Many of you may have noticed that the prices at gas pumps are well above four dollars per gallon these days. While oil companies may be raking in multibillion-dollar profits, they are not the source to blame. Instead, we need to blame ourselves.
Costs of fuel are a reflection of global demand. There is a limited amount of gasoline and other petroleum products that are produced every day, so when individuals increase their needs for energy, prices increase based on simple laws of economics. The war in Iraq has caused for declines in oil production over the past couple of years, which in combination with the struggling production issues in a few other countries, has led to lesser amount of petroleum available per day. The growing industrial economies of China and India have also established more demand for fuel, and with America continuing with its uninhibited desires for oil there is not enough to go around without affecting pricing.
The price per gallon that we pay every time we decide to refuel our car is composed of a variety of costs and fees, some of which are not even imposed by the oil companies. Crude oil accounts for over half the cost of gasoline, obviously because it is the main resource necessary for the product. On the other hand, refinery costs, taxes, and minor expenditures account for the remaining factors that affect prices. The refining process converts crude oil into usable petroleum commodities, but only accounts for a small margin of profit for oil giants. On the other hand, federal taxation makes up nearly 20 percent of the cost for gasoline, something that helps with government budgeting but simply acts as another tariff on the general population because, let’s face it, almost everyone uses a car in some form or another.
Exxon-Mobile recently released their quarterly profit estimates at a staggering 11 billion dollars. While some would scoff and claim that there is no way oil companies are not making massive amounts of money off of gasoline, this is a reflection of the profit scaling that occurs with land speculation. These companies survey land and potential oil fields with the idea of making investments that break even if oil prices are approximately $25 per barrel. Considering the millions of barrels that are produced a day, these are very costly. However, crude oil is currently trading at nearly $113 per barrel, meaning there is an $88 margin of profit per barrel on their investment. This accounts for the extremely high profits that oil companies are capable of producing, not the prices charged at your local pump.
If there is any way to realistically make the price of a limited commodity decrease, it is to slowly reduce the taxation of it. This proves a challenge considering these tariffs greatly affect the budget and effectiveness of the federal government in carrying out policy decisions. If anything, this indicates that petroleum prices will only continue to rise over time. At which point will we say, “Enough is enough” and begin to seek out energy alternatives that to a source that our entire societal structure has fixated itself upon.
Only time will tell.
