Stephen Colbert Versus High Gas Prices

This is a couple years old, but we’re posting it for two reasons: one, it’s Stephen Colbert interviewing his daughter, demonically possessed by Getty Oil. It’s adorable and worth a chuckle.Two, the point the segment makes is as pertinent as ever: if gas stations can lower their prics by thirty cents and find business and profit booming, exactly why aren’t gas prices thirty cents lower per gallon? Oh wait… greed. Right.

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  1. Ben Popken says:

    $2.19 a gallon record prices, ah, memories.

  2. adamondi says:

    Why is it immediately labeled “greed” when oil companies make a profit? Isn’t the entire point of the capitalist economy of this country to make as much profit as legally possible? The oil companies have to pay higher prices for crude supply, so the price of the finished product has to go up to compensate. It is the same as when the price of milk goes up. The supply is more costly, so we pay more for it at the grocery store. People get all up in arms about gas prices, but they just happen to be more volatile than other commodities. That is what happens when the main supply of something comes from a region of the world that is constantly in upheaval.

    As for the guy running the gas station, he got what he deserved. He was what the gasoline industry calls a “jobber.” Simply put, a jobber signs a contract with an oil company that owns a gas station. He runs the gas station, but leases the property from the oil company. He sells branded gasoline from a particular oil company, and that oil company gets the profits from the gasoline sales. In return, the jobber gets all the profits from the convenience store sales (which is where all the money really is made at a gas station).

    The guy Steven interviewed was violating his contract and setting the price per gallon thirty cents lower than the oil company told him to in order to get more people into his convenience store, where he makes his money. But he does not own the gasoline sold there, and therefore had no legal right to do so. He breached his contract and was essentially giving away gasoline at cost that he did not pay for in the first place.

    I have no sympathy for someone like this who violates his business contract and is subsequently punished for doing so. He is lucky the oil company didn’t pursue criminal charges.

  3. MattyMatt says:

    So, wait. If I’m understanding Adamondi, oil companies make gas station owners stewards of the oil company’s gasoline — that is, gas station owners are given gas for free, in exchange for which they sell it, and give all of the returns to the oil company who gave the gas to them? That arrangement sounds … odd.

  4. droppedD says:

    “if gas stations can lower their prics by thirty cents and find business and profit booming, exactly why aren’t gas prices thirty cents lower per gallon?”

    Because demand for oil is relatively inelastic and therefore normal laws of supply and demand don’t quite apply. When gas was $3 a gallon, we still bought it. If it goes down to $1.50 a gallon, we may use somewhat more… but not that much so. I’m not going to go trade in my sedan for an SUV just because gas prices drop, nor will I sell my car and move to the butt-end of nowhere to be near my workplace just because my commute costs me an extra buck a day.

    Also, significantly, if the gas companies suddenly increased output drastically and dropped prices (they’d have to drop them a lot to move more oil, given the inelasticity of demand), they’d run out of oil faster and with lower profit margins. That’s a bad thing for our economy and for the environment, long term.

    not that i don’t hate Big Oil, but I understand it’s just market forces between OPEC, the refineries, and our static well-locked reliance on our gas. I suppose we could always run our oil supplies like Soviet Russia did, or you could move to Venezuela. :)

  5. bambino says:

    If you honestly believe that pump prices are high because the ‘cost of oil’ is high, I’ve got more than one bridge I’d like to sell you.

  6. I’d also like to point out that oil refineries play a large role in the price of gasoline, not just the supply of crude.

    Gas could be a lot cheaper if we had more refineries in the US…but you know..NIMBY and all…

  7. homerjay says:

    Wow, I think we know where Adamondi works. Bambino is right. There is a reason Exxon/Mobil saw outlandishly record profits last year and its not because their costs are going up.

    Oil it not comparable to milk or almost any other product. There are very few oil companies and they all talk. They know they can skirt laws because they have politicians in their back pocket. This allows them to set prices based on greed and they all do it together. Its called collusion and its illegal but who is going to prosecute them?

    Why do you think the price of oil is going down right now?? Its obvious that their costs have not changed. We all know that it will go right back up come mid November.

  8. salem says:

    Bambino and Homerjay should go back to wearing their tin foil hats and wonder what other big conspiracy is out there. Everybody is bought off or colluding with one and other. Give me a break. I mean where is your evidence for these allegations?

    You are right, oil is not like any other commodity and nor will it ever will be. So get over it. In fact oil is better than milk, since it is traded in an open market on daily basis for a spot price, and as a result you will always knows what the cost of oil is per barrel. The cost of oil in the wholesale market is about 80% of the price you see reflected at the pump. The remaining 20% of the price is due to marketing, transportation, and taxes.

    The price of oil is determined at the NY and Chicago Merc. Open up an account and feel free to trade oil future contracts–and be part of the “collusion.”

    Gas stations do not make a lot of money on the gas that they sell, the margins are slim.

    As for ExxonMobil, please don’t use the word “outlandish” since it only makes you look foolish. If anything that would suggest that you should be looking to buy their stock then.

  9. salem says:

    Please don’t use the word “outlandish” since it only makes you look foolish.

  10. Ben Thoma says:

    Here in NJ I actually saw prices lower than $2.19. Perhaps Adamondi didn’t lose his livelihood. Perhaps that was just a cover, as he is now the head of OPEC and has slowly been working to bring prices back down.

    Or not.

  11. Marsupial says:

    Adamondi is talking about a very specific situation. When I worked for a Gas Station/Mini Mart, the way it worked was that our owner, the Franchisee, was contracted to purchase fuel from the oil company (Arco, in this case). Shipments arrived about every 18 to 20 hours. We gave them a check (about $9k), they filled the tanks, our owner set her resale price (usually based on what the other gas stations were charging and/or if her wholesale price had changed (OR if she needed extra money). If the price was too low, we would run out of gas. If the price was too high, we would have to skip a shipment, which Arco would frown upon.

  12. homerjay says:

    Ben, Its almost the first tuesday in November. They’ll keep going down until then.

  13. Triteon says:

    That’s it, go the well with the vast right-wing conspiracy. Just like when gas prices were low during the administrations of Ann Richards of Texas and David Walters of Oklahoma during the early 90’s, and Clinton was President.

  14. LeopardSeal says:

    @ Shinobi:

    The location of the refinery in relation to the end user has nothing to do with price, contrary to popular belief. Here in Alberta, I drive past refineries on the way to work and work a stones throw from even more refineries, yet up to a few weeks ago we were paying over $1.00 CDN per litre (approx $3.37 USD / gallon).

  15. adamondi says:

    @ homerjay: “Wow, I think we know where Adamondi works. Bambino is right. There is a reason Exxon/Mobil saw outlandishly record profits last year and its not because their costs are going up.” — Exxon/Mobil saw outlandishly record profits because Exxon/Mobil is an oil drilling company as well as a refiner and a gasoline retailer. They own the entire path from source to retail. Same with ChevronTexaco. However, there aren’t a whole lot of humongous oil companies like that. Most refiners and marketers of gasoline have to buy their supply from other companies. THEY are the ones who really take a hit in all of this.

    All of the oil refiners in this country would love to build more refineries, especially since the technology at most of the existing ones is pretty ancient. However, there is no way in heck that they would ever be able to get through all the red tape that would be required in order to do so.

    The more people spew off nonsense about gas and oil prices being a conspiracy, the more they reveal their own ignorance about the oil industry. There is absolute cutthroat competiton among the oil companies. I doubt any of them could get along well enough to conspire to screw over the people of the world.