The diesel car craze never took off. But the oil companies discovered a captive customer already on the roads. The trucking companies paid the rising prices.
My friend Richard e-mailed me the other day asking me to explain (at least write about) the exorbitant cost of diesel fuel. He’s a big-rig trucker and is upset about diesel fuel costing him $3.85 per gallon, while premium gasoline costs roughly $3.50 per gallon. He pointed out something we both know, premium gasoline costs considerably more to refine and produce than diesel fuel. So he asked, why is he being ripped off, paying more for less?
I’ve had this discussion with him (and others) more than once over the years. Diesel fuel used to cost much less than any gasoline. Then about 1980 the first “fuel crisis” was winding down. GM, the biggest automaker, belatedly decided to produce diesel cars. Up until then there were few such cars on the roads.
GMs foray into diesel vehicles at the time was a disaster. But it woke up the oil companies! They realized that if a diesel car craze caught on their profits would plummet. They’d be stuck selling diesel fuel (a cheaper product, barely a step above kerosene) to millions of happy diesel car drivers. Their higher priced gasolines might become a relic of the past? Before you could say “Wow! Look at my mileage on cheap diesel fuel!” the price of diesel began to climb!
As I said, the diesel car craze never took off. But the oil companies discovered a captive customer already on the roads. The trucking companies paid the rising prices. They had to get their goods delivered. Being a group made up mostly of independent businessmen they weren’t very organized. As diesel prices continued to climb (passing gasoline) they continued paying. Meanwhile praying to make a profit just to stay in business. They managed, because they ultimately passed their shipping costs along to you and me.
Granted, every company doing business looks for one thing at the end of each year (quarterly, for short-sighted american companies) and that’s to make a profit. Fair enough, since capitalism is based on profit. It keeps the rest of us in jobs. We shouldn’t begrudge any business making a profit. Without profits there wouldn’t be any companies. Therefore no jobs for ordinary working stiffs.
But there comes a point beyond which “profit” becomes greed (isn’t there?). And some businesses strive for much more than to simply turn a profit. Granted, in a reasonable world, profit is regulated by supply and demand. If you try to charge way too much for your product, the market (you&me) will buy elsewhere or quit buying altogether. But we can’t do that with oil. Homes must be heated, cars driven, and truckers gotta deliver those goods!
Knowing this, oil companies have conjured up the concept that greed is interchangeable with the concept of profit.
Now you’re thinking, how is it he makes that leap? Well folks, it’s not a big jump over some unknown abyss! (good thing, cuz this ole paratrooper’s grown scared of heights). All one really has to do is read oil companies annual reports (or newspaper reporting).
Looking around for just one (there’re so many doing the same thing) I’ll pick on the largest, Exxon-Mobil. Golly, they do manage a profit most of the time don’t they? Whoops! I meant, they practice greed! (poor english ya say? well, let’s see if that even matters).
Reading in recent months I found the following: In 2006 Exxon-Mobil made “record” profits of 39.5 billion (yes, Billion) dollars. Ok, granted they’re the largest company in the world, big profits should be expected right? Then in the final quarter of 2007 they cleared 11.7 billion dollars (in three months you say? Yep, I say!). Include the entire year and they netted “record” profits (again!) of 40.61 billion dollars. That’s about $78,000. dollars a minute! Every minute, 24-7!!
Folks, I don’t believe any economist worth his salt could call that “profit”, it’s greed. (Sorry, “Record” Greed).
Final note: This is the same company that sprung a leak in one of their boats some 20 years ago up near Alaska. 11,000,000 gallons of oil despoiled hundreds of miles of pristine coastline. All these many years later and they’re in our supreme court yet today, arguing! Still trying to weasel out of paying a few measly dollars to all the folks they hurt!
I don’t know about you.., I don’t believe huge oil companies honestly pursue “profit” nowadays, they’re just greedy.
So in answer to my friends e-mail query? I can only offer one reason for that diesel fuel costing more than premium gasoline. The oil companies charge him more..., just-because-they-can-.
Cal Teeple, only fulltime member of the Observational Cogitation Consortium may often be found three stools down from you. He may be ignored, accosted or contacted at” email@example.com.