That Leahy's a pisserooni -- got a touch of Jon Stewart in him. He nailed these guys on the same game that the big Pharma boys play -- after you take out our R&D, misc. overhead, and marketing (yeah, marketing!), we make pennies in profit on every dollar of product we sell. There must be a seminar they go to where they learn to give out this rap with a straight face.

These companies have shareholders they're accountable to, right? Don't the shareholders ever ask 'what are we getting for our 12m that we couldn't get for 1m?' That's got to be cutting into expansion potential, no?

I mean... what does a guy have to do to actually be worth 12m? If he were a triple-doctorate child prodigy who could predict the future I can just about see 6m as being an acceptable salary but....

Boggles the mind.

High exec compensation is not responsible for high gas prices. The real culprit is SUVs, Hummers, the long commutes, and everything else that makes the US consume so much Oil. It is completely ridiculous that US senators are trying to blame these guys for high gas prices when they are more to blame. Our senators should of come up with a sensible energy policies decades ago.

In my opinion $4 a gallon isn't enough. We should pay $8, maybe then all these idiots in pickup trucks and SUV's will get fucking reasonable cars. It's disgusting that everywhere you go in the world, SUV's are the exception, but in America they're the rule. I don't see how we have that much more big shit to move then the French or British that we need these cars. The technology for cars that get over 100 mpg is there (and has been for quite some time), all that's missing is the incentive. And while these oil executives all deserve to be hamstrung, they're not the real problem, it's oil consumption in general.

The reason for high oil prices is the low value of the dollar.

Demand has not changed dramatically enough to cause the spike in prices.

The price of gas in Europe and other non-American-dollar-using economies? It is relatively unchanged over the same period.

What the government should be focused on is letting the economy right itself.

Then the dollar will rise, oil prices will subsequently fall, and we can move on to a long-term solution for oil independence.

Now that that is settled, I would like our Senators to focus on the ridiculous price of hot dogs at baseball games -- since when does a sanctioned monopoly get to raise prices with no interference from government?

This article explains it quite nicely.

This guy is awesome; he's the same guy who schooled that loony evangelical bush aid.

I'm with tyson. Except that I don't even think that gas prices are high. They're low. Not everyone can afford them, but that's why we have a public transit system (or should have).

If gas hits $7 a gallon, it will be pretty tough for some people. On the other hand, people might like having less traffic. A lot of things in American life would get better if we had England-level gas prices.

The oil companies are doing nothing to innovate or prepare for a post-petroleum world. Why should they? Our public policy environment is geared toward a transit system where everyone is supposed to drive the Hummer or the F-150 to work, with only themselves in the car. Works great for the 25 years that oil stays super-cheap, but one little bump, and everyone takes the hit directly. If people had to carpool, take the bus, or catch the train, they'd be sharing the energy cost exposure with other people.

I guess Leahy is doing what some might say he has to. He and the oil execs know that high gas prices are politically indefensible (though they make perfect policy sense). But senators can't just sit there and do nothing, so they stage these events where we all get to be mad about CEO salaries. The oil execs may not like it, but they should feel lucky they're not elected.

company makes $390b in net revenues last year, and you think the price of oil is directly impacted by the $12.5m paid out to the CEO.

hrm.

Did you know that gas price gouging almost never occurs as prices rise? Rather, it's most often when dealers keep prices artificially high even as their costs fall.

Hmmmm. I am conflicted on the speculation issue. As Paul Krugman has pointed out, if price gouging was the problem, then there should be enormous surpluses or inventories somewhere going unused. That is not what is happening. See also Here for a broader overview.

Broadly speaking, there are three competing views.

The first is that it’s mainly speculation — that investors, looking for high returns at a time of low interest rates, have piled into commodity futures, driving up prices. On this view, someday soon the bubble will burst and high resource prices will go the way of Pets.com.

The second view is that soaring resource prices do, in fact, have a basis in fundamentals — especially rapidly growing demand from newly meat-eating, car-driving Chinese — but that given time we’ll drill more wells, plant more acres, and increased supply will push prices right back down again.

The third view is that the era of cheap resources is over for good — that we’re running out of oil, running out of land to expand food production and generally running out of planet to exploit.

I find myself somewhere between the second and third views.

There are some very smart people — not least, George Soros — who believe that we’re in a commodities bubble (although Mr. Soros says that the bubble is still in its “growth phase”). My problem with this view, however, is this: Where are the inventories?

Normally, speculation drives up commodity prices by promoting hoarding. Yet there’s no sign of resource hoarding in the data: inventories of food and metals are at or near historic lows, while oil inventories are only normal.

One of my big worries is that I saw an article a few months ago--can't find it now--saying that the cost of gas was mostly due to a drop in supply problem, while demand remained constant. The conclusion was that the falling U.S. dollar hadn't yet affected oil prices. That is frightening, because if that's true, things are going to get a lot worse--and with gas at $133, perhaps we just beginning to feel that. One analyst of Goldman Sachs has that it will hit $200.

The price of gas in Europe and other non-American-dollar-using economies? It is relatively unchanged over the same period.

There, you would be dead wrong. Here in Canada, despite a local currency that has risen to par with the American dollar over the past year, gas prices have risen roughly 25-30 percent during the same period.

Max: well said. There is zero, and I mean literally zero rationale for owning a Hummer for private use unless you are a fucking undercover mercenary (in which case you're being paid enough to not care that your vehicle gets about 70 feet to the gallon.) As for SUVs, if I had a nickel for every time I go past an SUV with one person driving and no cargo I would possibly be richer than these oil goons.

The oil guys are overpaid assholes, but Leahy is still showboating - tyson is correct. The fall in the dollar has accentuated the run-up in oil prices, but it is far from the only cause if you work out the math. In any case, the fall in the dollar is is synergistically related to our oil consumption. Too many dollars in the rest of the world was inevitably going to drive the dollar down - and our oil imports are a big chunk of our trade deficit.

This country should have levied much higher energy taxes long ago to curb over-consumption. (To be compensated for increases in the minimum wage, and the earned income credit.) The McCain/Clinton tax holiday is STUPID policy.

Our energy policy has been nothing short of idiotic. Here are some blasts from the past:

Early in the Bush administration, Ari Fleischer (his press secretary until Scott McClellan became the official daily liar of the administration) laid out Bush energy policy:

Q: Does the president believe, given the amount of energy that Americans consume per capita, how much it exceeds any other citizen in any other country in the world, does the president believe that we need to correct our lifestyles to address the energy problem?

A: (Ari Fleischer): That’s a big ‘no’. The president believes that’s an American way of life.

Yep, that's the same presidential jackass who just humiliated himself begging the Saudis to pump more oil. Some more gems:

We need an energy bill that encourages consumption. -- George W. Bush, clarifying once and for all his idea of energy policy, Trenton, New Jersey, Sept. 23, 2002

The California crunch really is the result of not enough power-generating plants and then not enough power to power the power of generating plants. -- George W. Bush, Interview with the New York Times, Jan. 14, 2001

...And we need a full affront on an energy crisis that is real in California and looms for other parts of our country if we don't move quickly. -- George W. Bush, press conference, Mar. 29, 2001

[The last two quotes are ones in which Bush conveniently ignored the fact that his #1 campaign contributor in 2000, Enron, manufactured the short-term "energy crisis that was real in California".]

It's always good to remember Fleischer's "Big No" from 2001. One of the many ridiculous statements of the Bush administration that was later annihilated by reality.

It's actually not true, though that the U.S. has the highest energy consumption per capita in the world (though the U.S and Canada are significantly higher than the rest of the G8). The gulf states are considerably higher. In those oil-rich countries, your mom actually tells you to leave the window open with the AC on, precisely so that you can cool the outside.

I don't think you read his conclusion...

Ok... so why IS gas so expensive? A butterfly flaps its wings in the Saudi desert, causing the State Department to release a warning of increased terrorist activity. The futures market flips out, sending the price of crude skyward.

The higher price on the futures market makes it more expensive for refiners to acquire crude to refine into gas. When the refiner's work is done, the emerging gas will be priced accordingly higher. This raises the rack price and the prices on the spot markets. Oil companies and jobbers with long-term contracts might be insulated from the higher price, depending on their contracts.

Refining oil into gas isn't instantaneous, and there can be a lag before the higher price of the oil is reflected in higher gas prices paid by jobbers and oil companies. That, of course, didn't stop them from raising prices the moment the futures market jumped. So now that the oil that was purchased for refining at a higher cost is ready to hit the market as gas, the oil companies will raise prices again.

This double-dipped price is passed onto dealers as the DTW price, which is then inflated yet again so the dealers can turn a profit.

You paid more for gas thanks to a butterfly.

"It's just a !@$% butterfly!," you say. Sure, but it scared the hell out of the markets. Since the oil companies all move in lockstep, that butterfly can cause the price of gas to rise for several days as one oil company sees another raising prices and adjusts accordingly.

Eventually the markets will calm and the price will begin to fall. This allows the introduction of a friend much more insidious than the butterfly: price gouging.

Despite popular misconceptions, price gouging almost never occurs as prices rise. Instead, price gouging occurs when dealers keep prices artificially high in order to gain a little extra profit or recoup costs, even though the DTW price has declined.

Sticking with our butterfly friend, let's say she caused the DTW price of gas to spike for four days. It may be ten days before dealers lower their prices. That's price gouging.

Most people never notice true price gouging. They will complain that the price went too high, but that's the fault of the oil companies, not the dealers. Prices that stay high for too long go unnoticed. Just because the price of gas stays high does not mean that a dealer is price gouging. The price may actually be higher. That's why it's almost impossible to prove, let alone prosecute, price gouging.

The reason for high oil prices is the low value of the dollar. Demand has not changed dramatically enough to cause the spike in prices. The price of gas in Europe and other non-American-dollar-using economies? It is relatively unchanged over the same period.

We still have very low gas prices compared to the rest of the world (except OPEC). And, we manage to waste more gas than any other country. Hmmmm...correlation?

Gas will probably have to hit $7-10/gallon - or liter - to get most U.S. citizens to conserve, walk, ride a bike, or take public transit outside of NYC or Chicago.

Erick,

I've been wondering about the gas prices. Thank you for the link which explained in detail what is going on (quite complex) and for your informative analysis.

Americans are going to just have to get used to the idea of using less gas and electricity. ouch.

Or we can just put our heads in the sand and point our collective fingers at China and India, which then gives us the excuse to not have to worry our little heads over any of this.

In my opinion $4 a gallon isn't enough. We should pay $8, maybe then all these idiots in pickup trucks and SUV's will get fucking reasonable cars. It's disgusting that everywhere you go in the world, SUV's are the exception, but in America they're the rule

Um, no. The SUV and pickup are quite common in Canada (although, much like the Northern states, one could argue that such trucks are sensible given the high level of yearly snowfall).

Many other countries don't have sufficient space to navigate large cars, or have large tariffs against importing 'foreign' cars onto their soil, or don't have high enough personal income to be able to afford 'luxury' cars. So it's a rather ridiculous issue to debate.

It's also funny that all you nouveaux environmentalist Chicken Littles are screaming that everyone should 'get a better car!', apparently not realizing the tremendous stockpile of hazardous materials this would create as people dispose of perfectly-functioning cars, or the extra energy that would be used to replace those perfectly-functioning cars. And that you assume everyone has sufficient disposable income to just go out and buy the latest trendy auto.

Further, one has to wonder what makes the trendy cynic leap right to 'stupid' as the answer to everything. And how someone can openly wish for seniors and low-income families to freeze in the winter and not be able to commute to work so a point can be made about oil consumption.

Your post epitomizes elitist, yuppie liberal thinking.

We still have very low gas prices compared to the rest of the world (except OPEC). And, we manage to waste more gas than any other country.

Define "wasting" gas. Seems to me you're bootstrapping.

Or we can just put our heads in the sand and point our collective fingers at China and India

Right, we should just ignore the fact that both countries are seriously taxing the petroleum supply because you want everyone to know you drive a Prius.

Not only is China sucking up a huge - and growing - amount of the world's oil, they still burn coal for a significant portion of their country's energy supply. Contrary to what your patchouli-oil-drenched college teacher told you, the US is not the root of all evil.

Higher gas prices would motivate some people to invest in more efficient cars but since we have been living in a cheap oil infrastructure for so long an instant increase in the price of oil could be catastrophic for some people. For years we've been building homes and transit systems under the assumption that oil would always be cheap. Instantly doubling the price of oil would be horrible for people who live in poorly insulated homes or in areas with sparse public transit.

Here in Seattle I have the option of taking the bus or driving and I think they are about economically equivalent over my commute. I take the bus because it's less stressful. Where I grew up in rural California, though, owning a car is not an option, there is simply no public transit. This represents a catch-22 for transportation policy: rural areas are hard hit by changes in gas prices because people in rural areas often have low-ish incomes so they can't afford multiple/new cars, have no option but to drive their cars over long distances, and yet these areas are the last to receive improvements to public transit because they are the hardest areas in which to recoup the cost.

I think we have something of a "chicken and egg" problem here: do we raise the price of oil gradually and let some people suffer while infrastructure catches up? Or do we spend money up front to improve infrastructure and recoup our money afterwards somehow?

I think we have something of a "chicken and egg" problem here: do we raise the price of oil gradually and let some people suffer while infrastructure catches up? Or do we spend money up front to improve infrastructure and recoup our money afterwards somehow?

The thing is, the system is already correcting itself. It's just that people are so smug and cynical and self-righteous and impatient that they can't just admit the system works. They have to have something to rant about to show that they're smart, they're conscientious, they care a little bit more than you.

When gas was cheap, the average person didn't care about wasting it. People bought big cars and drove them nearly empty all the time. Now gas is more expensive and people who can afford it are buying smaller, more efficient cars. The big car makers are noticing this and trying to shift production, put more money into hybrids. The people who can't afford it are buying bikes, walking, driving less, and squeezing their budget to pay for the gas they need.

We are changing, it's just happening at about the speed you can expect a gigantic entity to change. In a capitalist society (you know, the type that brought about the greatest age mankind has ever known) demand drives change. Need drives demand. The system works.

"In a capitalist society... demand drives change. Need drives demand. The system works."

It does work in the sense that it will bring about changes in behavior and the development of a somewhat different transportation system, where the political will was lacking and where moral (and moralistic) environmental awareness raising was ineffective. But as an economy and a society we will pay the price for poor planning. Just because demand meets supply in a theortically free market doesn't mean everyone is always just as well off as they always were or would be otherwise. Sometimes there is just less of the stuff you've been using and you become poorer as a result, because your economic system bases its growth disproportionately on cheap energy. The rest of the G8 besides Canada are not as energy-intensive as we are, and they won't feel this like we will. Add to it the fact that our dollar is in the toilet. It kind of sucks to be us right now. Most of all those of us who took calligraph's advice to leave the heat up, the lights on, and buy another Hummer. Conservatives just can't catch a break lately, can they? Oh well, they'll always have sneering at Prius owners to keep them warm at night.

The fact that everyone has a different theory about gas prices is enough to make me think that something stinks (other than gas).

I find it loony that some feel that prices aren't high enough, as if punishing ourselves is an avenue to teach SUV drivers a lesson. It's like allowing road rage to eclipse logic and mutate into raving political statements. America is becoming so driven by anger -everyone's an 'asshole' or a 'fascist'- that there's fewer and fewer reasonable voices.

We're totally doomed.

The fact that everyone has a different theory about gas prices is enough to make me think that something stinks (other than gas).

I find it loony that some feel that prices aren't high enough, as if punishing the average consumer is justification enough to teach SUV drivers a lesson. It's like allowing road rage to eclipse logic and mutate into raving political statements. America is becoming so driven by anger -everyone's an 'asshole' or a 'fascist'- that there's fewer and fewer reasonable voices.

We're totally doomed.

Define "wasting" gas.

Hmmm...that'll be tough, but here is a good description:

When gas was cheap, the average person didn't care about wasting it. People bought big cars and drove them nearly empty all the time.

And you accuse liberals of "ranting" - your rant is so heated you can't even get past your next post without contradicting the previous one. Sometimes I think Norm made you up, calligraph, as a kind of conservative straw-man. You almost never cite facts, you resort to the most ridiculous, and often bigoted, generalizations - and you so often make an ass of yourself. Examples abound:

... Liberals hate the military.

Of course, when liberal veterans call your chickenhawk bluff, your response is muted ... nonexistent, in fact.

Now you've repeated this liberal fascist drivel, but you're the one who thinks it is treason to refer to the American presence in Iraq as an occupation - just the sort of attitude with respect to dissent that any self-respecting fascist would embrace.

JiffyClub - I agree with you - perhaps because I'm from LA.

I lived in NY and London and I didn't even own a car. I also lived in SF where I could use public transportation in the City but I worked in Silicon Valley and I HAD to drive - I couldn't even carpool because hours were so long and erratic. And, even though everyone talked about telecommuting, the CEOs usually want you IN the office.

And, now I'm back in SoCal and it is impossible. I don't have a gas guzzler - never have - but, you HAVE to do a ton of driving and this is ridiculous.

I remember when Cheney got involved in the CAFE standards back in 2001 making sure they wouldn't be raised. You know, the pre-9/11 part of the presidency when you knew we had a greedy, horrible administration in charge who were going to gouge everyone AND the environment to make themselves and their cronies rich. (You know - that's when they start telling the little naive people - this is just capitalism - when what they really were calling for is a plutocracy.)

What I don't get is how are the oil companies making record profits (and ridiculously high compensation) if their costs aren't part of the gas cost problem. Wouldn't their profits just be their normal (already high profits?) I'm sorry - I haven't read Eric's link and maybe that will explain it.

It's also funny that all you nouveaux environmentalist Chicken Littles are screaming that everyone should 'get a better car!', apparently not realizing the tremendous stockpile of hazardous materials this would create

Great idea to make current cars more gas effiecient

also, The tax "rebate" that we all have been getting lately should have been a $2,000, one time credit that went towards making homes more energy effiecient, which could decrease the amount of energy we use (by some accounts) by 10-15%.

And how someone can openly wish for seniors and low-income families to freeze in the winter and not be able to commute to work so a point can be made about oil consumption.

Contrary to what your patchouli-oil-drenched college teacher told you, the US is not the root of all evil.

Oh callgirl, your conservative-gun-toting-home-schooled generalizations always makes me smile. :D

"I mean... what does a guy have to do to actually be worth 12m?"

Well Arnold the Governator was paid $30 million(not including residuals) to star in the film T3. So in the light of that 12m for a whole year's work doesn't really sound that bad. :P