Why is the price of gasoline so high?

Gas prices go up by the day. The five biggest oil companies earned a combined profit of $375 million per day, or a record $137 billion profit for the year, in 2011, despite reducing their oil production.  Photo/daymonjhartley.com

Gas prices go up by the day. The five biggest oil companies earned a combined profit of $375 million per day, or a record $137 billion profit for the year, in 2011, despite reducing their oil production. Photo/daymonjhartley.com

 

Today, the average car owner spends $3,000 per year on gasoline. Pain at the pump? It’s more than that. It’s highway robbery combined with imperial politics camouflaged by propaganda that borders on the downright silly.
A few years back when the oil giants turned the screws upward, the people—including much of the political left—bought the idea that the world is running out of oil so prices have to go up. Oddly, we don’t hear that line any more.

Now the line is that we don’t have the refinery capacity to keep up with demand. To make that true, refineries on the East coast and the Virgin Islands recently cut capacity over a million barrels a day. The refinery giant, Valero gloated that this allows them a significant increase in profit.

There are any number of phony explanations out there such as the fall in the value of the dollar pushes up the price of gas. How do they reconcile that with the line that the rise of the dollar is making it difficult for American producers to compete on the world market? Then there is the line that speculators are driving the price up. No serious person would consider that speculators could influence such a huge global market.

In the 1950’s gas was very cheap—and the line then was America was self sufficient in oil. What was the real reason? We were in a deadly Cold War with the Soviet Union. With 28 million killed in the war and countless others injured, with billions of dollars of destruction by the war, the only source of income for the Soviets was oil revenue. The United States paid the Saudi royalty billions of dollars to place their oil on the market at the then high price of $11 a barrel that forced the Soviets to do the same and which would bankrupt them.

Now, it is in the interest of US imperialism to keep oil prices high in order to slow the growth of China. This is leading to the opening up of vast oil reserves throughout South America and Africa, let alone the huge new field opening in Iraq. No one told us before that Venezuela had greater oil reserves than Saudi Arabia. How do you resolve the contradiction between a world awash with oil and the screams of scarcity?

Couple the political role of oil with the basic law of monopoly capitalism —maximum profits—and you have the answer to why the pain at the pump. (See box on oil industry profits on this page.) Can we do anything about it? Yes, we can. However, there comes a time when you can no longer do little things. Today we have to think big! We have to think in terms of taking over these oil companies and running them in the interest of the people.

 

Where your gas money is going

The five biggest oil companies earned a combined profit of $375 million per day, or a record $137 billion profit for the year, in 2011, despite reducing their oil production.

In 60 seconds, these five companies earned $261,000— more than 96 percent of American households make in one year.

These five oil companies received $6.6 million in federal tax breaks every day.

In 2011, the three largest domestic public oil companies spent $100 million of their profits each day, or over 50 percent, buying back their own stock to enrich their board, senior managers, and largest shareholders.

The entire oil and gas industry spent on average $400,000 each day lobbying senators and representatives to weaken public health safeguards and keep big oil tax breaks, totaling nearly $150 million.

Each CEO of the Big Five companies received an aver- age of $60,110 in compensation per day last year. On average, their pay jumped 55 percent in 2011. Exxon CEO Rex Tillerson’s compensation came close to $100,000 per day last year.

Statistics from thinkprogress.org, written by Rebecca Leber

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