I caught this snippet on the Ed Schultz show on my way home Thursday and had to listen to it again to make sure I understood. Ed Schultz was interviewing Governor Brian Schweitzer of Montana (
audio) and early on this comes out (below the fold).
Governor Brian Schweitzer talking:
I'm going tell you something that is going to make you mad and everybody listening mad. Last week I had Governor Hoeven from North Dakota and Governor Freudenthal from Wyoming meet with me up in Billings and meet with about 100 oil producers. And what's happened in North Dakota and Montana and Wyoming is we have answered the call of the President and we have increased our oil production.
We've opened more oil now than we were last year. And we have outstripped our capacity to get it to pipelines to the refineries...so the refineries, get this, the refineries have come out to our oil producers and say, "Well, you know, we can kind of pick and choose who we are going to buy our oil from, so I tell you what, we'll buy oil from you producers who are willing to sell it for $32 a barrel." Now if you're buying oil for $32 a barrel, and it costs about $10 a barrel to crack...the bottom line is they are making gasoline, diesel and aviation fuel for about $1.05 a gallon using Montana, Wyoming, and North Dakota oil.
(1:44 thru 2:44 of the audio).
Now, I'm certain that Montana, Wyoming and North Dakota oil doesn't add up to a large percentage of the oil processed in the United States. However, if the refineries can "kind of pick and choose" who they are buying from, how many other oil producers are they getting discounted oil from?
If, say, 1/2 of the oil costs the refineries $30 / barrel and the other 1/2 of the oil costs the refineries $70 / barrel...doesn't that mean oil is costing them an average of $50 / barrel? And if they were making money when the average barrel of oil cost $35, but gas cost $1.25 / gallon, then why do they "need" to charge $2.87 / gallon (more than double the price)?
Here is just another piece of proof that the oil companies are price gouging. The variable component has probably only gone up 40% or so (you'll probably never get the true costs out of the oil companies)...and the fixed component (refining) has not really gone up in cost at all. So back when they were charging $1.25 / gallon, it cost the oil companies $35 + $10 per barrel or $45. Now they are charging $2.87 / gallon, and it probably costs the oil companies $50 + $10 per barrel or $60. Overall cost has only gone up 30% (no, I'm not including the additional costs of paying the C-level executives salaries and benefits). But pump prices have gone up about 130%.
I'm not saying that the prices can go back down to $1.25 / gallon (they can't)...but they definitely don't need to be as high as they are. This is price gouging, pure and simple.