The Oil Drum

When I try to explain to people about what is going on in the oil patch (potential peak, potential export problems, gas is really cheap, etc), the response is always that I'm wrong and it's just Big Oil gouging us. It really seems to gear up this time of year as the gas price goes up. How would you recommend responding to these people? Or is it pointless?

It is almost pointless, but I try anyway. If people think that high oil prices are all about Big Oil gouging them, they are never going to understand the problem we face. They will point fingers at Big Oil until they realize that there’s more to it than meets the eye.

So, the question I always ask someone who says something like this are: 1). What is gouging? Please define. 2). How much money should a company be allowed to make? 3). Should it depend on the size of the company? 4). Do you think a major oil company has a higher risk profile than a major software company? 5). Did you know that they oil company earns on average under a dime per dollar of sales, while the software company earns almost $0.30 per dollar of sales? 6). Did you know that oil company profits would plunge if we all drove 10% less?

Those are the kinds of questions I use to frame the discussion. Ask them if they believe demand increases in the summer. Then, ask what they think would happen if prices did not go up as demand increased. There is a limit to how much we can crank up production. This can help them understand a little bit about the supply and demand pictures, and then you can explain that other things affect supply and demand, and it isn’t just a summer issue. Next, you may be ready to hit them with oil depletion and ask them what they think is going to happen when supply starts going down while demand is still rising.

But they have to get past “It’s all an oil company conspiracy” and start understanding the effects of supply and demand.

This layperson appreciated the presentation.

It may be hard for ADHD afflicted consumers to consider their own demand, let alone omnipresent supply constraints.

How would you recommend responding to these people? Or is it pointless?

I just jumped over to the Digg thread where this article is being discussed. Look at that, and fear for what we are up against. A sampling of comments:

this is complete propaganda. if you believe this crap your dumb. Why is Exxon making records profits. and where were these summer/winter blends in 1998 or earlier?when gas was 1.09 a gallon. why have gas prices just skyrocketed since the war?? dont just stop at this little report about it, continue to research oil and gas and im sure you'll stumble upon some hard to take truth.

well despite the reasons behind the price increases the best way to drive the prices down is to purchase the cheapest gas around, so by forcing higher priced stations to compete with lower competitors will drive the cost down.

Show me any other year where the seasonal fluctuation is over 90 cents per gallon. Until gasoline refining is nationalized we will always face these kinds of price gougings.

Don't the refineries own calendars? Last time I checked, summer comes at the same time every year. You'd think they'd be able to figure that out by now.

Summer blend my ass!

I didn't rtfa, but I am pissed off that these scumbag thieves (big oil) can take gas from 2.20 to 2.80 in Three ****ing weeks.

While this article clearly states the variations in winter and summer gasoline, I'll clairify it very simpler for you in a way that the oil companies never wish you to hear, but know about anyways. First of all, Menthol Hydrate is used in winter gasoline and since many people don't drive pleasureably in winter, the only way to do it is to reduce the price in order to get people on the go.

Menthol Hydrate? Is it any wonder that educating people on energy is such an uphill struggle? This the mindset of the majority of Americans, and our politicians are trying to pander to this sort of nonsense. That's why our energy policy is so screwed up. The one comment just typified the average person: I didn't read the article, but I am going to share my uninformed opinion anyway.