http://www.counterpunch.org/pringle05022006.html
May 2, 2006
Gouge and Profit
Will Big Oil Destroy the US Economy?
By EVELYN PRINGLE
The higher oil prices are a threat to America's overall economy and
the skyrocketing costs of heating public facilities and keeping school
buses, police cars, emergency vehicles and snowplows running are
wreaking havoc on local governments all across the country.
For example, in Charlotte, SC, each one cent increase in a gallon of
gas means a $70,000 increase in annual fuel costs to the city budget,
according to a report distributed at the League of Municipalities
Conference, on October 17, 2005.
According to district administrator, Lois Cuff, the small school
district of Freedom Wisconsin, came up $100,00 short for heating bills
in 2005.
The district budgeted $135,00 to heat the school buildings but the
actual bill topped $233,000.
To help cover the increase in heating costs, Freedom was forced to
pull $87,000 from accounts that supply funding for equipment, athletic
uniforms, copy paper, staff travel, student field trips and upgrades
in technology.
"Buildings must be kept at a reasonable temperature," Cuff said.
"These are costs that are out of our hands in many ways."
Local governments are scrambling to find ways to cut costs.
In Rhea County, Tennessee this week, about 3,800 school children got 2
days off of school to save money on transportation expenses.
Brad Harris, Finance Director for Rhea County said schools spent
$14,000 on fuel in March 2006, compared to $7,800 in March 2005, and
that year to-date-spending was up from $68,000 to $102,500.
Fuel prices are already taking a huge slice out of family budgets but
higher prices also mean paying more elsewhere as businesses are forced
to pass on the increased costs.
The nation's small businesses that depend on deliveries are feeling
the squeeze.
Businesses like floral shops, pizza parlors, taxi drivers are finding
it hard to make ends meets.
On March 29, 2006, the city of Seattle, Washington authorized a fuel
surcharge of 50 cents per trip for taxicab trips originating in
Seattle.
The surcharge will also be added to the $28 flat rate charged for the
trip to the airport from downtown Seattle.
In Lafayette Indiana, since September 27, 2005, Star Taxi & Courier,
has had a temporary surcharge of $1 in effect.
In March 2006, the city moved to discontinue the surcharge and
increase the flat fee from $2.50 to $3.50 since gas prices had not
decreased since September.
Fernando Mateo, spokesman for New York State Federation of Taxi
Drivers, wants to charge passengers a $1.50 surcharge to help with the
cost of gas now, and if the price hits $4 a gallon, the taxi drivers
wants a $2 dollar surcharge.
On February 14, 2006, Montgomery County, Maryland made permanent a
$1.50 per trip increase for cab rides in effect since September 2005,
to provides relief to cab drivers.
Late last year, Business Know-How, interviewed a number of small
business owners to see how they were affected by rising gas costs.
At Royal Pizza in Centereach, New York, the manager said the rising
cost of gas has seriously affected the business:
"Rising oil prices have affected not only our delivery costs;" she
told Business Know-How, "but it has also affected just about all our
costs: cheese, flour, boxes, soda. The distributors are charging us
more because their costs are higher as a result of rising oil prices."
"Our pizzas used to sell for $3.99 a pie," said the manager, "and
because of higher gasoline prices, we've had to raise our prices; most
recently in 2003, and again in 2005; now a pizza costs $6.90."
Jack Wright, owner of Wright-Way Moving and Storage, in Seattle told
Business Know-How, that pennies count.
"When you're using 8000 to 10,000 gallons of fuel per month," he
explained, "five cents less per gallon can mean a savings of $500."
Fuel prices are at the top of the list of concerns for members of the
trucking industry.
"Fuel is our second-largest expenditure following labor costs," Tim
Lynch, a senior vice president of the American Trucking Associations
told reporters on April 24, 2006.
"Fuel expenditures are roughly 20 to 25 percent of total expenditures
for a typical trucking company," he said.
ATA predicts the industry will spend $94.3 billion on fuel this year,
based on current fuel price forecasts, a $6.6 billion increase over
the $87.7 billion spent by trucking in 2005.
Spiraling fuel prices threaten to spoil what many had hoped would be a
recovery year for the airline industry.
The record-high cost of commercial jet fuel is the primary reason why
the industry is expected to post an estimated $10 billion net loss for
2005
The average cost of a gallon of jet fuel has more than doubled since
2000 from 78 cents-per-gallon in January 2000 to $1.81 per-gallon in
January 2006, according to the Energy Information Administration, US
Department of Energy.
The Air Transport Association expects jet fuel costs to average $70
per barrel or $1.67 per gallon in 2006, a 90% increase since 2001.
According to the ATA, at a usage rate of 19.5 billion gallons of fuel
a year, each penny increase in price per gallon adds $195 million in
annual costs for the airline industry
Rising costs caused airlines to raise fares 12 times in 2005.
Last month, American Airline raised domestic round-trip ticket prices
by $10, and in the first quarter of 2006, both Continental and
Southwest reported a 5.4% increase in ticket prices, increases that
fell short of rising fuel prices, according to Airwise News on April
21, 2006.
Farmers face an increasing cost-price squeeze in 2006, according to
economists from the University of Missouri-Columbia.
Production costs that increased $28 billion in the past 3 years will
increase another $7 billion in 2006, the economists predict.
Rising energy prices, including fuel and fertilizer, made up $10
billion of the increase since 2002, they said.
In 2005, farmers spent $3 billion more on fuel and $1.4 billion more
on fertilizer than they did in 2004.
Natural gas which is 90% of the cost of nitrogen fertilizer is one
reason and diesel which has commanded a large per-gallon premium over
regular gasoline is another, according to Agriculture Secretary Mike
Johanns remarks to The Second Annual National Agricultural and
Forestry Renewable Energy Summit Washington DC on March 8, 2006
In 2002, farmers spent $18.36 billion on energy for crop production.
Increasing prices raised those costs to approximately $46.4 billion in
2004.
Price increases of 20% or more on essential items like fertilizer,
fuel, and pesticides have made it very difficult for farmers to get
by, according to the Congressional Research Service, on November 19,
2004.
And prices for fuel and natural gas are forecast to rise by about 5%
in 2006, according to the Department of Energy, coming off last year's
35% hike in diesel and natural gas prices.
In addition to oil companies, major credit card companies are making
huge profits from higher gas prices because the fee that banks charge
gas station owners to process a credit card transaction is based on a
percentage of the purchase price.
So, if gas prices rise, the processing fee goes up.
On September 25, 2005, columnist, Margaret Webb Pressler, explained
the details in the Washington Post:
"So a year ago, when gas prices averaged $1.87, banks involved in
credit card processing made about $12.5 million a day on fees. Now,
with prices averaging $2.75 nationally, the credit card companies are
raking in $18.4 million a day. That is $183 million more a month, or
nearly $2.2 billion dollars on an annual basis in extra money paid to
the nation's banking giants just because of rising gasoline prices."
Moreover, interest rates are on the rise, which means Americans will
be facing higher rates on credit cards.
There needs to be a full investigation into why Americans are getting
gouged when the major oil companies are experiencing windfall profits.
Three of which are currently ranked in the top 10 corporations on the
Forbes 500 list.
ExxonMobil holds the number one spot, ChevronTexaco weighs in at four,
and ConocoPhillips has the number 6 position.
In 2005, Exxon reported third-quarter profits of $9.92 billion, 75%
higher than its third-quarter earnings in 2004, and the largest
quarterly profit ever reported by a US company.
For the 3rd quarter of 2005, ChevronTexaco reported a 53% increase to
nearly $4 billion; and ConocoPhillips,s profits were up 89% to $3.8
billion.
Exxon is reportedly giving its retiring chairman, Lee Raymond, a
package worth nearly $400 million, in combined pension, stock options
and other perks, including a $1 million consulting deal, the use of a
corporate jet for professional purposes, 2 years of home security, and
a car and driver.
While testifying at a Congressional hearing last November, Raymond
claimed that high gas prices were a result of supply and demand.
"We're all in this together," he told members of Congress, "everywhere
in the world."
"In 2004, Mr. Raymond," Senator, Barbara Boxer (D-CA), was quick to
point out, "your bonus was over $3.6 million."
After exhibiting a chart revealing the pay scale for each of the CEOs
at the hearing, Senator Boxer told the oil executives:
"Your sacrifice appears to be nothing."
According to Exxon's filings with the Securities and Exchange
Commission, Raymond's paycheck rose to $51.1 million in 2005.
These profits and CEO salaries are obscene at a time when the elderly
and families with young children are struggling every day to keep
their homes heated and fill up the gas tank to drive to work and back.
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Suck it in, folks, the Grand Oil Party ain't done giving the country
away to their Big Oil employers.
Harry
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