The price of gas keeps on rising, nothing comes for free.
"Price of Gas" Bloc Party, off Silent Alarm
WASHINGTON — When the average price of a gallon of regular gasoline peaked at $3.07 recently, it was partly because the nation's refineries were receiving an estimated 99 cents on each gallon sold. That was more than three times the amount they earned a year ago when regular unleaded was selling for $1.87.
Companies that pump oil from the ground swept in an additional 47 cents on each gallon, a 46 percent jump over the same period.
For a company such as Exxon, producing a barrel of oil from an existing well costs about $20, according to analysts. When the selling price exceeds that, the increase is almost all profit, they said. After Katrina bore down on the Gulf Coast, the price of oil set a record, approaching $70.
(Source: Justin Blum, Washington Post, reprinted in The Seattle Times)
Refiners processing the oil into gasoline faced lucrative market conditions. They may have had to pay producers more for the oil, but they were able to sell gasoline for higher prices as a result of the short supply and the spike on the mercantile exchange.
In their view, the increases were justified because the market dictated that their final product — gasoline — had risen in value.
Refiners, particularly those with most of their facilities outside the path of Katrina, cashed in. Analysts predicted a windfall for companies such as Philadelphia-based Sunoco, which continued operating normally during the hurricane.
Exxon Mobil, the Irving, Texas, behemoth that produces and refines oil, reported in July that its second-quarter profit was up 32 percent, to $7.64 billion. Analysts expect Exxon's profit to soar again this quarter.
I'm paying over $50 to fill my car with gas these days, which is something I wouldn't mind if it were going towards something like conservation or relief to the people in New Orleans. But when it's simply going into the pockets of Exxon-Mobil, that pretty much just sucks. I'm sure Bush and the Republicans are right on top of this one, given how much they hate the oil industry and big business. I'm hoping that some of that $7.64 billion that Exxon made in 3 months goes to the American Red Cross. I'm not holding my breath though.
And oh yeah, if you think that rising oil prices aren't hurting the economy, you're fooling yourself...
NEW YORK (CNN/Money) - Consumer confidence took the biggest tumble in nearly 15 years last month as Hurricane Katrina and the spike in gasoline prices put a surprisingly big dent in Americans' expectations for the economy.
The Conference Board said its consumer confidence index sank to 86.6 in September from a revised 105.5 in August, which was before the storm and the rise in gasoline prices that followed. Economists surveyed by Briefing.com had forecast that the index would fall to 95.
The drop was the biggest since October 1990 -- when gas prices were climbing after Iraq's invasion of Kuwait and ahead of the first U.S.-Iraq war -- and took the index to its lowest since 81.7 in October 2003.
A downturn in consumer confidence, especially if prolonged, can cause a sharp drop in spending. That in turn can slow the U.S. economy, which depends on consumer spending for nearly three-quarters of economic activity.
Comments