Five Percent: Conserve Energy

Climate Change Is Important: Energy Conservation is the First Step


May 6, 2007

Two Who Are Happy About $3.00 Gas

Category: Companies,Economics,Editorial,Policy,Transportation – Tom Harrison – 4:11 pm

U.S. Gasoline prices are back up over $3.00 a gallon, near the record high price set after the Katerina hurricane in 2005. The cause this time is, again, a shortage of refinery capacity. But this time there wasn’t a storm. According to A Reuters reports today

AAA said it was “alarming” that gasoline prices were rising so high without the backdrop of a major geopolitical or natural event to disrupt supply, like a hurricane or a new military flare-up in the Middle East.

Good thing geopolitical or natural events that disrupt supply never happen. Like a hurricane or a flare-up in the Middle East.

This makes me and ExxonMobil happy.

The reason gasoline prices are rising is that refineries are out of service. Econ 101: reduced supply, unchanged demand, prices rise. And the reason they are out of service: environmental regulations (specifically relating to more stringent standards on sulfur content of fuels). Another Reuters report says:

A string of serious U.S. refinery outages that has triggered a spike in gasoline prices ahead of summer driving season may signal that tougher environmental standards are straining the complex equipment needed to make greener fuels.

U.S. refiners struggling to meet lower-sulfur diesel requirements have been forced to take units down this spring for longer, more extensive maintenance than normal

So, who is happy about this?

I am.

And so may be ExxonMobil (NYT Article on April 27th reports “Exxon Says Quarterly Rise Is the Best In Its History”, and an article the next day reports that Chevron may be happy too:

The Chevron Corporation reported an 18 percent increase in first quarter profit as it cashed out of a Netherlands venture and cashed in on lucrative refining margins. Chevron said it earned $4.7 billion, or $2.18 a share, in the quarter, compared with $4 billion, or $1.80 a share, a year earlier.

I don’t think our shared happiness stems from the same root (a wild guess).

Here are some reasons I am happy about near record gasoline prices:

  • Econ 101: Higher prices, same demand, reduced consumption
  • Prices are rising due to environmental regulations, which are in our control. This is a better wake up call than a hurricane.
  • Environmental regulations are at least a start of the reckoning, when we’ll all start having to pay for the full cost of gasoline and other global warmers
  • High prices get peoples’ attention (witness the recurring Internet chain letter, promoting a boycott on May 15th)
  • People might start buying hybrids again, or driving less
  • I can thumb my nose at all my 3 or 4 neighbors who have bought Honda Pilot SUVs because they think they are “better”, but are getting 18MPG

Here are some reasons why ExxonMobil and Chevron are happy about near record gasoline prices:

  • …18 percent increase in first quarter profit
  • …Quarterly Rise Is the Best In Its History

I like my reasons better. I am still frustrated with my neighbors’ car buying choices.

1 Comment

  1. […] price spike is simple supply and demand. In May of 2007, gas prices started the ball rolling, when gas prices here in Boston reached $3.00 a gallon (and a month months later when I saw 4 dollars per gallon gas prices in Chicago. Both of these […]

    Pingback by Oil Price, Heating Oil Prices Reach New Highs | Five Percent: Conserve a Little Energy — October 27, 2007 @ 2:52 pm

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