On April 3rd the President held a news conference. Asked about the rising price of gasoline (the national average added another 18 cents a gallon last week), he was quoted as follows, "... but a lot of the price of gasoline depends on the price of crude oil. And the price of crude oil is on the rise because people get spooked, for example when it comes-when it looks like there may be a crisis with a crude oil producing nation, like Iran."
And there is no question that the price of gasoline depends in large measure on crude oil. But what was left unsaid is that most of the major buyers of crude oil -- the refiners who crack it into gasoline -- are also major producers of crude oil. For example, Exxon Mobil produces as much crude oil equivalent on a daily basis than the "crude oil producing nation, Iran" referred to by President Bush in his comments. As major producers and consumers of crude oil, what incentive do they have mitigating the price of crude, be it Exxon Mobil, Shell, Occidental, BP et al -- none! Crude oil is their lodestone and the higher its price the fatter their bottom line.
It is as though the miller and the baker owned all the grain farms and when people complained about $10 dollar loaves of bread they would look you sadly in the eye and tell you "we would love to lower the price of bread but the price of wheat has become so expensive. And we are only making pennies on each loaf of bread," while smugly content that the fact that they have successfully deflected from our awareness the fact that they are making five/ten times their costs on each bushel of wheat while doing all they can to push up the "market traded" price of wheat (broadcasting wheat supportive news: drought, floods, grain fungus, boycotts, you name it).
No, in the agricultural to food chain the gouging, if there is any, doesn't start on the farm.
Yes, in the oil patch to gasoline chain the gouging does start at the oil well.
President Bush is right. The major component in the price of gasoline is the price of crude oil. Given that fact is it now time that our government -- the Justice Department -- take steps to sunder the production of oil from the downstream activities of the oil companies. Let an ExxonMobil choose: do they want to be oil refiners or oil producers? Being both may be logical for them but consummately detrimental for the consuming public. Would it be permissible, given the anti trust and competition provisions of our laws to allow the miller and the baker to own all the farm land? What would it do to the price of bread? Well that's what it is doing to the availability and price of gasoline.
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