Gas Magic
As designers, we are privy to advance information and the inside workings of many major companies simply because we prepare their marketing proposals and annual reports. Back in 1988, when the price of oil bottomed out, almost every small Texas entrepreneur suffered cash flow problems unless they were smart enough to diversify. Business in Houston, especially, depended on some facet of the oil economy for healthy cash flow. One evening after a board meeting at my luxury high rise, I struck up a conversation with a neighbor who worked for a big oil company. I asked him what he did at his forty-story office tower in downtown Houston. "I'm one of the big nasties that sit around all day and decide how much you'll pay at the pump," he chuckled. He was a career marketing man at one of the big four oil companies. The whole country was in an uproar about the recent rise in gas prices and it was a hot topic of conversation.
Gas was selling for a comfortable US$1.05 a gallon two weeks earlier, and had recently risen to US$1.35. News reports were rife with information about shortages, high demand, and the importance of national reserves during a time of war—during the Gulf War. Sound familiar? "Americans have been getting a deal and the price of gas will continue to rise, take my word for it. Do you know how much they get for gas in Europe?(Note that he was concerned with "what they get") We have marketing goals just like any other business—the price of gas will continue to rise until it reaches or surpasses what the rest of the world pays." Here we are 18 years later, steeped in another war on the other side of the world. Gas prices are skyrocketing, politicians are showboating and cash-strapped citizens wonder helplessly when the price of gas will level off; before or after it reaches the cost of a gallon of milk.
Sometimes only a cliché can sum up an unjust situation—those who do not learn from history are destined to repeat it. Yet here we are, a nation of car lovers swallowing the big oil companies' explanation—hook, line and sinker. Like little fish, we jiggle and wiggle, making the hook sink deeper, sold on the benefits of raising families in the suburbs, the safety advantage of a big car in collisions and the efficiency of high-speed highways that link us to workplaces. Americans believe press statements regarding the high price of oil as if marketing professionals are bound by rules of patriotism. "By the year 2000, a total of 900 billion barrels of oil had been produced. Total world oil production in 2000 was 25 billion barrels. If world oil consumption continues to increase at an average rate of 1.4 percent a year, and no further resources are discovered, the world's oil supply will not be exhausted until the year 2056," writes David Deming in How Much Oil is Left?
"The estimates above do not include unconventional oil resources. Conventional oil refers to oil that is pumped out of the ground with minimal processing; unconventional oil resources consist largely of tar sands and oil shales that require processing to extract liquid petroleum. Unconventional oil resources are very large. In the future, new technologies that allow extraction of these unconventional resources likely will increase the world's reserves." You can read the entire article at the National Center for Policy Analysis. Marketing departments are responsible to the companies they work for and concern themselves with positioning, promotion and price. Their marketing plans don't consider whether a family bypasses prescribed medication to put gas in the car so Dad can make a living.
What's the solution in a free-enterprise, market-driven economy? The solution should be simple. Congress should remember our government is for the people, by the people and end the gas-gouging on moral grounds. Instead of acting on behalf of the majority, they are held back by the lining of their pants pockets, firmly gripped by a minority—lobbyists for big oil interests. They can get away with this as long as Americans have better things to do than email their congressional representatives. In order for this to be truly a government for the people, by the people; you must participate. If you don't vote and you don't make your wishes known to your representatives in Congress; complaints about the high price of commodities fall under idle chit-chat. Complain where it counts and work for change through the democratic process.
Additional Resources
Find your Senator's email address here.
Find your House Representative here.
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On the WW list you said, "I've posted some inside information I know about how the price of gas is established." I thought I'd reply here rather than there to avoid too much OT stuff.
Beyond your neighbor saying, "I'm one of the big nasties that sit around all day and decide how much you'll pay at the pump," I'm missing where you describe how the price is established.
give me a break already! price gouging at the pump? most experts have already said this is not whats happening. more people need to educate themselves before jumping on the price-gouging wagon.
you know who started this entire hypothesis? the media. they love scandals and deceptions. they will strongly persue a story at even the smallest possibility of wrong doing. thats their job. and like most americans who cant think for themselves, they buy it.
articles like this only feeds the fire of silly conspiracy theories. i urge everyone to take a look at the current world we live in, and notice that its not the same as it was when gas cost $1.35.
Susan,
He was joking. The future markets dictate the prices of oil. The markets also react whenever the president of Iran rants about fighting Israel and us. David Deming is wrong. The world has lots of oil left. Castro will be drilling it up forty miles from Florida. Think beyond what is repeated by your friends and the media. Arguments based on emotions leave you stuck in a moral absolute box.
Facts and thinking clearly can set you free.
Hysteria and living in fear is a easy trap to fall into. Creative thinkers need to be clear and focused.
Do remember that oil is only a fraction of the cost of gas. If the price of oil increases by 40%, that doesn't mean gasoline prices should increase by 40%. The math is simple, but not that simple.
How is the price established? The facts are self-evident in spite of all the pussy-footing around in front of Congress--insiders know it's according to a marketing agenda established years ago using a piggy-back strategy based on world events that have a minute impact on oil availability. Let's look at the number of times raw crude is traded from port of origin to port of sale. Use the oxymoron "mandatory options" to describe that part of the acquisition process.
I am crystal clear in my thinking; that was no cocktail party joke, and nobody was laughing except the guy raking in the dough.
You are much more right than the people like "Matthew" are concerning the price of gasoline!I got news for those who accept that BULL**** that the oil companies give us and by the way it has only been less than 5yrs.back that we were paying about $1.35 a gallon!! So it isn't the same as it was,but you know what yesterday,last week or last year won't be either but it doesn't mean that excuses the oil companies for driving up the cost of fuel!!
Pause for thought: I filled up at the gas station last week and paid $6.50 a gallon. That's about average these days in the UK (and yes, I've calculated that figure based on the capacity of US gallons, not UK ones).
I'm pleased that gas-guzzling SUV usage over here is starting to decline (they do look so ridiculous on our tiny roads anyway) but we've a long way to go. Until consumers make significant changes to their need for a convenient lifestyle, the price will - and should - continue to rise.
The majority of what we pay for gas here is tax for the government - just like it is on alcohol and cigarettes - and I don't have a problem with that. As soon as an alternative means of transport is available in the rural area in which I live and work, I'll be the first in line to use it.
English distances pale in comparison, though owning a MINI is becoming more popular here. In Houston, TX you can drive for 60 miles and still be in Houston. The first time I got stuck in traffic in Los Angeles, I laughed out loud. Compared to being stuck on 59 South at rush hour, the "legendary" traffic jams of LA are a cup of tea. It's all relative; and though gas in the UK is twice what we pay here, the distances you cover in the course of your daily life are less than half of statesiders with no comparable, reliable mass transit widely available. Different circumstances play a part in common choices and must be considered without prejudice.
I couldn't agree more. It is, as you say though, all relative. I've lived in both the Southwest and New England and both are good examples of vastly different driving habits. Long distances are essential in the high desert of Arizona and for getting from Simi Valley to LAX; using a car to go to a store two blocks away is hard to justify in suburban Boston - worse still, driving into the city when the trains are so good.