Is Big Oil Guilty of Price Gouging?
Unfair Profits or Lots of Volume?
Most people, if asked to name off the top of their head which industries were taking advantage of consumers to generate insanely high profits, would likely have the oil and gas industry at the top of their list. Isn’t it a well-known fact that with gas prices spiraling through the roof, “Big Oil” is by far the most profitable industry out there, hence they must be taking advantage of consumers?
Actually, it’s not that simple. But public opinion would have it otherwise.
In fact, industries such as internet information providers and personal computers rank well above major integrated oil and gas (Big Oil) when it comes to profit margins. The simple definition of profit margin is: A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings.
Wind Power Continues Trend of Rapid Growth in U.S.
Generation from wind turbines in the United States increased 27% in 2011 from the prior year, and is up 350% since 2006.
“During the past five years capacity additions of wind turbines were the main driver of the growth in wind power output,” the U.S. Department of Energy reported. “As the amount of wind generation increases, electric power system operators have faced challenges with integrating increasing amounts of this intermittent generation source into their systems.”
- Wind is currently the largest source of non-hydro renewable electricity in the U.S.
U.S. Crude Oil Imports Down 12% Since 2005
Foreign Oil Imports at Lowest Level Since Before Y2K
U.S. crude oil imports have fallen to their lowest level since 1999, according to data provided by the U.S. Energy Information Administration (EIA), an arm of the U.S. Department Of Energy (DOE).
Crude oil imports for 2011 averaged 8.9 million barrels per day (bbl/d), falling below the 9 million bbl/d mark for the first time since 1999, and down 12 percent since hitting a peak of 10.1 million bbl/d in 2005.
What Makes Up the Cost of a Gallon of Gasoline?
Gas Price Breakdown: It’s All About the Cost of Crude Oil
“What am I paying for in a gallon of gas?” is a question on people’s minds and often posed by regular visitors to Consumer Energy Report. With the assistance of the Energy Information Administration, who provided the data (see the methodology they used for calculating the component percentages at the end of this column), I was able to break it down into a series of charts from 2000-2012.
For a more detailed look into the recent spike in gas prices, see: Charting the Dramatic Gas Price Rise of the Last Decade
- Figure 1. The composite share of various components that make up the price of a gallon of gas, 2000-2012.
Charting the Dramatic Gas Price Rise of the Last Decade
Different Situation, But Prices Are Not Unprecedented
In a previous column, I pointed out that — perhaps surprisingly — the price we’ve been paying for gas lately, compared to 90 years ago, is not as high as people would think — that is, once the rate of inflation is factored in to the equation. For instance, while motorists may have been paying only $0.25/gallon in 1919, when converting that number to February 2012 dollars, the cost was $3.35/gallon — a mere 6.5 percent cheaper than 2011′s annual average of $3.57/gallon. The chart below shows the price movement (based on February 2012 dollars) from 1919-2011.
- Annual gas prices adjusted for inflation 1919-2011. Cost in Feb. 2012 U.S. Dollars.
How High Have Gas Prices Risen Over the Years?
Inflation Adjusted Data
Gas prices are spiraling through the roof like never seen before. People often point to specific years that gas was so cheap, in an effort to blame politicians, Big Oil, or whomever else is the flavor of the day. Indeed, a gallon of gas was going for only a quarter of a dollar in the years after World War I, and even less than that before and after World War II.
- A 1920 Standing Liberty Quarter could buy you more than a gallon of gas for most of the years after World War I until after World War II.
But the key fact that’s missing from all the ranting and raving is the rate of inflation. The simple definition of inflation according to Wikipedia is: “A rise in the general level of prices of goods and services in an economy over a period of time.” Keep in mind, that at the end of World War I, average annual income was only $1,500. Currently, annual income is around $50,000.
For this exercise I plotted various sets of data in graphs — sometimes combined — based on information compiled by the U.S. Department of Energy’s (DOE) statistical office, the Energy Information Administration (EIA). The purpose of this two-part segment is to provide a clearer understanding of how much the price of gas has actually gone up relative to a family’s budget and other household costs, and most importantly, during what time frame.
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How Not To Go Solar
On a recent trip to Canada, I passed through Kingston, Ontario — home to Canadian Forces Base Kingston (CFB Kingston). A solar power installation just off the roadway — inside the perimeter of the base — caught my attention. Unfortunately, the reason it captured my attention was because the solar panels looked like the side of a trash can.
The picture tells the story.
How Much Can Renewables Bite Out of the Coal Pie?
20 Years Down the Road — Will There Be a Marked Change?
While sifting through data in the Energy Information Administration’s (EIA) Annual Energy Outlook 2012, I came across some tidbits that I thought would be interesting to share with readers and graphed it to bring out the points.
What we’re looking at here are the sources — and percentage of those sources — of the generating mix of electricity in the United States, as projected for the years 2012 and 2035.
In 2012, coal is projected to provide three and a half times the amount of electricity as renewables will. By 2035 that will be reduced to less than two and a half.
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