Pump Shock: Consumers Fume : Anyone cynical about those overnight hikes in gas prices?
Whatever the West winds up doing about Saddam Hussein, it’s a mortal certainty that U.S. gas consumers right now are ready to do battle with the oil companies. Just tell them where to sign up.
Who can blame them? It takes six weeks from the time oil tankers fill up on the Persian Gulf until they arrive at refineries on the Gulf of Mexico. But it takes about six seconds, it seems, for pump prices to go up.
What’s going on here? Sure, unrest in the Mideast has caused anxiety among sellers; the current structure of the oil business emphasizes the short-term deal on the volatile spot market. Few suppliers are locked into long-term deals, so prices are certain to go up.
But let’s not underestimate thinly disguised greed in the form of price-gouging as a factor.
Consider: Gasoline prices jumped within 24 hours after Iraq took control of Kuwait last Thursday. The run-up continued through the weekend with prices at the pump up as much as 15 cents a gallon higher, despite assurances that there are ample stocks of crude oil.
With sufficient inventories of oil on hand, the United States is not suffering from an actual oil shortage, which was the case with the oil shocks of 1973 and 1979. Even the Bush Administration, anything but hostile to oil interests, senses political trouble. “It is not clear that all the price increases that have been reported at the consumer level are necessary,” White House spokesman Marlin Fitzwater said. “It would be unfortunate if there was any gouging or anyone was trying to take advantage of the situation.” Sen. Bob Dole (R-Kan.) sent a letter to Atty. Gen. Richard L. Thornburgh asking for an investigation of what he called “price gouging.”
Oil companies maintain they are simply passing on their higher costs for oil, which they continue to buy as a hedge against continuing price hikes. The price hikes, the rationale goes, help to restrict demand and discourage hoarding. The only problem is that the average consumer might wonder why oil companies always are willing to move quickly to pass on higher costs to consumers, but it’s another story when it comes to sharing lower prices. Last spring, for example, when crude-oil prices fell, gasoline prices remained high, allegedly because of a bottleneck in refinery capacity. In contrast, gasoline prices skyrocketed in the weeks after the massive oil tanker spill in Alaska’s Prince William Sound in March, 1989.
The United States is still overly dependent on oil imports, which account for nearly 50% of our supplies. Consumers should be indignant about price hikes, but the only way to settle the score at this point is conservation. By cutting down on gasoline usage, they can send a powerful message--not only to Saddam Hussein but to the oil companies--that American gas users are educated consumers.
