to demand a little cooperation from a country who owes its economic rise to us. Instead of fighting us on North Korean and Iranian nuclear development, they could work with us. And if you don’t think that’s important, then you are the idiot. At what point do we put our foot down on North Korea? Twenty nukes? Two hundred nukes? Two thousand nukes? Twenty thousand nukes? They aren’t going to stop on their own, pal.

Selfish to transfer that economic prosperity to Mexico, where they are so poor that thousands are crossing our borders daily to let us pay for their education and healthcare? I call it sound foreign policy.

I never said Iraq could replace all of the oil from Venezuela and Iran, but it might mean the difference between recession and total economic collapse. How would you like that? Do you think that will help us set our priorities straight? Do you think that will help us keep Iran from eventually having their own nuclear arsenal of say…oh, I don’t know…maybe 5,000 nukes? Our quick defeat of Saddam’s army and our possession of that oil are important moves in this chess game. Don’t think the Iranians aren’t wondering about it.

That is why we are in Iraq, believe it or not. I suspect people with a lot more political savvy than you are I took a long look at a tough situation, and decided that either we take out Saddam and hope Iran complies, or we take out Iran, and hope Saddam complies. THere weren’t ANY good choices.

Maybe it is about time the US government started making some long-term decisions. And in this case, democracy in the middle east sounds like the only solution short of all out war with Iran and their radical fundamentalist maniacal leaders. It may come to that yet, but at least we are trying.

It sounds to me like you want to continue the hands off policies of Bill Clinton. (Hands off, that is, if you don’t include giving the Chinese missile technology or plutonium to the North Koreans). Well, his policies got us 9/11. His lieutenants are the ones who passed laws making it illegal for the CIA to talk to the FBI. He is the president who wouldn’t take Sandy Berger’s calls when they had Bin Laden in his sights. Yes, that’s right. And the next attack could be ten times worse. MAybe we should delay action until Iran does have nuclear weapons. Hey, there’s a good idea. As my friend told me, “Not enough Americans have died yet for the Democrats to care.” And if you’re waiting for Europe to care…

You wouldn’t be making such statements if you’d bothered to watch ABCs The Path to 9/11. As Moussad, the leader of the anti-Taliban rebels asked, as men with night vision goggles surrounded Bin Laden’s encampment, only to be turned away by Berger and Tenet, “Are there any men left in Washington DC?”

And as for your last question or two, maybe I do need to smoke some pot. Perhaps then I’ll be able to understand what in the heck you were talking about.

9

No, I guess I kind of see your point there. They do owe us. However, the only way North Korea is going to own hundreds or more nukes, or hell, even dozens, is in Kim Jung Il’s dreams. Besides, all he wants is some fucking food for his starving people (the nukes are mostly just hand-waving to get more aid). A lot of the fault in this particular situation is on us, for trying to destroy their country by obliterating their people with sanctions (and another reason for nukes is so we don’t invade). This whole Hate-Communists-In-The-Name-Of-God spiel has to end already. It’s ridiculous. Especially since the best way to make people think like us, is to make them prosperous like us (prosperity leads to liberalism and democracy, always). Alternately, to make a people military fanatics you make them suffer for a while.

Sigh, let me repeat myself: IRAQ WOULD NEVER CUT US OFF. That would be suicidal for such a frail nation. It would have always continued to sell its oil (unless we restart the Crusades or something). Only idiots think that invading Iraq would stabilize our supply of oil (even supposing we had turned it democratic). Also, idiots don’t realize what a market is and think that by owning Iraq we actually get something out of it. Oil will always have to be bought and sold, and that exchange will have to happen at the market rate.

There is no significant strategic reason for us to occupy Iraq for its oil. There might be a little tax benefit to have our companies do the drilling. There might be an advantage if we ever decide to go into World War III and invade the whole Middle East (the only situtation in which we should fear Iraq cutting us off). All other times, it’s the market as usual. Oil is a commodity, and it costs the same to America no matter who owns the wells.

As for democracy in the Middle-East being the solution… democracy is not something we can just come in and put in place. Democracy always comes from the people, and is always the result of extended prosperity (or other feelings of fortune). When people feel good about their recent history, they become liberal and peaceful. When people feel bad about it, they become militant and fanatical. Just like chimps and other animals.

People often liken easing off on the Middle East to the appeasement of Hitler. Sure, once Germany got its mind set and got going, trying to please it wouldn’t get it to turn around. However, if we hadn’t tried cutting Germany a new asshole after WWI and empoverishing its people, it wouldn’t have turned fanatical in the first place. Cutting sanctions and not invading will likely strengthen the leaders in the short term. But that is the ONLY way of accomplishing what we would like in the long term.

No, I wouldn’t want to continue Bill Clinton’s policies. His policies were economic sanctions. In 1991, the successful, secular Iraqi people really would have sprouted a flourishing democracy following an American invasion. A decade later, the reason they won’t now can be blamed squarely on those policies.

Regarding your fears of future terrorist attacks… if you are worried about conventional attacks, you are GREATLY overconcerned. 3k dead once a decade is bad, but a bit dwarfed by the 100k dead from murder in the same time. Or the tens of thousands we’ve killed in Iraq. If you are worried about a nuclear attack, then the Republicans are hardly doing anything about this real (if unlikely) danger. (Like securing ports and etc.)

10

Iraq is what the Republicans are doing about future nuclear attacks. As I said, it is one chess move to keep all these idiots from getting them.

And you don’t think if Saddam was still in power, he wouldn’t be trying to get them. And you don’t think he would team with Iran and Venezuela to squeeze us, especially if we tried to bomb his (now) and their nuclear facilities?

It wasn’t the US that “squeezed” the middle east into finally attacking us. It was dictatorial regimes that rise and survive by terror. Look at Hezbollah in Lebanon. Cut off a few heads of leaders and suddenly you’re part of the government. Take the US’s money. We gave the Taliban $200 million, mostly from Clinton, most of which went to Bin Laden, before 9/11.

These leaders don’t want peace and harmony. They want control of much of the world’s supply of oil. They want to export Islamic Fundamentalism across the globe. They want nuclear weapons.

I continually hear bleeding hearts talk about just getting along. Let the UN handle it. Like they handled Darfur? Like they handle Iran? I hear all these suggestions about what we should do, but not one suggestion that will keep the Iranians from developing nuclear weapons, which they will export to terrorists. How can you not believe this? Iran is the biggest exporter of terror in the world. You won’t find any fingerprints, or car license plates on exploded nuclear weapons. How would you like it if they found a way to smuggle ten of them into the US? Maybe they explode one and tell us the others are hidden and unless our women start wearing burkahs, they’ll explode the next one?

You say North Korea will never get very many nukes. What do you base that on?

Democracy doesn’t just happen overnight. We remained in Japan for ten years after WWII and longer than that in Germany. Now they are two of our strongest allies. And you say all we really should have done is just left Iraq alone and maybe given them more money? Right.

SAddam was paying the families of suicide bombers $25,000 or was it $50k. Suddenly he’s going to turn nice guy and let democracy prevail.

You obviously didn’t watch the path to 9/11 because it contained information you don’t want to face. YOu want to bury your head in the sand because once upon a time America got in a war it shouldn’t have.

One other thing. You might try reading War and Rememberance, or talk to a scholar on WWII. The US and England were very close to losing that war. If a couple of decisions had been made differently, we might be speaking German today. We now know that Hitler had plans for taking over America once he completed his conquest of Europe. He too wanted nuclear weapons. There’s no law that I know of that says democracy is somehow a superior form of government that will eventually prevail across the world. This is the age of nuclear terrorism my friend. Before long Chavez will have them, maybe Iran and who knows who is next - somewhere in Africa. But one thing I know for certain, you can’t have a country that supports terrorists, like Iran, develop nukes. Because they won’t stop until we are all dead and the earth in uninhabitable. The time to stop it is now. Wake up.

11

Check out Krauthammer’s latest article from yesterday’s Washington Post.

There is no easy solution, but you can bet there will be a confrontation. So get ready.

12

[QUOTE=Sickly Shut-in]

First, as I understand it, there are only five gasoline refineries in the United States (there are plenty of chemical refineries).
[/QUOTE]
Who in the world told you THAT? Hell, there are two gasoline refineries in Toledo, Ohio ALONE. Gasoline refineries abound around the country; California has plenty of them.

If the rest of your argument is grounded upon factual bases as poorly understood as this first comment, it isn’t worth bothering to respond to.

13

[QUOTE=DSYoungEsq]
Who in the world told you THAT? Hell, there are two gasoline refineries in Toledo, Ohio ALONE. Gasoline refineries abound around the country; California has plenty of them.

If the rest of your argument is grounded upon factual bases as poorly understood as this first comment, it isn’t worth bothering to respond to.
[/QUOTE]

The EIA groups refineries into five reporting regions in the US; that might be what they’re thinking of.

http://tonto.eia.doe.gov/dnav/pet/pet_pnp_wiup_dcu_nus_w.htm

There are indeed more than 5 gasoline refineries. This link shows 149 crude oil refineries total in the in the US. It does specifically say on the link the gasoline production, but given the large proportion of crude oil refined into gasoline it’s not hard to say that most all of them produce gasoline. At a minimum, no five refineries have the capacity to supply the US even if they had 100% conversion.

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/refinery_capacity_data/historical/2006/table1.pdf

14

LIke I said, there are lots of refineries. They all distill oil into other products, so no one has said anything to disprove my original assertion. There may also be some refineries that take gas and add ethynol or whatever.

Whether that is right or wrong, it only would affect my theory about the oligopoly that is wringing every cent they can out of the gas buying public. There is very little incentive to add new fields or new refineries. They are defacto partners with Opec. The higher the price goes, the more money they make.

As far as why we are in Iraq, only a handful of people in the world know exactly why that decision was made, but my theory is better than any you can come up with. We are there to stop Arabs from getting nuclear weapons. And once again, I get all this flak from naysayers who don’t have one useful suggestion about how to stop Iran from obtaining nuclear weapons. Not one.

15

[QUOTE=Sickly Shut-in]
LIke I said, there are lots of refineries. They all distill oil into other products, so no one has said anything to disprove my original assertion. There may also be some refineries that take gas and add ethynol or whatever.
[/QUOTE]

Good grief, there are 12 subdistricts for refinery production of finished motor gasoline, all of which produce substantial amount of gasoline. Unless these refineries span multiple States, there are at a bare minimum 12, and this is from my first Google hit.

http://tonto.eia.doe.gov/dnav/pet/pet_pnp_refp2_dc_nus_mbbl_m.htm

Second, gasoline production in 2005 was 3,330,805,000 barrels, versus 7,539,370,000 barrels of oil input. So those 5 refineries dealt with 40% of the production, and the other 144 are just there to handle the rest?

http://tonto.eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbbl_a.htm

Third, I could dig up after a bit a State-by-State and refinery-by-refinery gasoline production table, but I’m not going to, as it’s up to you to prove your assertion that “there are only five gasoline refineries in the United States”. I suppose it’s theoretically possible that there are only five refineries that produce absolutely nothing but gasoline, but that would be a very uneconomical way to run a refinery.

16

I thought Cecil did a pretty good job covering a complex topic in a few brief paragraphs. I will take issue with a couple of things:

Maybe not. The question of when peak oil is going to arrive is always a hot topic and you have the debate between those who beleive there is a lot of geologically formed oil, and those who maintain the majority of the supply formed from decayed biomass. How much of the former there is goes a long way to determining what the ultimate supply is.

More importantly, just in the last two weeks Chevron and Devon energy made a rather major discovery in the gulf. It’s important for two reasons. First, it’s about as big as the Alaskan oilfields and could double our reserves. More significantly, it signifies that what was hitherto impossible is now merely difficult. IIRC they drilled 28,000 feet in 17,000 feet of water. This opens up a large portion of the earth to oil exploration.

Considering how, dire predictions concerning oil prices and supply have been going on for over thirty years with little effect, I’m surprised to see Cecil make such a common mistake, finding surety where there is none.

This really isn’t at all how it works. Most any indpedandant gas station or heating oil retailer will hedge his supply. Let’s say you have a tank with 100,000 gallons of go-juice in it. You paid $1.50 a gallon for it. Your customers will expect to pay the current market price for it. If it suddenly drops to $1.00 they will not be willing to pay the $1.60 you need for it.

If you expect your supply to last for three months, you buy a futures contract that gives you the right to sell 1/3 of your gas for $1.50 for each of the next three months. Your futures contracts will increase proportionately with the drop in gas and you will be able to sell your gas at the current market price (plus your profit margin) and maintain a profit.

Buying these futures contracts costs money. Normally this would eat into your profit margin, but what you do is sell a matching contract giving somebody else the right to buy your gas for $1.50 for each of the next three months. If the price goes up, the value of the contract goes up but so does your inventory of gas to offset the loss. The premium you receive writing the contract goes to pay for the contract you purchased.

Virtually all suppliers hedge their inventory in this fashion.

17

[QUOTE=Sickly Shut-in]
in your column.

First, as I understand it, there are only five gasoline refineries in the United States (there are plenty of chemical refineries). I also believe these operate at a very high percentage of their capacity.)
[/QUOTE]

Ridiculous, as has been pointed out by others. There are over 100 refineries producing gasoline. If your refinery isn’t making gasoline, you are losing out, as gasoline is very valuable compared to heating oil, heavy fuel, and asphalt. There are a few old smaller refineries in the US that don’t make much gasoline, but this is because the cost of upgrading units is too high.

[QUOTE=Sickly Shut-in]
They are either owned or controlled by the big oil companies and because of this and other factors, there is virtually no competition in the oil industry.
[/QUOTE]

Ridiculous as well. Valero is the biggest refiner in the US and they don’t produce a single drop of crude oil. All crude throughput is purchased. The refining industry is quite competitive, well, it has been since Rockefeller at least. What is your evidence that there is no competition in the oil industry?

[QUOTE=Sickly Shut-in]
Where is their incentive to explore, open up new fields, and increase the supply of oil???
[/QUOTE]

Umm, profits? Why wouldn’t you want to find new supplies? If you do, you can sell that oil for money which can be exchanged for goods and services. Did you know that the starting salary for a graduating petroleum engineer is nearing 6 figures? What the hell do you suppose they are paying them to do, smoke cigars down at the Houston Petroleum Club? In my rolodex beside my computer I have business cards of hundreds of people all actively engaged in finding and developing new oil fields. Somebody already mentioned the big Chevron strike in the Gulf, do you think Chevron found it by accident?

[QUOTE=Sickly Shut-in]
Where is their incentive to build new refineries? Anything they did would only serve to reduce their profits.
[/QUOTE]

Building a refinery in the US is difficult and risky because of environmental regulations and NIMBY attitudes. If I had a permit for a greenfield refinery in hand I’d be in tall cotton. While we haven’t built a brand spankin new refinery in the US since the 80s, we have added over 2 million barrels of capacity to existing refineries on the last decade, per this graph from the eia. These capacity additions are not free, in fact, they cost a king’s ransom. Doesn’t go very well with your theory now does it?

[QUOTE=Sickly Shut-in]
The Feds allowed Exxon and Mobil to merge so that “they could better compete in the world market.” If you believe this, you’ve been smoking too much straight dope. If anything, they did it to eliminate the last bit of competition.
[/QUOTE]

Yeah, they eliminated all the competition except the little mom and pop guys like ConocoPhillips, Chevron, BP, Shell, Total, EnCana, Anadarko, Devin, Apache, Hess, etc.

[QUOTE=Sickly Shut-in]
They bought off Congress and have become a defacto partner with Opec.
[/QUOTE]

OPEC acts as a cartel by setting production quotas for its members. Could you please cite that ExxonMobil adheres to any production quotas? And while you’re at it, go ahead and cite the buying off congress part.

[QUOTE=Sickly Shut-in]
Again, where are they opening up new field???
[/QUOTE]

Lot’s of places. The Gulf of Mexico springs to mind but how about Brazil, North Africa and Nigeria to name a few.

[QUOTE=Sickly Shut-in]
Seems the Chinese are going to start drilling off Cuba and they will be doing slant wells directly into fields owned, but not utilized by US companies. (Yes, environmentalists have been a thorn in their side, but come on, do you believe they couldn’t overcome that if they wanted to?)
[/QUOTE]

It is currently illegal to explore most of Florida’s coastal waters. But why doesn’t “big oil” just buy off congress like they like to do? And you can bet your sweet ass that if a Chinese well bore extended into US waters, there would be some trouble.

[QUOTE=Sickly Shut-in]
Next thing you might want to ponder. THe increasing demand from the Chinese is serving to drive up the cost significantly. If you go down to Wal-Mart, Best Buy or Home DEpot, you will find that most of the things Americans buy are made in China. We are driving their economy! The money you are saving at Wal-Mart, you are more than paying for at the pump and increased prices for energy at every level of the food chain.)
[/QUOTE]

Ridiculous. 'Nuff said.

[QUOTE=Sickly Shut-in]
What would happen if the US struck a deal with Mexico (which has more oil than God) to develop their resources in exchange for a sweet deal on crude? What would happen to the immigration problem, which costs us a fortune to police (and jail and prosecute and defend), if Mexico suddenly had an economy? How flexible might China become on issues like Iran and North Korea, if they thought we had them by the cajones?)
[/QUOTE]

Mexico is a little bit sensitive about allowing foreign investment in their energy sector. In fact, I believe it is expressly forbidden in their constitution. If they were to allow it, you would see competitive bidding for prospects from companies all over the world, like you see now in Brazil to give but one example. Also, I don’t know how much oil God has (his figures weren’t included in this pdf) But Mexico has much fewer proved reserves than the US.

I recommend that you know what you’re talking about before posting next time.

18

Lots of things to reply to:

First: so Mexico is sensitive. A lot of people here don’t like having 12 million illegal immigrants. The money they send home is an important factor in their economy. I think they would be open to an agreement with America that would help employ those workers, especially if we start enforcing the immigration laws with employers and especially if it involved US investment in Mexico.

Oh, so one new oil field has been “opened up”. Gee, I haven’t seen that reflected in the price at the pump yet. The oil companies have been slow to respond because they are getting rich as supplies “dwindle”. In reality, we are finding there are immense reserves out there, but what is the incentive of these companies to bring it in? They love the high prices.

Seems a month ago a Chicago gas station dropped its price by fifty cents a gallon. Seems the owner was happy to light his cigars with twenty dollar bills instead of fifties. The outcry from the competition and the government was deafening. Haven’t heard the resolution on this yet, but it sure doesn’t sound like a full fledged competition situation.

Oligopoly is not competition. Here’s an excerpt from Public Citizen’s website siting lack of competition in refining. http://www.citizen.org/cmep/energy_enviro_nuclear/electricity/Oil_and_Gas/articles.cfm?ID=11829

“The largest five oil refiners in the United States (ExxonMobil, ConocoPhillips, BP, Valero and Royal Dutch Shell) now control over half (56.3%) of domestic oil refinery capacity; the top ten refiners control 83%. Only ten years ago, these top five oil companies only controlled about one-third (34.5%) of domestic refinery capacity; the top ten controlled 55.6%. This dramatic increase in the control of just the top five companies makes it easier for oil companies to manipulate gasoline supplies by intentionally withholding supplies in order to drive up prices. Indeed, the U.S. Federal Trade Commission (FTC) concluded in March 2001 that oil companies had intentionally withheld supplies of gasoline from the market as a tactic to drive up prices—all as a “profit-maximizing strategy.” A May 2004 U.S. Governmental Accountability Office (GAO) report also found that mergers in the oil industry directly led to higher prices—and this report did not even include the large mergers after the year 2000, such as ChevronTexaco and ConocoPhillips. Yet, just one week after Hurricane Katrina, the FTC approved yet another merger of refinery giants—Valero Energy and Premcor—giving Valero 13% of the national market share. These actions, while costing consumers billions of dollars in overcharges, have not been challenged by the U.S. government.”

I might have been wrong about the number of gas refineries but I think the crux of the argument still holds. Keep in mind that half the oil we get is imported, and I’ll bet a bunch of that comes in on tankers and is refined at major refineries in major oil ports. I’ll bet you there is a bottleneck somewhere that is being worked by the oil companies. Before 1974 America had price wars. When was the last time you heard about one of those? There is no competition when it comes to gasoline. The industry is controlled by an oligopoly. That’s the way to go in America. Heard the four big cell phone companies just announced they’ll be running ads on your cell phones. Sounds like they’ve been talking to each other.

And why are my comments about us driving the Chinese economy ridiculous?

Oh, and by the way, thanks for all the suggestions on keeping nukes out of the hands of Iranians. It has to be real frustrating for you to realize that the moves of a Republican Administration were the best moves that they could make under the circumstances, not to mention the continued ignorance of the democratic party in their support of cutthroats like Iran’s Immadinawad. I may have heard it one Neal Boortz, that Iran has a national holiday called Death to America or something like that. Thanks, MIke Wallace for that cutting interview on a leader who wants Israel wiped off the face of the earth!