Gouged Out: The Consumer and the Gas Station Operator

Thursday, 24 April 2004, CNN Money ran an interesting article called Gouging myth out of gas1 that further explained how the myth that gas stations participate in "price gouging" is unlikely, at best -- and it casts an eye toward the primary culprit through the use of some very interesting facts and figures.

Image created by GreyHawk using Microsoft Excel, based on the percentages provided in the article.2
Note: Excel automatically changed the 72% to 71% because the total of the figures provided added up to 101, not 100.

According to the article, some people assumed that gas station owners get a bigger slice of the approximately $3.50 per gallon than they actually do -- but several suspected something much closer to the truth.


Abby Razaque, manager of the BP station where Garnes filled up, said the owner's take was 8 cents per gallon, and that the lion's share of the proceeds go to BP.

With the lion's share of the profit going to Big Oil, it's not surprising that companies like ExxonMobile are shattering profit records. An attempt at a Congressional investigation into price gouging by oil companies yielded dubious results, particularly after it was proven that oil company executives lied to Congress about their participation in Dick Cheney's 2001 Energy Task Force meetings.3


When Sen. Frank Lautenberg, D-N.J., asked last week during a hearing on oil industry profits whether any of the companies' representatives had participated in the task force, four of the executives said they did not and the fifth said he did not know.

The oil executives weren't put under oath at the hearing, but it is still a crime to lie to Congress, reports CBS News correspondent Bob Fuss. Lautenberg wants the Justice Department to look into it.

Of course, note that the oil executives weren't put under oath.4 That makes it OK, then -- right?

In any event, prices are rising, further hurting the general populace and raising an outcry that has resulted in Congressional leaders engaging in verbal slapfights of blame-trading. From The Swamp,5


Republicans say Democrats have broken their promises to contain rising gas prices. Democrats say Republicans have stymied their efforts to increase market regulation and reduce American dependence on oil.

Given that the Republicans have been steadfastly protecting their own interests and Party over those of the nation and her people as a whole, and that they have been working in sync with the White House in nearly all disasters that have been brought to bear on our economy, our energy policy, our infrastructure, our security and our environment, I'd be willing to bet that the GOP shoulders the lion's share of blame here.

Particularly when I keep in mind the emphatically stated, Republican-supported quote from the White House that they would be fighting oversight attempts by the now-Democratic majority Congress, promising a "cataclysmic fight to the death."

The Republican members of Congress have also bragged about their ability to obstruct progress now that they've lost the majority.

Overall, when the Republicans claim6


"It has been two years since [House] Speaker [Nancy] Pelosi promised 'a common sense plan to help bring down skyrocketing gas prices,' " reads the conference's new YouTube video, set to a bouncy lounge soundtrack that recalls the I Dream of Jeannie theme. "Where have the Democrats gotten us?"

it behooves us all -- as a united people -- to give them back their own words:7


"The strategy of being obstructionist can work or fail ... and so far it's working for us."

The little guy at the pump isn't gouging us; the big oil companies are, in concert with the Republicans who are hell-bent-for-leather determined to to wage "a cataclysmic fight to the death" to protect their party, their inflated reputation and their tenuous grip on power (and the purse) in the United States government today.



  1. Gouging myth out of gas, by Aaron Smith, CNNMoney.com staff writer; Last Updated: April 24, 2008: 6:13 PM EDT
  2. From the article:

    For every gallon of gas, about 72% of the price goes to the producers of the crude oil from which it's made, according to the U.S. Energy Information Administration - producers like Chevron (CVX, Fortune 500), ConocoPhillips (COP, Fortune 500) and BP (BP). Exxon Mobil (XOM, Fortune 500) recently made history by reporting the highest annual profit ever for a U.S. company when it reported 2007 results.

    13% of the remaining price of a gallon of gas goes to taxes, while 8% goes to the refiners, and another 8% goes to distribution and marketing, which includes gas stations.

    The total of the numbers provided equals 101%; without the raw data, this was adjusted by knocking the 72% to 71% for purposes of the pie chart.

  3. Who met with Dick Cheney's 2001 Energy Task Force? Why, several members of Big Oil:

    A White House document shows that executives from big oil companies met with Vice President Cheney's energy task force in 2001 -- something long suspected by environmentalists but denied as recently as last week by industry officials testifying before Congress.

    The document, obtained this week by The Washington Post, shows that officials from Exxon Mobil Corp., Conoco (before its merger with Phillips), Shell Oil Co. and BP America Inc. met in the White House complex with the Cheney aides who were developing a national energy policy, parts of which became law and parts of which are still being debated.

  4. "...oil executives weren't put under oath..." -- That was something that the then-majority Republican party insisted upon.

    The executives were not under oath when they testified, so they are not vulnerable to charges of perjury; committee Democrats had protested the decision by Commerce Chairman Ted Stevens (R-Alaska) not to swear in the executives. But a person can be fined or imprisoned for up to five years for making "any materially false, fictitious or fraudulent statement or representation" to Congress.

    Almost as if the Republicans wanted to give the executives "wiggle room" and minimize potential penalties if they got caught lying.

    Note, too, that the the WaPo article cites Secret Service logs as part of the reason behind how the lies came to light; this serves as the second reason that the WH and Secret Service attempted to obscure the log files -- it took a court a court case to reassert the reality that the WH Visitor Logs are public documents. The first reason? Propagannon, of course -- the visits of a falsely credentialed sham reporter & gay prostitute to the WH, and several unexplained overnight stays.

  5. Gas at $3.50 a gallon: Whose fault?, The Swamp (Chicago Tribune's Washington Bureau), by Matthew Hay Brown, April 22, 2008 6:30 AM
  6. The common claim I've seen on forums and in many places since the Democrats took over the majority in Congress by a very slim margin has been to say that "everything fell apart since the Democrats took control" -- a claim made in the hope that people will still be half-asleep and not paying attention to the Republicans' stated goal of obstruction. It's not working very effectively, however. The People are beginning to pay attention, and the GOP is on the verge of imploding.
  7. Politics of Obstruction -- source Bill Sher, Huffington Post. This is all part and parcel of the Republican "culture of corruption" -- their primary job, as they see it, is to screw Democrats and to further their own capacity to lie, cheat and steal -- not to help secure the nation, provide for the common defense or promote the general welfare. Further evidence and reminders of Republican corruption overall as par for the course is available at Salon.
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Our society has a Myth of Competition in which everyone competing yields the best results. Students are supposed to compete with each other at memorizing useless garbage in the schools. What good are spelling bees? But large numbers of competitors often end up driving each other into the ground. Anyone can drive to a different gas station so in a given area they are forced into just keeping their heads above water.

The small number of people that can control the supply don't have to compete hard and can figure out that it is stupid to do so. But they will give lots of lip service to the competitive ideal. So the majority of people in the REAL ECONOMY are losers. Where are the Brilliant Economists demanding mandatory accounting in the schools?

Kill an economist for Karl

there's little chance that until efforts to put real ~education~ back into schools takes place that any program promising to actually turn out an educated public will actually take shape.

We need to stop waiting on the schools to magically fix themselves and just start telling kids about some good books.


More book but worth the time.

Kill an economist for Karl

...have you thought of writing up a piece to post directly on good sci-Sci-Fi books to read, and perhaps telling folks what kind of things they could learn from 'em?

That'd be one heck of an interesting piece. It could make the items on that link easier to find and perhaps give people a succinct, concise reading list to draw from.


I have a question.... Does Hugo Chavez control the price of gasoline in Citgo stations here in the US? I know that this past few Winters, he has made sure that the dis-advantaged have received affordable heating oil. I seem to remember New York...and.. This article is dated February 2006 Venezuela's Oil Giveaway
I could also swear the Chavez has done the same this past Winter also...I know I read it somewhere..think Alaska.

Seems to me that big oil with all their profits cares not for consumers...not a twit! I have my fingers crossed that Citgo gasoline stations may pull a fast one...at least I hope so.

Many Republicans denounced it as a propaganda trick, but you know something? They aren't exactly believable, given their proactive complicitly helping the oil executives lie more easily.

I believe there are restrictions and other factors that keep Citgo from being able to undercut the market bad boys, but I'm not certain what they are -- I'd have to look further into it.

...do you know if Sunoco is one of the importers with the claim to fame of not importing Middle Eastern oil? I'd be interested in seeing a little more about both Sunoco (or whichever company it is that doesn't use ME oil) and Citgo, and the various barriers to market they face in competition with the other oil and gas companies.

so not sure if it is correct [I did not fact-check]

These companies import Middle Eastern oil:

Shell.......................... 205,742,000 barrels
Chevron/Texaco.........144,332,000 barrels
Exxon /Mobil..............130,082,000 barrels
Marathon/Speedway..117,740,000 barrels
Amoco..........................62,231,000 barrels

Do the math at $30/barrel, these imports amount to over $18 BILLION! (Oil is now $90-$95 a barrel)

The latest price is a record high ($105.00 a barrel)

Here are some large companies that DO NOT import Middle Eastern oil:

Sunoco................ 0 barrels
Conoco................ 0 barrels
Sinclair................ 0 barrels
BP/Phillips.......... 0 barrels
Hess.................... 0 barrels
ARC0. .................. 0 barrels
Also: Pilot, Flying J, Love's, RaceTrac, Valero

All of this information is available from the Department of Energy and each is required to state where they get their oil and how much they are importing.

ePMedia ... get the scoop with us!
If it's true that our species is alone in the universe, then I'd have to say that the universe aimed rather low and settled for very little. ~ George Carlin

I remember actually contacting Sunoco and confirming their status; I got sidetracked and didn't complete going down the list.

It was a while ago.

A looooong while ago.

...but, of course, with these companies not importing ME oil, what then factors into their price structure?

Guess that's the question of the week -- it'll help determine to what extent, if any, individual producers have regarding influence of prices.

And then, of course, there's the government subsidies...

I can comment on this with some degree of knowledge...

(Necessary Disclaimer: I *do* work for Sunoco. However, I'm a corporate IT geek and not working directly in the refining or marketing side of the business.)

1. Sunoco's oil source is off-shore Nigerian crude.

2. Price structure is based upon a number of factors:
a. Price being paid for crude (long-term contracts, probably with some spot market purchases if there is a shortage.

b. Refinery capacity. Only so much can be processed, more crude doesn't do much after that. And as refineries are down (maintenance, accident, etc.) there's less product going on the market and the supply gets squeezed. (Katrina had this sort of effect since it shut down Gulf Coast refineries for a period of time.)

c. Product market price spreads. This is an important factor. A barrel of oil can be broken down into multiple products (diesel, home fuel oil, unleaded gasoline, high-octane aviation fuel, propylene, etc. Depending on the market prices (supply/demand) and the breakdown ratios there is continuous analysis going on to work out the more profitable ratio of products to make. If aviation fuel is highly profitable the refinery will simply make less unleaded gasoline.

Combine the above with the fixed costs of the business, price contracts, and some variable costs and you get a continuous curve of of the margin between the current selling price and what it cost the company to produce and transport the product.

And the margin varies as raw material and other costs flucuate, even to the point of going negative at times.

All in all, it's a bit more complex than most short critiques give it credit for being.

Is there any way you can elaborate or provide some further insight into how the margin factors break out by barrel then product?

I'm most interested in the breakout of, and factors impacting/influencing, the following (in order of priority):

  1. Gasoline,
  2. Home heating oil,
  3. Diesel fuel

I don't know how feasible -- or fair -- the question is, but I don't often get a chance to talk to folks in possible position of being able to answer these questions. :)

I appreciate your jumping in here. It reminds me that when I spoke with someone at Sunoco about sourcing all that time ago, the answer I'd received was prompt and courteous.

Is that a company-wide phenomena, or have I just been lucky -- first the person who'd initially replied, and now you, both helpful, informed and courteous. It's almost scary.


Nice try but I don't think bushco hears prayers from anyone.


Don't you know these oilmen are doing high fives!