UPDATED: Maybe this is wrong, but…
I posted this over at peoriaspeaks.com’s forums:
Based on the tax information from this page, plus the highest prices at the pump or per barrel, I’ve made this little worksheet:
Quote
$147 highest price per barrel
$4.30 highest average price per gallontotal gas tax: $0.405
sales tax percentage: 8%minus gas tax: $3.895
minus sales tax where 1% is $0.03895 and 8% sales tax is $0.3116: $3.5834Current price per barrel: $97
Price percentage drop from $147ppb where 1% = $1.47: 34%Current price per gallon: $3.95
Minus gas tax: $3.545
Minus sales tax where 1% is $0.03545 and 8% sales tax is $0.2836: $3.2614Old gas price after taxes: $4.30 per gallon
New gas price after taxes: $3.95 per gallonOld gas price before taxes: $3.8950
New gas price before taxes: $3.2614What gas prices should be before taxes: $2.5707
What gas prices should be after sales tax, where 1% = 0.25707 and 8% = $0.205656: $2.776356
If we’re going by the market, gas prices should be, including taxes, around $3.20 per gallon. That would more accurately reflect a 34% drop in market prices.
Basically, what I did was worked based on the $4.30 per gallon/147 per barrel price. First I took our $0.405 gas tax out of the picture, then took the 8% sales tax out of the remainder. I deducted 34% from the total of that price, then added 8% and $0.405 to that.
My exact figure was $3.23 per gallon.
Now, the math isn’t perfect, since I took the percentages based on the after-tax price. The problem with that is, for instance, if you take 8% out of 100, you end up with 92. But if you take 8% of 92, then add it back to 92, you don’t end up with 100, but pretty darn close. It’s off, but the difference is not chaos-theory scale. I’d say the margin of error for my total is no more than 10 cents.
Ollie, wanna check this? I did do pretty shitty on my math placement test.
What I didn’t know is that my co-worker was running the same calculation as to what the price *should* be based on entirely different numbers. Instead of starting with peak prices and working backwards (like I did), what he did was take the wholesale price, which includes crude costs and refining costs, then added the cost of distribution and delivery. Onto that total he added taxes and ended up with: $3.21 per gallon.
Prices today were $3.95 per gallon. Doesn’t take a math whiz to figure out something’s wrong.
Supply hasn’t been impacted nearly enough by hurricanes to justify the recent spike in prices, and demand, as far as anyone can tell, has remained steady. So c’mon Conservatives: what gives? Crooks.
============================== UPDATE!
BJ Stone mentioned something that made me wonder: what were prices like the last time crude was selling for $97/barrel? I decided to look.
According to MSN, crude oil hit $97 per barrel on 11/6/2007. According to the Department of Energy, the average retail price of a gallon of gasoline was around $2.90 during the same time. They put it in this nice little chart:
The cost approaches the numbers I reached when you factor in the higher cost the Midwest seems to suffer regularly, plus the potential impact of taxes. Dirty, gouging bastards.
Tags: Gas, Gouging, Scumbaggery
September 17th, 2008 at 3:00 pm
Great post. I will read your posts frequently. Added you to the RSS reader.
September 17th, 2008 at 3:29 pm
You need to look at the trend between the price of a barrel of oil and the price of a gallon of gasoline as oil went up. You will find that gasoline did not keep up with the price of oil. Refiners and station owners ate some of that cost. So when oil was at $147, the price at the pump did not reflect that increase in oil. Now here we are on the way down… and people are crying gouging when in fact it may be that the price more accurately reflects the cost of the oil used to produce it.
September 17th, 2008 at 3:42 pm
Linkages? I’ll crunch the numbers if you have ‘em.
September 17th, 2008 at 3:44 pm
The mathematics checks out ok. As far as the price of gas not keeping up with the price of oil: I’ve always understood that prices were set on how expensive it would be to replace the product that was sold (e. g., gas from a refinery was marked up if the price of oil went up, even if the oil to refine the gas had already been purchased.
But all in all, just look at the oil company PROFITS and the trend in those. :)
September 17th, 2008 at 3:47 pm
Ah, beat me to it. I just went back to edit my comment to include the following:
September 17th, 2008 at 4:27 pm
This is what what you need to know
September 17th, 2008 at 4:28 pm
Financial Times Reno… I am not free to go diggin for it. Yes.. the recent spike to 147 a barrel defied conventional wisdom on the price of gas leapin ahead. But then the 147 wasn’t driven by crisis but rather high demand particularly in Asia.
September 17th, 2008 at 4:32 pm
Ollie that is a red herring and is dishonest with reality. Makes for great campaign fodder but Exxon, BP, et all don’t set the price. Yes they are reaping profits from high demand for oil. Demand in an open commodities market. Supply has been pretty fixed with a natural downward trend.
September 17th, 2008 at 5:34 pm
Follow this link for my two cents on oil and gas prices.
Rather than look at raw profits, you should be looking at profit MARGINS if you want to compare the oil company’s “greed” today versus some time in the past. If they are not making more PER GALLON today than before, what’s the problem? They might make more total dollars, but that could just mean they are bigger, NOT more greedy.
September 17th, 2008 at 7:12 pm
Ollie that is a red herring and is dishonest with reality.
——————–
Oh it is very honest; they are making record profits. That is beyond dispute. There is nothing dishonest about saying that.
You have to love it don’t you: conservatives think it is dishonest to state the facts without the framing that they prefer. :)
Bottom line: they can afford to lower the pump price if that is what they wanted to do. They just don’t want to.
And yes, the profits “just happened” to go up when an R got into the executive branch.
September 17th, 2008 at 10:10 pm
I can’t comment on the profits yet because I haven’t looked at the raw data, but I do know they’ve been given hellacious an unnecessary breaks by the government, which undoubtedly fits into the picture somewhere, though it makes sense that their profits would rise with higher demand. The market has simply grown in that regard. I do remember India and China being singled out as the largest growth areas. I couldn’t say whether they’re guilty of much, if anything, and there are a number of slippery slopes by going there. But I do know they have tremendous influence in Washington.
Still, there’s something harrowing about the fact that we have such a discrepancy between prices and the figures we came up with, which are more or less double-blind, then finding our figures correlating closely with price history. Somewhere between the oil in the ground and the gas in our tanks is a 60-75 cent-per-gallon padding. If it’s not padding, it has to be coming from somewhere and I can’t find it.
But ah, I wouldn’t describe Mahkno as a conservative.
Anyway–since we’re all talking about profits, in light of Ollie’s chart I’d be most interested to see figures showing that demand has quadrupled worldwide in the past 6 years. Y’know, to correlate with the profits increases. If such data exists, I think it’s fair to close the profit=greed argument. If not, why not? It certainly makes profit=greed plausible, if not probable. Any takers on this one? I’ve looked and I can’t find anything definitive.
September 18th, 2008 at 5:08 am
The FT article I had read presented the argument like this. First off the price of gasoline was not keeping up with the price of oil, which in their estimation would have put gas in the $7 a gallon range. So refiners and the distributors were eating their profit margins. Why were they just not passing the cost on in full? Well it was determined that if they did and gas were at $7 a gallon, that the demand for gasoline would fall more steeply than the price would rise. This would result in the companies making LESS, and even a loss, than if they kept the price under $5. So the refiners were getting squeezed from the bottom by the price per barrel and from the top by falling demand as prices rose.
September 18th, 2008 at 5:28 am
Ollie.. the oil producers.. the guys pulling it out of the well do not set the price. Look … lets say oil is trading at $150, Exxon could sell oil to Ollie’s Refinery for $100 a barrel instead through a private contract. But why would Ollie refine it? He could turn around and sell that contract for $150, pocketing $50 a barrel without ever lifting a pen. Or would Ollie out of the kindness of his heart refine it and only net $10 a barrel?
Price fixing never works either. When you fix the price, you run the very real risk of outright shortages.
The oil producers have a fiduciary responsibility to MAXIMIZE profits for their stock holders. The refineries, most of which are independently held apart from the oil producers, likewise have a fiduciary responsibility to MAXIMIZE profits. They could theoretically go to jail for failing to do so.
I say let these companies profit. The higher the gas price is, the more attractive alternative energies become. The higher the gas price, the more attractive mass transit becomes. This country needs a passenger rail Renaissance. The higher the gas price, the more attractive livable, walkable cities become. People become more willing to live in denser urban environments. New Urbanism conserves energy and is better for people’s overall health. The conservation the New Urbanism, which would be greater than simply increasing engine efficiency (which we should press for as well) is good national security policy.
Letting the companies profit, keeps you on the most desirable side of the economy, keeping it market oriented. The Conservatives seem all to willing to talk about windfall taxes, gouging penalties etc. It is pretty satisfying to hear a Conservative, when the squeeze is on, to cry like a marxist.
Oh and don’t expand drilling. Not that that will make a whole lot of difference in the price.
September 18th, 2008 at 5:49 am
Mahkno: you made a sensible argument that has given me something to think about. Thank you.
September 18th, 2008 at 7:38 am
HA! “A passenger rail Renaissance.” I couldn’t have said that better. Should have seen the exchange between me and David P. Jordan on peoriachronicle.com. A “Renaissance” is exactly what I was proposing.