James Fox

It seems like every time every time something happens in the world that could possibly have an impact on the delivery of gasoline from the oil well to the gas-pump, the petroleum industry giants immediately bump up the price of a gallon of gas.

They don't wait until the eminent cost increase is verified, they just zip out and reset the gas pumps and justify their actions via the news media after enough complaints are received and enough questions are asked about the price increase.

The captive victims, the dependent public never seems to question or try to verify the actual impact on real total margins that quantify and justify the increases in pump prices - prices that currently have jumped 25 cents in less than 7 days.

Real total margins -- the difference between the pump price and the sum of crude costs and taxes -- had declined during the 1980's, were fairly stable in the 1990's, and have fluctuated over the last several years as the gasoline supply situation became more volatile. While this was happening, numerous enhancements in the quality and complexity of gasoline (such as the phasing out of lead as an octane booster and the introduction of oxygenated and reformulated grades) have been introduced.

These margins have profit already factored into them, so a gradual recovery of diminished profits could be stretched out over several months, and these sudden huge increases in pump prices could be eliminated. The following is an example of how the oil companies are attempting to get the consumer to finance increases in costs and in the process double dip to profit from the change:

The average franchise gas station has 10,000 gallon, storage tanks, so we will base this example on a typical gas station on 8/11/03 selling gas at $1.74 per gallon. And on 8/18/03 increasing the price to $1.92. The cost of crude actually dropped 3 cents. Distribution, Marketing and Profit costs dropped 7 cents. State and local taxes increased 1 cent. However, refinery costs and profit increased 25 cents resulting in a total cost increase of 16 cents during this one-week period.

One rip off was the 2 cent increase over the actual cost increase, but the real rip off was this…If during this week, the station pumped 4,000 gallons of gas at $1.74 the remainder in the tank was $1.74 gasoline with all the costs and profits factored in, the next load of $1.92 gas was mixed with the $1.74 gas and the resultant price based on ratio and factored costs, should have been $1.81.

When they raised the price of the whole 10,000 gallons in that tank, they double dipped to the tune of 11 cents times 6000, or $660. That's on just one tank, think about the huge rip off throughout the state. Reclaiming that money from the oil companies would go a long way toward getting California out of debt.