Who's to Blame for the High Price of Gas?

As gasoline prices rise to record highs, Americans across the country are feeling the impact.

"Nearly an entire day that I was paid in compensation is going to pay in gas and tolls," Mirian Schaer told ABC News in New York.

"If I've given up anything because of high gas prices, it's been driving," said Amanda Perkins in Los Angeles. "I have definitely cut back on that."

U.S. travel during the Memorial Day weekend is still expected to rise, but the AAA reported drivers would likely stay closer to home because of high cost of gas.

Other drivers, however, don't have the option of driving less — and they are upset.

"I think the gas prices are totally outrageous," said Michael Rowe who needs his car for work in New York City.

So, who's to blame?

The Fault of 'Big Oil'

When gasoline prices rise, many drivers often point to and blame "Big Oil."

In turn, oil company executives point to "market forces" to explain increases at the gas pump. In particular, they signal out the price of crude oil.

"More than half the cost of gasoline is attributable to the cost of crude oil," said John Felmy, chief economist at the American Petroleum Institute, in written testimony submitted to a congressional hearing examining higher gas prices.

"Oil companies do not set the price of crude. It is bought and sold in international markets, with the price for a barrel of crude reflecting the market conditions at the time of purchase," Felmy said.

In addition to higher oil prices, oil executives say that supplies are tight as demand continues to grow not only in the United States — where gasoline consumption is up 1 percent, compared to a year ago — but also in places like China and India where economies continue to boom.

Despite these explanations, what upsets many drivers is that higher prices have resulted in less money in their pockets and more in oil company coffers.

"I think it's appalling," said Schaer in New York reflecting on how much she had to pay to fill up her car.

Record Profits

In the first three months of this year, the five largest integrated oil companies made $29.5 billion in profits, up 4.5 percent from a year earlier.

That works out to $320 million a day, $13.4 million an hour, and $222,569 a minute.

It's profits like this that lead consumer advocates to argue for greater government oversight of the industry in order to help consumers who are paying more at the pump.

The Consumer Federation of America calculated that households now paid $1,000 more for gasoline each year compared to just five years ago.

According to the latest available figures from the Bureau of Labor Statistics, from 2000 to 2005, Americans spent $722 more on gasoline.

"Today's high gasoline prices highlight fundamental problems in the industry," said Mark Cooper, the group's director of research in press release, "a lack of competition that enables oil companies to exploit a tight market."

Refinery Slowdowns

As an example of how the industry can do this, Cooper points to the 149 refineries in this country that process oil into gasoline. He argues that oil companies have underinvested in refining capacity and reduced stored inventories of gasoline to the point where they cannot perform any maintenance or changes without gasoline prices — and company profits — increasing.

Page
  • 1
  • |
  • 2
  • |
  • 3
  • |
  • 4
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...
See It, Share It
PHOTO: In this stock image, a woman with a hangover is pictured.
Peter Dazeley/Getty Images
PHOTO:
Redfin | Inset: David Livingston/Getty Images
PHOTO: Woman who received lab-grown vagina says she now has normal life.
Metropolitan Autonomous University and Wake Forest Institute for Regenerative Medicine