Mister Gas Man, you’re gouging me

Driving back from San Francisco yesterday I got a little look inside the world of high-volume gasoline sales. You could also say I got a little look inside the world of ‘America’, given the gouging, grifting and daily making of folklore by our corporate overlords. But let’s just ask ourselves, once again…why are gas prices so high?

There are no pipelines connecting California to its neighbors; imports come slowly by ship or truck, panelists said. And state regulations require specific, clean-burning fuel blends.

That unique recipe – not recent adjustments to California’s cap-and-trade regulations – is the “fundamental problem” causing the price increase, said Jay McKeeman, vice president of the California Independent Oil Marketers Assn…

Prices surged in the aftermath of a Feb. 18 explosion at the Exxon Mobil Corp. refinery in Torrance. Tesoro Corp. idled processing at its Martinez, Calif., plant earlier that month in response to a strike.

It’s always the same with these guys: Costs. Fiscal burdens, capricious factors, production difficulties, refinery accidents, Summer blends that are really complicated, onerous regulation, and – of course – federal and state taxes. Obviously these guys aren’t making liquid gold from goo that just oozes from the Earth, they’re in the business of making space shuttles. In the dark.

And of all the burdens to competitive shuttle pricing the Number One Cost, the worst of the worst, is crude oil.

oil prices 2008 - present

Thank God oil prices have come down so significantly this year. It’s only less than half as expensive as it was last year. Compared to 2008, the cost is down by a full two-thirds. And keeping in mind all the industry experts and spokesmen who swear that costs are the real problem, and that nice people never lie, we can safely assume gas prices have fallen dramatically as well.

gas prices 2008 - present

But they haven’t. They’re actually rising dramatically. What gives?

The two charts show gas prices from 2008 tracking oil prices month to month, at least roughly. That is until this year. In 2015 while oil prices plummet, gas prices skyrocket. Which is weird because there are no new and outrageous costs to refinery and production – not on the scale of buying crude oil. So something else must be driving up the price of gasoline. Could it be the ignominious X Factor? Is it at all possible we’re seeing…non-competitive pricing? AKA collusion? And greed?

I think so. Coming back from the Bay Area yesterday I drove into the little town of Lost Hills about 4 o’clock to refill my truck with diesel. The town sits at the crossroads of one of two major East-West routes (the 46) between California’s San Joaquin Valley and the coast, and the state’s major North-South interstate, the I-5. There are thousands of cars whizzing by every hour.

Suffice it to say that selling fuel in Lost Hills is a lucrative business, and there are plenty of gas stations fighting it out. As I pulled up to the interstate, I saw a Mobil station on one side and a Valero on the other.

Lost Hills gas prices

The Valero was selling gallon diesel fuel $1.24 cheaper than the Mobil across the street. And no, the station wasn’t fronting a steak house and a casino, it wasn’t just pulling in the rubes. It was beating the hell out of its competitors. Clearly the profit margin for gasoline is currently huge, maybe as big as it’s ever been, and the retailers are raking it in.

I thought about that as I got back into the truck and pulled out toward the interstate. As I turned down the on-ramp, I briefly looked up and saw another major retailer sporting a big green sign. The Arco was selling diesel for $2.49 a gallon.

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