US drivers subsidize European pump prices-report (US oil profits up 334%)

http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-08-31T200914Z_01_N31221683_RTRIDST_0_ENERGY-GASOLINE-PRICES.XML&rpc=66&type=qcna

WASHINGTON, Aug 31 (Reuters) - U.S. drivers helped to boost Big Oil's record profits more than their European counterparts, by paying more for gasoline once taxes were taken out at the pump, according to a report released on Thursday.

The report from the Foundation for Taxpayer and Consumer Rights also showed that profit margins were much larger for multinational oil companies' refinery operations in the United States than those located in Europe.

<snip>

Based on retail gasoline prices in July, when taxes were taken out European drivers paid 24 cents a gallon less to fill up than their Americans, the study showed.

"Thus U.S. motorists are essentially subsidizing European drivers, who pay more for taxes but substantially less into oil company profits," the report said.

The report also found that the refinery and marketing profits of Exxon Mobil (XOM.N: Quote, Profile, Research), Shell Oil Co. (RDSa.L: Quote, Profile, Research), Chevron (CVX.N: Quote, Profile, Research) and ConocoPhillips (COP.N: Quote, Profile, Research) outside the United States increased by 117 percent this summer compared with 2003, while profits for the same companies at their U.S.-based operations soared an average 334 percent.

I thought it was still the dollar...

Mind you, I might be getting things mixed up again... :)

But since the article says, "...paying more for gasoline once taxes were taken out at the pump..." I'm pretty sure Euros were involved. Regardless, I think it's safe to assume that exchange rate conversions were employed to negate the differences for a comparison that was currency-neutral, with the conclusion reported here based on US Dollar equivalents. Otherwise this would have been very shabby reporting indeed.

between more oil companies/refiners - ie. less of a cartel. And perhaps slightly more reliable government/judicial regulation?

Or, to put it another way, prices are being gouged by an uncontrolled oligopoly in the USA. Same thing I guess, but it it feels better to say it that way because I'm mad.

First, my information about the study is incomplete. I have not read it, so I do not know if the metric was absolute prices, or real prices with standard of living adjustments. If this study looked at absolute prices, then I suggest that the results are meaningless. There is no way to draw any conclusions about the relative prices if we are looking at absolute prices measured in currency. The problem with this type of comparison is that due to transit issues, demand issues, and modest inefficiencies in currency markets, we do not have perfect purchasing power parity. Thus we need to look at average wages and then determine who has to work more in order to earn enough to purchase a gallon of gasoline. Frankly, I cannot imagine any decent first year grad student not doing this, but then again, if someone is interested in making a provocative statement rather than an accurate one, , , ,

The appropriate metric is not what we paid in dollars, vs what they paid in dollars. The appropriate metric is what we paid in time vs what they paid in time. In other words, the real price of gas in this type of comparison is how much time the average US consumer had to work to earn enough to pay for a unit of gas vs how much time the average european consumer had to work to earn enough to pay for a unit of gas. For example the price may be $2 in the US and $1 in europe, but the average wage rate may be $25 in the US and $10 in europe. Given these numbers, the average US worker spends 4.8 minutes working to earn the money needed to buy a gallon of gas, while the average European worker would spend six minutes working in order to be able to buy a gallon of gas. This of course does not incorporate taxes on wages, which makes the situation less desirable for the European worker.

Now, if the study did measure the relative prices this way, then certainly relative supply inefficiency in the US could be the story, i.e. less competition. However, it could also be greater demand in the US relative to europe. This would mean that the average US consumer would be willing to spend more time working to buy gas than would the average european worker. Given the selfishness I see on the road, single drivers, few people relative to other nations willing to use mass transit, I suspect that demand is in play here. It is obvious that the US is a car loving nation.

I freely admit to being an environmentalist, and while I do not sit up nights praying for high gas prices, I do gleefully exclaim that we reap what we sow.

Want to spend less on gas? Drive less! You will help yourself and help the environment. And for those among us who feel that we are in a war about oil, well then there is the obvious benefit of reducing our dependence on the oil from terrorist states, fewer lives lost, etc. This is not that hard of a problem to solve.


But then again, I am often called an enviro-nazi.

FH

:rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl: :rofl:

Please, you're killing me here! :rofl: Yep, the Big Oil Companies are the CHAMPIONS of the American consumer! :rofl: Thank GOD for BIG OIL! :eyes:

CHUMPS.

Congratulations! You are our grand prize winner!!!

Although, technically, Big Pharma owns a big chunk of us, as does the Defense industry. But other than that, you've pretty much nailed it.

We owe our soul to the company store.

solar prices remained steady at $0 per KWH.

Other countries with socialized medicines pay low costs and to make up for it the Pharma Corps charge us out the ass.

This was the first thing that occurred to me, even before seeing a comparison mentioned in the article.

In a lot of countries with socialized medicine, the state picks up the cost of the medicine according to your earning bracket. I.e. if you are a unemployed student, the state will pay 80/90% of the cost of the medicine, if you are a CEO the state may pay 10/20% and so on.

There is also the issue, that believe it or not, US pharma companies are not the only ones doing drugs out there. Also other countries have decency, and they expect corporations who benefit from their citizens health to behave accordingly. Case in point, a lot of the research in the pharmaceutical field is actually subsidized by the taxpayers. Be it under development grants, educational institutions, you name it. European countries, and Canada, for example... understand that, and they force limits on what a pharma corporation can charge based on how much that corporation has benefited from the public money. In the US, customers are charged twice, first the US pharma co gets part of their research subsidized by public money (your taxes), and then the dumb ass US customer gets to pay twice.

So please, spare me the whole poor US customer subsiding somehow the rest of the world. For a country in which the majority of its citizens declare themselves as capitalists, the majority of the US population surely does not know how capitalism works.

We can also open the can of worms that is the US national debt, and we can figure out who is subsidizing who... :-)

CORPORATISM exists. The United States hasn't had a TRUE capitalistic system in place for decades, hell, the last CENTURY! If true capitalism and free market forces were allowed to exist in our country there would be a extremely different economic climate in place at this very moment.
Corporatism.........the face of the American economic system, packed with all sorts of government handouts to the corporations that "grease the wheels" of our "democracy" and vice-versa. :eyes:

and nice point. between farm subsidies, medicare part D (don't even get me started on that!), defense contractors, and corporate lobbies like Pharm - the us is not a capitalist country. It is like socialism but for corporations instead of citizens.

hey would corporate socialism be a good buzz word or what for november! confuse the heck out of red meat republicans who worship ronnie and hate the red menace.

The government only allows Pharma corps to sell drugs for a strictly regulated price or they don't sell them at all. This is why you have bus loads of old folks hopping the Canadian border to get cheap drugs. The Canadian government doesn't cover them, but they can still get drugs cheaper there.

The US on the other hand has a "free" market where pharma corps can charge whatever the market will bear. This allows them to offset the costs of their R&D, marketing, FDA costs, etc. by charging Americans whatever they want. So if we are ones bearing the brunt of these costs, thereby allowing others to have cheaper drugs, we are subsidizing other countries medications.

In your face americans ;)

Oh, wait a minute. I pay $8 a gallon.

These taxes are big money for EU countries. Which is not necessarily a bad thing as long as they are spent wisely (on tangible and intangible, environmental and social infrastructure; not so much military).

Also encourages energy-efficiency and suppresses profligacy.

Welcome to DU :hi:

Of course they falsely blame those nasty people who are fans of breathing, but the truths are
1 we have at least enough refining capacity despite the decades of building down
2 our government is so ruled by campaign dollars that the politicians let much more go in the favor of big oil then the general public.

than they screw Europeans".

A strange way to frame the article. Possibly an insight into the thinking of the BigOil.

In the last two years, I've noticed what seems like a concerted effort to transform Europe into "US Junior." Conservative Christians bucking for abortion restrictions in the UK on one side, while Libertarian activists here try to whip up public sentiment against EU speech laws and come at the EU from their other flank.

And now, we are told we're not being gouged, but rather WE are subsidizing EU gas prices!

I see this as completely driven by US business interests trying to chip away at Europe's community-over-individualist laws.

We know for a fact US Agribusiness wants all anti-GM/GE food laws in Europe to go bye-bye and force their products on that market, but the EU's community-minded citizens are dead-set against it. There are plenty of other multi-national business interests who run afoul of those laws and want them gone.

It sounds like they are framing the issue like the Republicans (some of them) are framing immigration in the US.... those "damn foreigners take our jobs" when in fact it is the corporations making more money off of immigrants.... liekwise its not those "damn foreigners aren't paying their share" cause htey pay double including lots of taxes but those damn companies getting more out of us cause our gov't lets them.

the uk has more refineries per person than the us with a massive supply in the North sea - please don't tell me that the US drivers paying 2.90 are subsidizing people in the UK paying $6.58. Taxes play a part but that discrepancy is huge.

Of course i think gas should be $10 a gallon to stimulate research into alternatives and decrease consumption so what do i know :)

on edit: of course you know in Euroland big oil actually has to pay the local governments to drill for that countries oil - the US lets them pretty much have at it with oil in US territories (and technically owned by you and I as citizens of the US)

hey doesn't that mean big oil is screwing us when they drill when they get their tax bill and when we fill at the pump - damn i need to be jet lagged more often if I keep coming up with bumper sticker slogans like this. then again this might be jet lag goggles talking.

doesn't reflect the hidden costs to the U.S. consumer that consumers in most countries are not paying. The military cost of protecting "U.S. interests," (The business of America is business - Calvin Coolidge) concerning international energy trading passed on to U.S. citizens in the form of Federal income taxes, raises the actual price of that gallon of gas to well above European pump prices.

U.S. citizens hear how high gas prices are in Europe (and Canada, to a lesser extent), so they think they must be getting a great deal. For example, prices seem to be about $2.50 a gallon in U.S. vs $4.50 in Canada, with most of the difference being higher gas taxes in Canada. But that $2.00 difference leaves lots of room for extra corporate profits before gas prices get anywhere near Canadian levels. So oil companies can gouge U.S. consumers without them noticing as much as they should.

"Oil companies also say that high U.S. prices reflect strong motor fuel demand and expensive crude oil."

Uh-huh. Riiiiiight.

" The industry points out that recent government investigations have not found that oil companies acted together to keep pump prices high."

Never mind that the Republican Congress neutralized those "investigations", so that they went no-where.

I remember hearing about that on NPR, while I was still looking for a job.

In the US you have to have a car. The US is a Automobile centered country. Some parts of the Country you can survive without a car (For example New York City) but that is the exception NOT the rule in the US. Thus you have a steady demand for oil NO MATTER WHAT THE PRICE and this demand keeps the price of gasoline up.

On the other hand, in Europe, you have the option of taking Mass Transit or the train (BOth are subsidized by the money from the tax on oil). If the price of oil gets to high, consumer can just opt for another way to get to where the consumer is going. This ability NOT to use Gasoline and still get to work or to shop or wherever the oil consumer is going puts downward pressure on the price of oil.

Thus the fact Europe uses its Gasoline Taxes to subsidize alternatives to using Gasoline helps keeps the price of Gasoline (without taxes) DOWN in Europe. Sounds odd, you tax something to keep its price down, but that seems to be what happening. Thus the high taxes on Gasoline forces the oil companies to keep prices low. If the oil companies do NOT keep their prices low even less people will buy gasoline. Maybe a $5 a gallon tax would do the same in the US, provided we use the new tax revenue to build other means of transportation to compete with the Automobile.