API runs ads against price-gouging, windfall profits tax

[TexasLawyer]

Source: Politico

June 01, 2007

API runs ads against price-gouging, windfall profits tax

The American Petroleum Institute has hit the airwaves to beat back calls on Capitol Hill to create a windfall profits tax or make price-gouging a federal crime, airing radio ads in “most major media markets” during this week’s congressional recess to remind consumers about the negative impact Congress had when it tried to temper gas prices in the 1970s.

The ads take a not-so-nostalgic view of the disco era to warn voters of the long lines at the pump when Congress tried to reduce the cost of gasoline by taking on oil-producing countries with a series of price controls and energy taxes, an API spokesman said.

An announcer encourages listeners to "tell Congress to leave relics like gasoline price controls and policies that discourage domestic energy development where they belong, back in the 1970s,” according to excerpts published in the Houston Chronicle on Friday.

Juan Palomo, a spokesman for the association, would not give details about the cost of the media buy or specify where the group is airing these ads. He said the ads began airing last week and would run through the end of the current recess.

<snip>


Read more: http://www.politico.com/blogs/thecrypt/0607/API_runs_ads_against_pricegouging_windfall_profits_tax.html

[Parche]

1. Oil Ads

Yes I about fell off my chair when I heard that ad at work here....

How dumb does the oil companies think the general public is?

[TexasLawyer]

2. They sure have plenty of money-- to buy ads

and to buy friends in high places.

[april]

3. Yes I heard it today very lame

Was channel surfing and yes put on Rush just to see what BS he was talking about and there was this commercial like we believe it ..just wait you will hear or I know you may not want to but it mentions the 70's long gas lines ect(I half listened and turned to another station
but what it does not mention is we had jobs ,farmers,industry,and not a so corrupt White House


..

[gravity]

4. I agree with these ads

Price controls are just going to lead to gas shortages.

The government should ensure that the oil companies are acting competitively and that the price of gas is set by market prices, which the FTC already does right now.

[aquart]

5. So. You've been perfectly distracted from the real issue:

A punishing windfall profits tax.

Do you have any clear understanding that the so-called "gas shortages" were OPEC blackmail? And are you so besotted with the Republicans that you believe the proper response to blackmail is to pay? And pay and pay and pay?

When I hear threats like that, I think the appropriate response is "nationalization." Of course, anyone who says it will die in a small plane crash. But it is still the appropriate response.

[Nickster]

8. I'm of the same mind. This makes me think of the electric company ads they are running

here in Illinois because they are attempting to deregulate our rates here. The commercials are basically blackmail stating that if we don't allow the rate hikes, that the electric system might not be as stable as it used to be, as they show the lights in a house flickering off. "It'd be terrible if something were to happen to your electric...."

[lakeguy]

14. great. maybe we should take over the OPEC countries

so we can open the taps full bore. then we can watch the earths ecosystem collapse due to all the pollution. i think a windfall tax would be great and then prices will continue to climb, forcing people to drive smaller cars...or none at all. then the windfall tax can go to building mass transit.

the best way to reduce the price of gas is to lower demand. demand is at record high levels and we have to import record amounts of finished gas to compensate. refineries are running at over 90% utilization in the US and cant keep up. and, even though new plants havent been built, the existing ones have been expanded greatly to increase production. that is why the price is so high (for the US anyway). you can complain all you want, but unless you want price controls, its a supply and demand game. we have record low supply and record high demand. 3 bucks a gallon is nothing in this situation and until we reduce demand, that is the situation we will stay in.

why not charge the car companies a 'dumb shit' tax until they stop focusing on building bigger and 'better' SUVs? or maybe just charge SUV drivers the tax. cant do that...its every americans god given right to drive whatever the hell they want until the planet dies.

[rmgarrette64]

6. Wow

It's so rare I find some one else on this board who disagrees with price controls. I agree, they'd hurt a lot more than they'd help, and we shouldn't institute them.

Gasoline is almost the definition of a commoditized product. I do not know anyone who has 'brand loyalty.' We just look for the cheapest price within our local range. And yes, I think the FTC is already on this job.

R. Garrett

[index555]

7. The problem with any one oil company dropping their prices is

If one oil company dropped their price by lets say 30 cents a gallon cheaper than all the others.
The result is that everybody flocks to said oil company's stations and buys gas there (duh).
But the end result is the sales go up to the point that the oil company can not keep up with the demand, even with all-out production .
The company then is actually forced to raise their prices to the point that will actually dissuade enough customers from buying their own product that they can keep up with the demand.
This actually happened in so. california when the rapid run-up in prices happened about 4-5 years ago. Prices rose from about $1.05 to $1.50 a gallon in about 3 weeks.
ARCO (now part of BP) held their prices down for the first 2 weeks until they only had about a 2 day supply left , after that they jumped prices by about $0.40 a gallon in 1 day , even though they had (still have) the largest refinery in so.cal. they couldn't keep up with the increased demand.

Just look at what happened in the bay area when valero tried to increase the capacity of their refinery there , all the residents there rose up and fought that like crazy.
yet , that would have helped to ease gas prices by increasing the production capacity.
Nobody wants a refinery (or an enlarged refinery)in their backyard , but they want cheap gas.

In the present , the local , independent, chain , which I use as a general barometer of gas prices(they sell both under their own name , "united oil" and buy wholesale gas like all "no-name" gas stations at these, they also sell name-brand gas at some of their stations) has dropped gas prices from $3.33 to $3.15 since memorial day.

So here are your problems
1) Any oil company that tries to build a refinery within 50 miles of an inhabited area they will automatically encounter fierce opposition.(why would they want to build in the middle of nowhere?)
2) If an oil company significantly undercuts the gas price of another , they will NOT be able to keep up with the increased demand. (result , higher prices all around).
3) While they ARE "laughing all the way to the bank" , they are also stuck in what they very well know is an untenable position , any one of them would LIKE to grab most of the market share , but they also know they can NOT do so.

THIS is the reality of our current gas situation.
comments WOULD be appreciated.

[aquart]

9. What a charming justification for price-fixing.

That's what that is, isn't it? They all have to charge the same because if one is cheaper, it will be so overwhelmed that it will have to charge more (okay, here is where I start laughing uncontrollably) which means that...what? No other company will then be cheaper? People don't shop for the cheapest price? Everyone will be forced to charge LOTS more because it's important to discourage customers??? (Laughing, still laughing.)

Where did you get this gelatinous crap? An oil company handout?

[gravity]

10. Price fixing will result in a shortage

It's basic economic theory, and if you set a price ceiling on the price of gas, we are gonna have to wait in long lines to buy some.

People tried to fix prices for millennium, and the same results always occur. While the intentions are good, they almost always make the problems worst.

If you can prove that the oil companies are colluding to control supply, then you have a point, but currently there is no evidence for it at the time. Market force explain all of the price of gasoline at the time.

Except for the energy sector, every corporation has a personal interest of keeping the price of gas low since it affects their profits too. It's not just the little man who would be getting screwed here, so this shit gets investigated.

[aquart]

13. But every gas station charging the same excessive amount

is NOT price fixing to you, my tender innocent? Do you at least coat your throat with oil when you swallow that shit?

[salin]

15. collusion - a long forgotten word per anti-competitive market place

behavior - describes when multiple corporations act together in a monopolistic way preventing the 'market place' to work. The poster's statement that the bushco FTC is "on the case" per rooting out any price-fixing, imo, is naive at best (as in not paying attention to the degree to which regulatory agencies have been given the charge not to enforce regulations) and dangerous at worst.

[aquart]

16. Collusion is exactly the word.

And anyone who touts the efficacy of regulation under BushCo has left naive in the dust and opted for pure delusion.

[gravity]

17. In a competive market, everyone charges the same amount

You have to look at the wholesale price of gas to see if the stations are price fixing.

[index555]

37. laugh all you want , but do you think the average

consumer will go to a station that is 40 cents a gallon cheaper if there is only a 50/50 chance they will have any gas to sell?
No they will go to the more expensive station saying "at least these rip=off jerks still have gas to sell" and Not go back to "the brand that never has gas when I want it".
I'm also not saying that the big oil companies are without fault , when the price of oil was under $15 a barrel was when most of the small , independent refiners went out of business. The big oil companies bought up these small refineries and tore them down. At least five in so cal that I can think of offhand.

The thing is even when they want to increase their production nobody will let them (at least Not In My Back Yard).

Just as a matter of curiosity if a refinery within 20 miles of where you live wanted to double it capacity , what would you do?

Is there ANY way that you can prove that I am wrong? I very seriously doubt it.

[gravity]

11. I agree 100%

but it's just easier to just say that it's just a big conspiracy

[tammywammy]

23. Agreed

excellent post.

[tammywammy]

24. I also agree with you

Price control and windfall taxes aren't going to help ease the current gas prices.

[reprobate]

25. What the hell do price controls have to do with anything. There were no price controls in the 70s

IIRC. What congress passed in the 70s was a windfall profits tax, much to the chagrin of the oil profiteers, who ran ads against just that thing then.

And the long gas lines were NOT the result of the windfall profits tax, but the result of blackmail by OPEC.

It's really amazing the lack of knowledge of the history of such important events by most Americans.

I believe that's the only reason such ads by the oil industry get any traction at all. It's much harder to run the flim-flam on educated people.

[Canuckistanian]

27. I don't remember any 'price controls', either

The gas lines were SOLELY the result of the OPEC embargo.

Nobody was blaming any US government actions for the shortages at the time.

It was all those "O-Peckers" - a common phrase at the time.

[Solon]

39. We are going to have gas shortages, with or without price controls...

It seems obvious now, we are, at the very least, at the plateau of peak oil. Basically its all downhill from here. From a practical standpoint, price controls, and rationing, may happen in the near future, while we transition to an oil free economy.

[w4rma]

12. I'd rather the government set the oil prices than the oil company executives fixing the price. (nt)

[gravity]

18. Oil execs don't set the price

International markets do

[w4rma]

21. Prove that, please. (nt)

[gravity]

22. Oil is sold on the commodities market

The price is determined by buyers and sellers making bids for the best price.

[w4rma]

26. That's not the price charged at the pump. The commoditites market determines what the oil companies

pay for the barrels of oil that they *buy*. They then sell the oil at a very high markup.

So, again. Prove that the oil executives aren't setting the price at the pump.

[tammywammy]

28. How much of a markup do you think there is?

Oil companies have a little less than a 10% profit margin. There's not marking it way up. When the cost of a barrel goes up, the cost of a gallon of gas is going to go up. When more gallons are being bought, profits increase.

[w4rma]

32. The gas stations have practically no profit margin. But the oil companies are raking in billions.

Exxon, alone, had about $10 billion of markup last year.

[tammywammy]

40. You didn't answer my question

Where's the markup?

I didn't ask about gas stations, and the things I posted were to the oil companies.

[gravity]

29. You're the one making accusations

Why don't you prove that gas stations are gouging the public.

[w4rma]

33. Wow, you're working to confuse folks. Gas stations have practically no profit, but the oil companies

are raking in record profits.

[DemoDemoCratCrat]

30. The consumer sets the price

The law of supply and demand applies wherever trades occur. When it comes to crude oil, that price is determined by the relative willingness of buyers and sellers in the cash and futures markets for crude oil. That price is one expense of many to gasoline producers, which they hope to recover in what they can charge me for gasoline.

Supply and demand applies at the retail level, too. Ultimately, it is the consumers' desire for the product that sets the price, given that the supply of gasoline is relatively fixed. Apparently consumers think the price is not too high, because the demand for gasoline continues to increase. This last Memorial Day weekend vacationers drove more than ever before and demanded more gasoline than ever before. This is elective driving, not commuting, so the argument that "they have no choice" doesn't apply (if it ever did).

Someday, people will demand less gasoline or maybe a new refinery will be constructed. Until then, don't expect the price to fall and don't blame the suppliers.

[w4rma]

34. The oil companies are an oligopoly and are colluding to fix prices at the pump.

Prove me wrong.

[DemoDemoCratCrat]

36. Prove yourself right

I'll pass on your invitation to prove a negative, but I am interested in what evidence you have to support your claim.
Do you not agree that demand is still increasing?

[TexasLawyer]

19. windfall

Oil companies get to charge a price based on the going world benchmark price of oil. Any tightness in supply anywhere in the world, and our prices rise here in the US. US oil companies have made out like bandits because of OPEC's supply restrictions, which tighten output and raise world prices. Also world demand is rising, and I am sure big oil is also enjoying the fact that Iraq production has been greatly diminished.

This is the situation even though two thirds of American oil is domestically produced, mostly by our own majors and much produced on federally owned lands. But the price charged for US production is not based on the oil company's own internal production costs, but on benchmark world prices.

The countries the US imports the most petroleum from ?(i.e., the one-third we don't produce ourselves) Canada is number one (with the vast majority of our imported oil), Mexico is number two, Nigeria (in OPEC) is number three, Venezuela (in OPEC) is number four and only then come the Middle Eastern countries. It's mot just the Middle Eastern countries that are driving up prices-- it's our own majors that are profiting in great measure by (among other things) an illegal cartel.

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html

Consolidation in the oil industry has also really hurt us, http://www.cptech.org/at/oil/mar29-2000-opec.html and oil companies are dripping in wealth-- on our backs. I don't think a windfall profits tax is out of line.

*******************

Posted 10/27/2005 9:12 AM Updated 10/27/2005 9:59 PM

Big oil tanks up: Exxon's profit nears $10B
By Matt Krantz, USA TODAY
While drivers have been painfully paying up at the pump, oil companies have been racking up eye-popping profits.

Thursday, ExxonMobil (XOM) became the most stark example yet of how much big oil companies benefited from the huge run-up in oil prices during the third quarter even as two major hurricanes ripped through the industry's Gulf Coast infrastructure. Exxon reported:

• Net income up 75% to $9.92 billion. That is the most a U.S. company has earned from operations in a three-month period and greater than the annual gross domestic product of entire nations including Cameroon and Zimbabwe.

<snip>

http://www.usatoday.com/money/companies/earnings/2005-10-27-xom_x.htm

[lancer78]

31. Yes, but remember

the Net Income of $9.92B is based off of sales around $100B. Profit Margin for Exxon is only 10%. I know trailer parks that have a higher profit margin then that. So, should we have a windfall tax for every company with a 10% profit margin or better?

[w4rma]

35. Maybe Exxon needs to be chopped up into smaller companies, again, then. (nt)

[index555]

38. still wouldn't help change the price.

What would help drop the price would be..
a) decrease demand (i.e. buy more economical vehicles, drive less, and use public transportation more)which imo is the best option.
b) increase supply (which means pump more oil and build more refineries , or expand existing refineries)

there is no other way around it , the refineries are currently maxed out , thats why any time there is an accident in one , prices jump everywhere , if there was any leeway left a single refinery accident wouldn't have such a dramatic impact.

[depakid]

20. "discourage domestic energy development"

and just what domestic energy development would that be?

And would the corporate media ever run ads (or- better yet, PSA's) that told the truth about the petroleum industry?