Big business: Draining American wallets at the pump?

KNOX — Scott Imus, Executive Director of the Indiana Petroleum Marketers and Convenience Store Association was a special guest speaker at a gas price forum held at the Knox Community Center Thursday night. Imus, who is considered a leading authority in the area of fuel prices, was in Knox as a guest of State Representative Nancy Dembowski, Senator Ed Charbonneau and WKVI radio.
Imus told residents that there were many myths regarding retailers and the profits they make off the price of gasoline.
“According to a gallop poll, consumers think we (retailers) make between 40 and 60 cents on the gallon. Unfortunately, we have other costs . . .,” he said.
Imus said that once all of the factors are taken into consideration, there’s often mere pennies on the dollar left as profit — and sometimes companies even take a loss.
Some of the factors Imus said affects retailer gas profits are transportation, taxes, credit cards and drive offs.
North Judson Council woman Connie Miller attended the forum; and she told Imus that she had very little sympathy for retail owners.
“Every business in the country has higher/lower profit margins to make up for areas that don’t make a profit,” she said.
Miller used a comparison of a small bottle of ketchup that she paid nearly $4 for at a local convenience store.
“I don’t have a lot of sympathy for these gas station people because they definitely make up for it (loss of profit at the pumps) with what they charged me for my little bottle of ketchup,” she said.
Miller also asked how gas purchased one day for one price could jump up considerably in price the next day.
Imus said gas wasn’t necessarily purchased at a lower rate — but instead, the retailer had to wait for competition to post a more competitive price. The recent gas wars in Plymouth were used as an example of businesses charging below the fair market price. And according to Imus, that practice gives others a bad name and in many instances even forces them out of business.
“No, it (gas) wasn’t purchased at a lower price — we lowered the price 20 cents because of a situation in Plymouth where they were selling gas for $3.13 to $3.17, which gives us bad press if we don’t lower our prices,” he said.
Imus said the competitive market place doesn’t allow for price increases as they’re incurred.
“We have to wait until competitors move, which usually means a big price increase,” he said.
Perhaps the largest elephant in the room at Thursday night’s forum was a statement made by Imus regarding big business, hedge funds and the commodities futures market.
Imus said for years oil has been bought and sold on the U.S. Commodities Market. And a few years ago, the market began to behave erratically and the price of oil doubled.
People attending Thursday night’s presentation got to view a 60 minutes broadcast, which aired in April 2009.
The purpose of crude oil being traded on the futures market was to give people who needed the product, such as farmers, an idea of what crops would be worth months before a harvest; manufacturers could get the best price for their raw materials; and fuel expenses could be better managed by businesses like airlines.
But in 2008, the price of crude doubled costing more than $147 a barrel. When this occurred, Dan Gilligan, the president of the Petroleum Marketer’s Association became suspicious.
Gilligan, who represents more than 8000 wholesale and retail suppliers, told 60 minutes a new breed of investor had invaded the commodities market and they hold between 60 and 70 percent of oil contracts in the futures market.
These investors are not people who need oil — there sole purpose is to make money on the market for oil.
“They buy the paper and hope they can sell it for more than they paid for it,” Imus said.
This practice is what is draining consumer wallets at the pumps.
“All investors putting money in the futures market were driving the price up. There wasn’t a supply and demand that could justify crude going from somewhere in the 60s to $147 dollars a barrel. We were trading 27 barrels of crude for every one barrel that was being consumed,” Imus said.
The situation that was taking place when gas first began to skyrocket really hasn’t changed much today,” Imus said.
And according to Imus, statistics don’t show supply matching demand.
“The EIA (Energy Information Administration) said worldwide supply went up and worldwide demand went down; and we had the largest price increase in history when demand was going down — the only thing that made sense was investor demand. And not much has changed,” he said.
So if big businesses like the Koch family, who controls hedge fund prices, are deliberately pushing the price of crude up for personal gain where does that leave consumers? And why isn’t anyone doing anything to stop it?
According to Imus, Congress did pass a law that would prevent big business entities from profiting off of crude oil trading on the market — however, everyone is still waiting for the regulations to pass.
Currently, if the price of fuel was determined by actual demand, Imus said the price would be considerably lower.
“Crude oil inventories are at a five-year high and oil demand is down. Yet crude has rocketed from $85 a barrel in February to more than $110 a barrel in April. If you look at supply and demand, crude oil should be $60 plus a barrel, which would make fuel price about $2.50 a gallon,” he said.