OPINION Around the globe people are feeling the pain of inflation. The main contributor is gas and diesel prices. In the current global economy goods are moved across America as well as around the world. The price increase in fuel has led to a spike in the cost of everything we produce and buy.
Factors leading to the economic hardship include recovering economies from COVID-19 shutdowns because of pandemic restrictions. For almost two years air travel was significantly reduced. Canadian CTV News reported in May 2020 that more than 17,000 airplanes were parked indefinitely worldwide. Many people were either working from home or not working at all. Of course the lack of commuter traffic reduced oil demand even further.
The reduction in fuel consumption caused big oil companies to change their operational philosophy. They decided to no longer prioritize repairing refineries, and in some cases shut them indefinitely. Take a look at big oil pre-pandemic, in June 2019. A Sunoco refinery outside of Philadelphia caught fire; it was the oldest continually running refinery in the United States. It was subsequently closed and the property was sold. It erased 175,000 barrels per day from the production equation.
Hurricane Ida in 2021 contributed to the closing of several refineries in the Gulf Coast area. Phillips 66 decided to shut its facility in Belle Chasse, Louisiana, and not replace the lost production of 255,000 barrels per day.
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In the past two years there have been eight other refineries close, totaling about 1 million barrels per day. Yet what we hear from big oil companies is they are producing as much as they can. They seem to be engaging in what many of us believe was happening all along – collusion. This time it’s not just the price; they’re cutting production, which keeps prices soaring at the pump.
Analysts report oil entities are making record profits. Why would they want to change the system? Those same companies insist they lost billions during the pandemic and are simply trying to recoup their losses. But I own some oil stocks in my IRA. During the pandemic I was still paid quarterly dividends. If they were losing money, where did all that cash come from that was being paid to shareholders? Apparently it was from the cash they had banked in accounts from past profits.
In January 2021 the price of a barrel of oil was about $52. Gas per gallon as a national average was $2.39. Federal taxes accounted for 18.4 cents per gallon; the average of four Midwestern states accounts for 26.1 cents per gallon of state tax. When we subtract 44.5 cents per gallon of taxes, $1.94 per gallon remains.
As of June 30, 2022, a barrel of crude oil was $106. AAA reports an average June 28 gasoline-pump price of $4.86. Subtract the taxes; that’s $4.41 per gallon.
Big oil companies didn’t see all their inputs double, including wages for refinery workers. I don’t begrudge anyone for making a profit, which every successful business must do. But it seems to me that profits should not be made at the expense of society.
This is an original article written for Agri-View, a Lee Enterprises agricultural publication based in Madison, Wisconsin. Visit AgriView.com for more information.
Bruce and Wendy Shultz operate a cow-calf ranch near Raynesford, Montana; they’ve been running the ranch full-time since 2000, and are the fourth generation on the ranch. Bruce Shultz was in 2020 elected National Farmers Organization vice-president, having served as national director for Montana for the three previous years.