Gas prices have been worse.
Nevertheless, they should be better.
Historically, motorists paid higher driving costs, according to an analysis by economist Rex Nutting in MarketWatch, citing inflation, better wages, and more efficient engines.
“The cost of driving a mile in your gas-powered vehicle is now lower than it was for most of the past century,” he said. “Once you adjust for the purchasing power of a dollar and the increased gas mileage of the cars and trucks on the road, you’ll recognize that even with the huge price increases, gasoline prices aren’t so high.
“Gasoline cost $1.25 a gallon back in 1980, but the average worker was only making $6.75 an hour,” he continued. “And that gallon of gas takes you a lot further. In 1980, gas mileage was so awful that driving a mile cost 30 cents for gas (in today’s dollars). Today, if your vehicle gets the national average of about 23 miles per gallon, driving a mile costs about 16 cents for the gas. If gasoline goes to $4.50, the cost will be a bit under 20 cents a mile. Gas would have to get to nearly $7 a gallon to match the 30 cents per mile of 1980 and 1981.”
However, that doesn’t dull the pain or rage – especially if the causes are due to greed.
Consumers understandably get annoyed when prices were raised within hours of Russia’s invasion of Ukraine despite gas stations already having fuel on the premises. (Gasoline retailers gauge the cost of re-filling their storage tanks when they adjust their pump prices, they say, which also doesn’t quiet complaints.)
Nationally, the pump price reached an average of $4.25/gallon on March 9, according to AAA, and at press time the average is $4.16 – but $4.40 in Illinois.
Meanwhile, oil companies are making billions, according to an analysis from Accountable.us, and that’s a continuation of rising prices from before Russia’s invasion, said former Labor Secretary Robert Reich.
“Last year, when Americans were already struggling to pay their heating bills and fill up their gas tanks, the biggest oil companies posted profits totaling $75 billion,” he said.
This is happening when crude oil prices – recorded as “West Texas Intermediate” (WTI) dollars – are falling.
“Oil prices are decreasing; gas prices should too,” President Biden said. “Last time oil was $96 a barrel, gas was $3.62 a gallon. Now it’s $4.31. Oil and gas companies shouldn’t pad their profits at the expense of hardworking Americans.”
On March 31, Biden announced a release of 1 million barrels of oil per day for six month from the nation’s strategic oil reserves to help spur price declines, and also actions the administration is taking to punish oil companies for not increasing production from unused leases on federal land.
“No American company should take advantage of a pandemic or Vladimir Putin’s actions to enrich themselves at the expense of American families,” Biden said. “Investing those profits in production and innovation, that’s what they should do. Invest in your customers.”
Critics say companies are taking advantage of war in Europe to see what they can get away with.
In addition, inflation is used as an excuse, according to data from the Commerce Department, which shows corporations’ profits increased by 37% during the last two economic quarters, compared to data from the previous year, when inflation was lower.
Oil companies are “ profiteering,” said Rep. Alexandria Ocasio-Cortez (D-N.Y.), “and there should be consequences for it.”
“Many folks run around claiming to be ‘free-market’ capitalists, but what they actually are is captured-market capitalists, using subsidies and restrictive policy to hold us hostage to fossil fuels, for-profit health-care, housing, etc. that many wouldn’t choose if they had the choice,” she said.
“Imagine if we actually had to pay the true price without” the billions of dollars that the U.S. gives fossil fuel companies in subsidies.
Another excuse is corporations responding to investors demanding high profits. “It’s just business,” executives say. But Wall Street investors who are “insisting on dividends and fiscal discipline” in the midst of a crisis are the ones who are truly responsible for the current sky-high gas prices, Amos Hochstein, the State Department’s senior adviser for energy security, told the Financial Times.
Reich added, “They’re buying back their own stock in order to give their stock prices even more of a boost. Last year they spent $38 billion on stock buybacks — their biggest buyback spending spree since 2008. This is a direct redistribution from consumers who are paying through the nose at the gas pump to Big Oil’s investors and top executives (whose compensation packages are larded with shares of stock and stock options).”
Engineering stock buy-backs to boost profits (and supposedly reassure investors) is bad for the economy, commented Roosevelt Fellow Lenore Palladino, addressing Congress’ Joint Economic Committee last month. Such manipulation hurts workers; weakens innovation; and disproportionately benefits wealthy households, she testified.
For instance, while facing allegations of unsafe working conditions and poor compensation, “Walmart, and now Amazon, both spend billions of dollars on stock buybacks that could have been instead invested in their employees,” she said. “[I]t is time to strengthen our commitment to American productivity by reorienting our public policy away from enabling a single-minded focus on share prices and towards enabling innovation.”
In The New Republic, Kate Arnoff wrote, “While they rake in massive profits, their tax burden remains shockingly low/ Since the Paris Agreement was signed [in 2016], top producers have, on average, gotten money BACK from the IRS.”
Indeed, according to corporate 10-K filings required by the Securities and Exchange Commission, ConocoPhillips, Chevron, ExxonMobil, Hess Corporation, and Devon Energy altogether got $1.95 billion back in U.S. taxes between 2015 and 2022. The same companies PAID $77.2 billion to foreign governments over the same period.
“Big Oil is raking in record profits while working families are struggling to afford gas at the pump,” said U.S. Rep. Ro Khanna (D-Calif.), one of the lawmakers who’ve introduced legislation to tax oil and gas companies’ windfall profits.
“What we are seeing right now is a prime example of corporate greed and companies profiting off an international crisis,” he said.
Legislation is aimed at putting “a stop to this corporate profiteering by raising revenue off the windfall profits of these companies and returning the money directly to working Americans.”
Sen. Bernie Sanders (I-Vt.) – who as Senate Budget Committee chair this month announced hearings on how corporate greed is contributing to inflation – asked, “Why is the price of oil LOWER today than it was in 2014 while the average price for a gallon of gas nationwide is 80 cents a gallon HIGHER than it was eight years ago? Answer: Corporate greed,”
Last year, inflation increased by 7% and corporate profits increased by 25%, reaching almost $3 trillion – a record high, according to the Department of Commerce’s Bureau of Economic Analysis.
“The American people are sick and tired of corporate greed,” Sanders said. “They are sick and tired of being ripped off by corporations making record-breaking profits. They are sick and tired of being forced to pay outrageously high prices for gas, rent and food while large corporations make out like bandits.”
According to a recent poll conducted by Hart Research Associates on behalf of the League of Conservation Voters and Climate Power, 87% of voters support taking action againt profiteering.
Besides Khanna’s House measure, Sens. Sheldon Whitehouse (D-R.I.) and Elizabeth Warren (D-Mass.) are co-sponsoring a companion bill to prevent price-gouging.
“We get it: supply and demand,” Warren said. “But profit MARGINS should not go up. That’s just oil companies gouging.”
Whitehouse added, “The fossil fuel industry should not be allowed to take advantage of a crisis by hiking prices and collecting a massive windfall.”
