Gas Prices

Yes, high gas prices suck. You'll never hear me say otherwise. Also, price gouging is bad. It's illegal. We know this.

That said, I have to go against popular opinion for a second. Remember a few months when gas was totally outrageous? Of course you do. Then we find out that the gas companies posted all-time high profits. I, like everyone else, was outraged. "Who are these fat cat oil-barons, gouging us hardworking folk with their high prices and making a profit!"

But if you think about it, could it just be math? Now, I'm being devil's advocate. But like all companies, don't the gas stations make a percentage profit? They buy the oil for one price, refine it, and sell it for a percentage more so they can make a living. Let's say their profit is 5%. When gas is $1.00 a gallon, and they sell 1000 gallons a month, their profit will be $50. Then, for the first time in history, gas hits $5 a gallon. The station sells their 1000 gallons, and now their profit is $250- a record.

"Shenanigans!" we cry! "This is crap!" "Why should the oil companies be making that much money?" Now again, devil's advocate: Are we or are we not a capatalist society? Who are we to tell them that they have to make less of a profit because their industry is expensive? That's (loosely) like having a nation-wide bacon shortage. Let's say a slice of bacon goes up $0.80, now Panera's bacon-turkey bravo sandwich went up $1.00. Would we be up in arms? Would we say hog-raisers are gouging us when we need ham the most?

Profits are based on a percentage. Would we expect congress to dictate that McDonald's only make 50 cents a sandwich, whether it's that lame little regular hamburger or the super duper double big Mac? No, that's insane, and it's not how the world works.

I keep seeing people on the news complaining that "Bush needs to do something to get these prices down" (these complainers are usually driving SUVs). No, loser, you need to get your consumption down. There's a reason you won't hear me shouting about gas prices: because I control how much I use. It's not like they're taxing oxygen or something. Where does this attitude come from? People set up their lifestyle to use so much gas, then when they can't afford it, they complain that the government needs to intervene. Where's the personal responsibility? Use how much gas you can afford!

Now I know people need to get to work, and we should definitely watch the oil barons a little closer, but take a little initiative. If you want a crusade, check out the soaring real-estate prices in Southern Maryland. That's something that expensive for no reason- people can't afford homes. Sure we're mad at the developers and builders, but did we demand that Bush get the St. Mary's county housing prices down? No, we looked at our finances and bought a house we could afford.

If I have a point, I guess it's this: manage your own life and you won't need to demand that the government manage it for you. Now I'm off the soapbox.

Update:
I have to clarify- I'm not really defending big oil. My main point when I set out on this rant was that I'm sick of people complaining about gas prices when they aren't doing anything to use less gas. I decided to throw in my little profit theory, and it became clear that I know very little about business. Jim (my step-dad) explained to me that they're supposed to adhere to price based on their fixed and variable costs- so when the price of oil goes up 10%, that shouldn't lead to a 10% increase in profit. So, yes we need to monitor oil companies and make gas prices fair. I never believed that big oil was a group of saints only making enough to feed their families. No word on how Panera operates.

My main problem is people demanding that we crack open reserves or increase drilling because gas went up 10 cents a gallon. Another thing Jim pointed out is that out of new cars sold, the same percentage of them have been SUVs since 2004. That's what's great about America- we don't learn very quickly. Back in high school Mr. Farr (my US histroy teacher) talked about the gas crisis in the seventies- how it forced everyone to buy smaller, more efficient cars. Gradually, the public learned that you can get buy with less gas. Then, the fuel crisis ended. As Mr. Farr asked "So, we all kept driving our small efficient cars, right? Wrong! We went right back to the gas guzzlers." People! Use your short-term memory!

Another anecdote that I couldn't work in anywhere: During last summer's fuel crunch, the news was interviewing people at the pumps (that's what I love about the local news- they go right to the source), and one lady was whining about gas prices. There was the obligatory "Someone needs to get these prices down. We had to cancel our family vacation because of it!" At this point gas was up like 25 cents a gallon from normal. They were driving an SUV (of course) that gets, let's say, 15 miles per gallon. It was a family in D.C. so let's say they were driving somewhere insane, like Disneyland. Round trip that's 5300 miles. So, due to the sudden fuel cost increase, they were out an extra...88 bucks! That's why you canceled the family vacation? 88 dollars? Did they even think about it? Did they do the math?

The lesson, as always, is that people are dumb.