Ill effects of gas prices

Published on

San Gabriel Valley Tribune (California)

The average price of regular gasoline soared above $3 a gallon this week, barely missing a new national record, while Californians continue to pay between $7 and $15 more per fill-up than the rest of the nation.

Oil companies keep coming up with different reasons for the gasoline price spikes. Last year, they said rising crude oil prices — mostly due to overseas pressures — were at play. This year, with crude oil prices down $6 a barrel from last year, Big Oil is blaming the hikes on refinery problems that are crimping supplies and pumping up retail prices.

Getting more attention is the consumer-based Foundation for Taxpayer and Consumer Rights, which says, hold on a minute. It is not uncontrollable forces, but rather, oil companies squeezing more profits out of less revenues. For example, Exxon Mobil reported first quarter profits last month of $9.6 billion, a 10 percent bump from 2006, even while revenues were down. Even after investing in oil exploration — something oil companies emphasize a lot during p.r. campaigns — the Foundation reported Exxon still had $34.6 billion in cash on hand.

The Foundation, and other watchdog groups, have alleged that oil companies are purposefully curtailing refinery production to artificially raise pump prices. They see similarities to the electricity and natural gas price hikes of 2000 and 2001 that hit California. The oil companies deny these charges. And government is mostly silent on the issue.

While it is refreshing to hear from other experts on the debate, the answers are still in short supply. Meanwhile, the average Southern California truck or large SUV owner is paying $75 a fill-up. Some say we’ve become anesthetized to what has been an 88-cent hike so far this year for regular unleaded. Motorists drive up to a service station in a kind of gasoline-price coma like someone who knows they’re gonna get punched in the stomach but can’t do anything about it.

One thing we can be sure of is the effect of high energy prices on the overall economy. And it’s not good. High gasoline prices, soon to be colliding with high, summer electric bills and creeping water bills, take away from consumer discretionary spending accounts. Consumers buy fewer goods and services because their cash is flying at a faster rate from their checking accounts to pay energy bills.

The high energy prices are sapping the economy of its power. The economy is slowing down. The number of jobs added by the economy in April was 88,000, the smallest gain since November 2004.

Unless gasoline prices level out, which some industry watchers predict will happen by the first of next month, Southern Californians will continue to spend more on gasoline and less on other things. This doesn’t help the economy, nor does it help advance alternative energy. It only advances oil company profits.

Consumer Watchdog
Consumer Watchdog
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