High Gasoline Prices: Gouging or Real Business?
64
Gouging the Everyday Joe!
Gasoline prices can jump up ten cents in one day, and decrease two days later. Price gouging is hard to define, but most people believe they recognize it when they see it.
Commodity prices may fluctuate for many unrelated reasons. Sudden demands or problems within the supply chain can cause prices to spike in short order. However, sharp price increases can affect consumers and businesses, and could be evidence of price gouging.
The system does not have built-in, moral circuit breakers. When supplies become limited or hard to get, businesses raise their prices and gouge consumers for the most they can get for their product. When business cannot restrain itself, they slap on an excess profit tax.
Government oil and gas stockpiles can be dumped on the market to drive prices down. But, prices will go up even more before the stockpiles are assembled. And, true, the stockpile might cut people's energy bills a few dollars, but it is doubtful that any significant difference for low-income households or people living on fixed incomes would be realized.
Sometimes, price gouging is spoken with relation to terms of profiteering, which is to say, pricing products or services unreasonably high during an emergency or disaster. Previous efforts to outlaw high gasoline prices through federal controls produced less than successful results, and didn't provide help or relief to consumers.
Many people think gas station owners raise their pricing when the media reports of a potential natural disaster, such as a hurricane or blizzard. But, if the storm dissipates and becomes a non-event, it's likely gasoline prices will not be lowered, and Americans might experience continued gouging.
Taking into consideration that many people have lost homes and jobs throughout the falling economy in 2009, even the most frugal consumer would have a tough time to purchase enough fuel to accomplish necessary errands. And, people on fixed incomes might be forced to put off driving to scheduled doctor appointments, shopping, or outings because of inabilities to purchase additional gasoline for their vehicles.
So, who is getting rich at the gas pumps?
To start with, many Americans hold stock in oil companies, either directly or indirectly, through employer investments. Retail gas prices fluctuate when crude oil prices, and supply and demand change, but gross profit margins per gallon, for the most part, remain stable.
The federal government receives about .59 cents per gallon through gasoline taxes, 7 ½ times or 750% that of the oil producers, and 20% of the price at the pumps. If oil companies were to cut their profit margins by 50%, the price of gas per gallon would drop just .04 cents per gallon. But, if the federal government was to cut their intake by 50%, gasoline would drop .30 cents per gallon. Additionally, if the federal government did not tax gasoline, prices could drop an additional .28 cents, and oil companies would still reap a 2.5% gross profit margin.
However, if oil companies wanted to gouge the American public, they could do so by increasing per gallon profit margins. However, keeping their gross margin at 2.5% results in increased overall profits as consumption increases. So, why bother?
However, 20% of retail gasoline pricing does demonstrate efforts to gouge consumers through taxation. It appears that consumers are, in fact, being gouged at the pumps, and have been for many years by federal and state governments.
And, just where does this money go?
Using $3.00 per gallon of gasoline, for example, the breakdown would be as follows:
Gasoline retailers: .01 cents per gallon
Oil Company: .08 cents per gallon
Refinery: .29 cents per gallon
Marketing/Dist. .32 cents per gallon
Taxing: .59 cents per gallon
Cost of Crude $1.71 per gallon (delivered)
Who's gouging who?
PrintShare it! — Rate it: up down flag this hub










iMoneyOnline says:
7 days ago
One very important thing to remember is that in the US the 'gas taxes' (both federal and state) aren't put into the general fund. They're allocated to transportation projects and is therefore more of a usage fee than a true tax.
Regardless, there are ways to save on your fuel usage.