Posted on July 27, 2008 - by Venik

Karl Marx and the White House

The redneck right in the US and their fearless leader John McCain are praising Dubya for lowering oil prices. Just look at the facts, they say, oil price dropped ten bucks and the gas price is a whole penny lower. We’ve been paying a lot of attention to the prices of crude and gasoline, but what we should be looking at is the relationship between the two. How much is a gallon of gas as a percentage of the cost of one barrel of oil?

Refining oil is an energy-intensive process and the cost of refining has been going up along with the increasing energy prices. One would expect to see a corresponding increase in the price of refined products relative to the cost of oil. However, something opposite is happening: oil is getting more expensive, but the price of one gallon of gas went from about 6% of price of one barrel of oil down to just 3%. Someone is taking a big hit in profits to artificially maintain relatively low fuel prices in the US.

Consider some numbers: in early 2004 one barrel of Dubai Crude was $32.10 and national average for one gallon of US Regular gasoline was $1.77, according to the US DOE. This means that 1 gallon of gas used to cost about 5.5% from the price of one barrel of oil. In July 2008 the price of one barrel of Dubai Crude is $133.56 and the price of US Regular gasoline is $4.05 per gallon. This means that the relative price of gas dropped from 5.5% down to just 3% of the price of one barrel of oil.

(source data)

So, if the cost of refining oil and delivering refined products to the consumer is increasing, then the refineries and gasoline retailers must be taking a tremendous hit to their bottom line by selling relatively cheap gas. For a long time prior to Bush’s “war on terror” gas used to cost about 6% of the price of one barrel of crude. If this was the case today, one gallon of US Regular gas would cost you just over eight bucks. Since you are paying only $4 per gallon, then who’s covering the other half? Your socialist Republican government, that’s who.

What we have today on the US gasoline market are government-controlled prices in the best socialist traditions of China and India. So how much is gas in the EU? Not surprisingly, just over $8 per gallon – the market price. Most economists agree that the US economy would collapse if consumers were to buy gas at free market prices of $8 per gallon or more.

The EU, often accused by the Republicans for being “socialist”, apparently has a sufficiently robust economy to handle free market prices of gas, while the US – the imaginary pillar of global capitalism – is forced to covertly subsidize gasoline, so its economy doesn’t burst like a pair of pants on a fat man. So there you have it, ladies and gentlemen, the legacy of Bush’s eight years in office: our economy is on its path to Communism.

Popularity: 1% [?]

Join the forum discussion on this post - (1) Posts

Related posts:

1. Russia to raise oil export duty to $212.6 per ton from July 1
2. Russia hikes oil duties by 25 percent: official (AFP via Yahoo! News)
3. US Confirms It Knew of Georgia’s Plan to Attack South Ossetia
4. Presidential primaries and the idiot’s war
5. The Melnikov house and the battle for the Soviet era’s artistic soul