Why is Gas So Expensive? Here’s a Breakdown

As gas prices rise and fall seemingly on a daily basis lately, it might seem like the shift in price is totally arbitrary.  After all, what can happen during one weekend to make gas go from $3.69 to $3.09 and back up to $3.36? A complex set of transactions has to take place before the price of gas is calculated, and The Consumerist has broken it down for us.

From The Consumerist:

The Three Markets: Contract, Spot and Futures

Both oil and gas are traded on three markets: the contract market, the spot market, and the futures market. Each is influenced by different factors and impacts the price of gas at different stages of production. Unlike the futures market, the contract and spot markets are not the kind of markets found on Wall Street; they are informal networks of businesspeople.

The Contract Market
Though it seems like oil companies spend most of their time ruining your day by raising the price of gas, their primary business is exploration. Once an oil company finds a field and coaxes it into producing crude, it takes that unrefined oil and sells to refiners. The vast majority of oil is sold by contracts. A veritable orgy of contracts signed between oilcompanies and dealers, oil companies and refiners, refiners and independent dealers predetermine the fate of most oil and gas.

Refiners plan their purchasing and refining activity to ensure that these contracts are fulfilled. In exchanged for this privileged standing, refiners charge contract customers a premium.

Check out the article on The Consumerist for the rest, including the spot market, the futures market, refineries, gas stations, taxes, and more.  It’s a fascinating look into what causes prices to fluctuate, and as described by The Consumerist, sometimes all it takes is a butterfly flapping in the wind to send gas shooting up in price halfway across the world.  And remember - though you might not be able to do anything to control the price of oil, you can control how much you consume.

Link [The Consumerist]
Photo credit: Flickr user micah.d

Government Officials Took Drugs, Money and Sex from Oil Industry

The offshore drilling debate is about to get a whole lot messier.  This week, shocking new allegations came to light regarding corruption in the form of sex and drugs between government officials and oil and gas company officials. An interior department inquiry discovered that government employees whose job was to process permits, hold oil and gas companies to account and collect royalties for the federal government have been partying it up with their oil industry buddies, taking gifts, snorting cocaine and engaging in trysts.

From The Washington Post:

Investigators from the Interior Department’s inspector general’s office said more than a dozen employees, including the former director of the oil royalty program, took meals, ski trips, sports tickets and golf outings from industry representatives. The report alleges that the former director, Gregory W. Smith, also netted more than $30,000 from improper outside work.

In the report released yesterday, investigators said they “discovered a culture of substance abuse and promiscuity” in which employees accepted gratuities “with prodigious frequency.” The report cited one e-mail from a Shell Pipeline representative asking a woman in the royalty office to attend “tailgating festivities” at a Houston Texans football game: “You’re invited . . . have you and the girls meet at my place at 6am for bubble baths and final prep. Just kidding.”

Apparently, many of the employees named in the investigation said they ‘didn’t think ethics rules applied to them’ because of their ‘unique role’ in the agency which supposedly requires them to socialize with industry representatives for ‘market intelligence’.  Wow.  Creative excuse.  Sounds just like what millions of people across the world try to pull when they get caught doing something wrong, like Tatum O’ Neil’s “I was researching a role” ploy.

It’s just another example of how tight the oil industry’s grip on America really is.  They’ll do anything to stay on top, and taking advantage of government officials’ greed has proven to be a lucrative tactic.  Not only do they have the entire Bush administration in their pocket, they’ve got thousands of lower-level government officials doing their bidding as well.  Hopefully, we’ll see the Democrats take hold of this issue and use it to fight offshore drilling.

Link [The Washington Post]
Photo credit: The Propaganda Remix Project

GOP Senator Ted Stevens Indicted for Gifts from Oil Company

The longest serving Republican senator, Ted Stevens, was indicted yesterday on seven felony counts of concealing over a quarter of a million dollars in house renovations and gifts from an oil contractor that lobbied him for government aid. Stevens, 84, has been a central figure in Alaskan politics since before statehood and is the first U.S. senator to be indicted since 1993.

From Yahoo! News:

He is accused of lying on his annual Senate financial disclosure reports between 1999 and 2006 — an indictment that caps a lengthy FBI investigation that has upended Alaska politics and brought unfavorable attention to both Stevens and his congressional colleague, GOP Rep. Don Young. Both are running for re-election this year.

Stevens’ indictment further damages Republican prospects in the November election as Senate Democrats, who now enjoy a 51-49 majority, try to capture a filibuster-proof 60-vote majority. Stevens faces both Democratic and Republican challengers who are trying to capitalize on his legal woes.
The Justice Department accused Stevens of accepting expensive work on his home in Girdwood, Alaska, a ski resort town outside Anchorage, from oil services contractor VECO Corp. and its executives. VECO normally builds oil processing equipment and pipelines, but its employees helped do the work on Stevens’ home.

VECO’s requests included funding and other aid for their projects and partnerships in Pakistan and Russia, federal grants from several agencies and help in building a pipeline in Alaska’s North Slope Region. If convicted, Stevens will face up to five years in prison for each count. He’s expected to turn himself in.

Ha ha – jerkass. I wonder how many other GOP senators are up to the same game with oil companies? Undoubtedly plenty of them…

Link [Yahoo! News]
Photo credit: Wikimedia Commons

Top Climatologist Wants Oil Company CEOs on Trial for Crimes Against Humanity

Climate scientist James E. Hansen called for putting oil companies on trial for crimes against humanity last Monday on Capitol Hill. Hansen stated that the heads of oil companies, who knowingly delayed action on greenhouse gas emissions, are guilty of crimes against humanity and nature and should be prosecuted thusly.

From Hansen’s speech, via Dot Earth:

CEOs of fossil energy companies know what they are doing and are aware of long-term consequences of continued business as usual. In my opinion, these CEOs should be tried for high crimes against humanity and nature.

Conviction of ExxonMobil and Peabody Coal CEOs will be no consolation, if we pass on a runaway climate to our children. Humanity would be impoverished by ravages of continually shifting shorelines and intensification of regional climate extremes. Loss of countless species would leave a more desolate planet.

If politicians remain at loggerheads, citizens must lead. We must demand a moratorium on new coal-fired power plants. We must block fossil fuel interests who aim to squeeze every last drop of oil from public lands, off-shore, and wilderness areas. Those last drops are no solution. They yield continued exorbitant profits for a short-sighted self-serving industry, but no alleviation of our addiction or long-term energy source.

Hell yeah! We’ll sign that petition. A commenter calling himself ‘blindjester’ on a related story at The Huffington Post Green sums it up nicely: “If you cause the injury of a few people, you get sued. You cause the death of someone, you go to jail. If you’re wealthy enough and powerful enough to contribute to disease and death worldwide, you get to live in a mansion.”

Link [Dot Earth] + [The Huffington Post]

The Shadow Yacht: The Perfect Way to Showboat Your Distended Bank Account (Literally!)

For the billionaire who has everything, including a grossly bloated environmental footprint, comes the Shadow Yacht: think of it as a garage for your main 400-foot boat. If you’ve never seen those specials on TV that highlight the amazing ways Middle Eastern oil billionaires find to waste their money, here’s a quick education in Disgusting Wealth 101.

The Wall Street Journal has it:

A shadow yacht is a trailer yacht for your megayacht — a floating garage of a sort that tags along with your main yacht to carry your collection of helicopters, cars, motorcycles, jet skis and motorboats. That way, when you pull up to the docks of Monaco in your 350-foot main yacht, you can also pull into the local restaurants in your personalized drophead Rolls, without having to endure the indignity of a rented limo.

The boats can also pack fuel, water, spare parts and supplies, allowing more remote travel.

Shadow Marine, of Ft. Lauderdale, Fla., is the main builder of shadow yachts, and they’ve sold two already — both to Middle Eastern clients. The company recently released a new model, called the Allure, which is much more plush than the earlier versions. Replacing the garage-like décor is an interior complete with six staterooms, a pool, sky lounge, theater, game room and mini gym.

For just $35 million, you can have a shadow yacht of your very own. It’s the perfect way to get back at your father for saying you would never be as rich as your 12 brothers, attract a plastic-tittied golddigging trophy wife, and can even secretly house your bevy of bleached blond, lucite-stripper-heels-wearing mistresses. It’s SO classy, y’all – Price Alwaleed Bin Talal Alsaud, net worth $20.3 billion, whose beautiful mug is pictured, agrees. Even better, you can convince yourself you’re doing something good for the environment: these babies are made from decommissioned oil-supply boats. Just ignore the fact that you’re using insane quantities of oil to run it, and you’re golden.

Link: [Wall Street Journal]
Photo credit: Wall Street Journal + YURI CORTEZ/AFP/Getty Images

Surprise! Politicians Threaten to Tax Big Oil, Big Oil Threatens to Raise Prices

The top 5 Big Oil companies pocketed a record $120 billion in 2007 alone, and they’re hissing and spitting at anyone who dares to come too close. Hillary Clinton and Barack Obama are pushing a windfall profits tax and House Democrats are threatening punitive measures if oil companies continue to amass evil overlord quantities of money at the expense of consumers.

CNN Money has it:

Oil industry: Hands off our cash. The industry, of course, doesn’t like the extra profit tax.

“If our profits are taxed, that means we’ll have less capital to invest in new production” and it could raise gas prices, John Hofmeister, president of Shell U.S., recently told CNNMoney.com.

Oil companies have been investing more in new production lately, but that argument is a little hard to swallow given the disparity between the huge amounts of money the big firms have been returning to shareholders versus the meager new oil discoveries.

Amy Myers Jaffe, a fellow in energy studies at the James A. Baker III Institute for Public Policy just finished a two-year study looking at oil companies and how they spend their money.
“These companies are spending a very small amount of their operating cash flow on exploration,” she said. “They are spending the majority of their funds buying back stock.”

Big surprise: politicians threaten taxes, and the oil companies threaten to raise prices. These guys are hoarding money like – well, like people who see that new technology is being developed that might push them to the sidelines. How dare we talk about taking away some of their precious profits. Their precioussssssss……

Link [CNN Money]
Photo credit: Flickr user Refracted Moments

Jeebus! Indian Oil Magnate Builds $2 Billion 27-Story Skyscraper House in Mumbai

This might just be the ultimate in excess. The richest man in India, Mukesh Ambani, has built the world’s largest and most expensive home. Ambani is the head of India’s most valuable firm, Reliance Industries, an oil and petrochemicals giant. The home is 4,000,000 square feet and 550 feet high with 27 stories.

From the Times of India:

“The only remotely comparable high-rise property currently on the market is the 70 million dollar triplex penthouse at the Pierre Hotel in New York, designed to resemble a French chateau, and climbing 525 feet in the air,” Forbes said in its report titled, “Inside The World’s First Billion-Dollar Home.”

“At the request of Nita Ambani, say the designers, if a metal, wood or crystal is part of the ninth-floor design, it shouldn’t be used on the eleventh floor, for example. The idea is to blend styles and architectural elements so spaces give the feel of consistency, but without repetition,” it said.

“Atop six stories of parking lots, Antilla’s living quarters begin at a lobby with nine elevators, as well as several storage rooms and lounges. Down dual stairways with silver-covered railings is a large ballroom with 80 per cent of its ceiling covered in crystal chandeliers.”

The report said that Ambanis plan to use the residence occasionally for corporate entertainment also and they want its interiors to have a “distinctly Indian” look and feel.

Four million square feet… how could you not feel like an evil archlord living in this place? It’s like Castle Grayskull if Skeletor had been a modern corporate businessman.

Link [Times of India]

Photo credit: Wikipedia