Sunday, February 26, 2012

A Numbers Game 9/10ths

Welcome back (or Welcome if this is your first visit, glad to meet you)

    Wow, gasoline prices are going crazy again. $3.69 to $3.79 a gallon and going up…  at least that’s the local price in south central Indiana.  Wait a minute did I say $3.69 a gallon?  That’s not right.  What’s that little number 9 behind the price listed on the gas station sign???  Oh that stands for 9/10ths of a cent.  I don’t remember ever getting 1/10ths of a cent as change…

    So when you pull up to the pump your actually paying $3.70 a gallon.  $3.69 sounded better, but it wasn’t the pure truth. Do you see a loaf of bread on the supermarket shelf priced for $1.69 and 9/10th a loaf?  A pair of shoes in the department store marked $34.99 9/10ths?   It’s a numbers game, I don’t know where or why this started but hay, how about a little honesty, how about a little integrity…

     What does this little accounting trick do for (or bring in for) the oil companies?  The most resent consumption numbers I could find were from 2006 but it makes the point.  In 2006 the United States consumed approximately 138,000,000,000 gallons of gasoline.  That equals $13,800,000.00 extra pulled from the consumers’ pockets one penny at a time.  Overall just a drop in the bucket but it shines a light on an attitude within the industry.                          

    By the way why is the price of gasoline going up?  Demand?  No, actually drivers in the United States have cut back, demand is down.  Winter heating? No, it’s been a very mild winter again fuel demand is down.  I know, Iran cut the oil supply to Germany and France that must be driving prices up…  No they only get 3% of their oil from Iran, an easy level to overcome with little impact (China and Japan are voluntarily reducing their imports of Iranian oil by 30% to 40%).  Maybe the local supply of crud oil is down after the gulf oil spill no new wells have been drilled?  No, even if new wells were allowed to start it takes 4 to 5 years till they come on line and start producing (this may hurt us in a few years).  Middle Eastern oil has been curtailed by tensions in the region, No just as much flowing out as ever.  Alright enough with the questions we are importing and producing locally as much crude oil as ever, refining as much as ever but the major oil companies are exporting an excessive amount of refined fuel to the Far East driving U.S. prices up. 

    The export is perfectly legal and to an extent understandable, President Obama kind of put it to the major oil companies since he took office, if gasoline prices continue to climb right or wrong Mr. Obama will be held responsible.  If by November the price of a gallon of fuel is $4.50+ locally (most likely $5.00+ in other regions of the country) I think one of my cats would beat him in the election.  I can’t say that would break my heart he’s been in over his head from day one, way over his head.  I guess it’s only fair; lately Mr. Obama has been trying to take credit for U.S. crude oil production that was started 1 to 2 years prior to his election and his poorly thought out energy plan that in his words “Energy cost would necessarily have to skyrocket.” Guess he’s getting his wish…

    Being one of the few industrial sectors that can change the outcome of a Presidential election, I would like to congratulate the oil companies on their end game, nicely timed and well played but they failed to grasp the damage they are going to be doing to the average citizen, the damage to our economy, the damage to our nation.  It will take a few years for the average Joe to make up for the loses he will take over the next nine months. 

    Looking out the window I see an open field, soon it will be time for the farmer to plow it and start the corn…  Do you think the farmer is going to eat the extra expense caused by higher fuel cost?  How about a 50 cent sir charge on every pound of beef, poultry or bushel of grain shipped to an oil producing country for every dollar over $90 a barrel of crude oil…  I’ve spent some time in the Middle East region (Thanks’ Saddam) not a lot of farming going on there.       

    About a year back I bought two used fuel tanks (175 gallon for diesel and 250 gallon for gasoline) they needed a bit of work and a clean up, paint, new filters, hoses, and a coat of tank liner (a $300 investment total) the first time I fill the gas tank up it was $2.98 a gallon from the local co-op farm supply.  Within a few weeks fuel at the local gas station had shot up to $4.20 and 9/10ths my investment paid for its self right there.  I just filled up two weeks ago at $3.52 a gallon; pump prices are now $3.69 a gallon (a $42.50 savings so far, I’ll take that).  Something you may want to look into. 

Look around you; are there options out there you may not have considered?  Think it through.

Till next week
The TOMCAT               

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