Wayne.B wrote:


If you think commodities are such an easy get-rich-quick scheme, why
not put on your own "suit" and throw some money in the ring. A quick
call or two to your broker and you can be a master of the universe
also.

The "free market" explanation for $4/gallon gas at the fuel dock and
the skyrocketing costs of chemicals that will soon put the price of new
fiberglass boats up to the stratosphere doesn't really work.

In a free market, competition to produce expands as demand to consume
expands and tends to moderate prices. Companies are forced to become
more efficient to flourish, even in prosperous times.

Demand to consume petroleum products is growing, but there are so many
barriers to the marketplace that new suppliers are not emerging. In
fact, the old suppliers are merging and competition is actually
decreasing.

There is no "free market" dynamic in the oil industry to defend.

We often hear that the "oil companies are only grossing 15-cents a
gallon!". Nonsense. That's their gross at the gas pump- pumps sitting
in gas stations now primarily owned by the big oil companies rather
than independent operators. The companies book "internal" profits as
crude flows from one subsidiary that pumps the oil, to another
subsidiary that transports the crude, to another subsidiary that
refines the crude, to another that distributes it, etc. Total oil
company profits are currently about 90-cents per gallon, up from closer
to 50-cents (yes, that's an 80 percent increase) a year or so ago.

Tracking this increase to supply and demand would tend to indicate that
somehow the oil companies sold 80 or 90 pecent more fuel. Didn't, of
course.

That 80% increase in the profit portion of the price of a gallon of gas
at the fuel dock is also pretty consistent with the increase in
coporate profits.....for example, Conoco/Phillips recently reported
profits that were up almot 90% from a year earlier.

It is possible to bit on supply and demand, I guess. As in "We've got a
corner on the supply, you guys have an insatiable demand, so in light
of the fact that we have no effective competition tying to place a
downward pressure on pricing we will simply continue to raise the
prices as high and as fast as we want to........"

A cut 'n paste analysis of pricing and profit follows:

"In 2005, Exxon reported third-quarter profits of $9.92 billion, 75%
higher than its third-quarter earnings in 2004, and the largest
quarterly profit ever reported by a US company.

For the 3rd quarter of 2005, ChevronTexaco reported a 53% increase to
nearly $4 billion; and ConocoPhillips?s profits were up 89% to $3.8
billion.

Exxon is reportedly giving its retiring chairman, Lee Raymond, a
package worth nearly $400 million, in combined pension, stock options
and other perks, including a $1 million consulting deal, the use of a
corporate jet for professional purposes, 2 years of home security, and
a car and driver.

While testifying at a Congressional hearing last November, Raymond
claimed that high gas prices were a result of supply and demand. "We're
all in this together," he told members of Congress, "everywhere in the
world."

"In 2004, Mr. Raymond," Senator, Barbara Boxer (D-CA), was quick to
point out, "your bonus was over $3.6 million."

After exhibiting a chart revealing the pay scale for each of the CEOs
at the hearing, Senator Boxer told the oil executives: ?Your sacrifice
appears to be nothing.?

According to Exxon's filings with the Securities and Exchange
Commission, Raymond's paycheck rose to $51.1 million in 2005.

These profits and CEO salaries are obscene at a time when the elderly
and families with young children are struggling every day to keep their
homes heated and fill up the gas tank to drive to work and back."


*************
Evelyn Pringle -

(Evelyn Pringle is an investigative journalist focused on exposing
corruption in government and corporate America)



All something to think about while watching the price wheels whirl like
an old time Vegas slot machine next time you're pumping fuel into the
good ship CostaLotta.