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1996 Barbwires |
BARBWIRE
Gasoline
Price Archive
Gas pedals and peddlers: BOHICA at the pump
originally
published April 28, 1996
Regular Barbwire readers recognize the term BOHICA, local construction industry shorthand for "bend over, here it comes again." If you've visited a gas station lately, you know the deeper meaning of BOHICA.
We, the biased, liberal media have done a lousy job of putting petroleum prices into perspective. Yes, the gas peddlers are pruning our pockets at the gas pedal. We are being conned, shucked, jived, cracked, peeled and eaten alive. Here's how it works.
About a dozen years ago, ARCO made a big deal of killing its credit card program in order to cut prices at the pump. They didn't publicize the other cutting they did on the throats of competitors.
ARCO attorneys developed what turned out to be a brilliant legal strategy, a way to eliminate competitors, especially independent retailers. They came up with pricing zones, the boundaries of which seemed to follow no rhyme or reason. Opponents argued that the zones were designed to sell gas in one area at an artificially low price in order to destroy competitors, especially independent retailers.
That's how an ARCO station in one end of town might sell gas for substantially less than another several miles away. Independent retailers screamed that it was John D. Rockefeller all over again, but they were not successful. Somehow, courts held that the pricing zones did not stifle competitition. Many independents either went out of business or became ARCO dealers.
Today, all the major oil companies have adopted the ARCO pricing zone strategy. As a result, there are few independents left.
In the 1995 Nevada legislative session, the big oil companies tried to complete the circle. They tried and failed to get Nevada's "divorcement" law repealed. That's the statute which says a gasoline wholesaler may not also sell retail at the pump. The seven sisters came close, but failed. Had the divorcement law been scuttled, every major brand gas outlet would become a company store as contract renewals were negotiated.
The independent retailer has very little spread to work with. He and she must look to candy bars and beer for most of their profit. Depending on local levies, about 50 cents of the price of every gallon of gas goes toward various taxes. Nothwithstanding the dealer's picayune profit and taxes, the biggest part of the price of gas goes to the major oil companies.
The corporate reasons for currently high prices make little sense to me. First, remember what one analyst said during the first "energy crisis" of the early 1970s: oil companies are like both Corsican Brothers, each knows what the other is thinking at all times.
The big boys don't need to conspire to fix prices. Each knows the other's costs and resources. The oil companies are like neon sign manufacturers. Anyone who's shopped the price of flashing plexiglass becomes amazed that no matter how many bids he solicits, they all magically arrive within a few dollars of each other.
Cable television companies likewise conspire without talking to each other. Local regulators tell me of interesting incidents where no cable operator pursues a new housing development up for grabs in a border zone. Why? Because of a profound reluctance to compete on the basis of price.
The oil company zoning strategy seems to have an effect of biasing up prices. Independents cannot price compete, as the big boys are their sources of product. With the zones deemed legal and not limiting competition, any small dealer would be crazy to try to undercut the big boys.
Let's say good ole Savin' Sam the Petroleum Man hit the lottery and decided to use some of his newfound megabucks to BOHICA back against the big oil companies. Let's say Sam started selling gas at 99 cents a gallon. He'd probably face legal action for cut-throat competition. He might find wholesale gasoline hard to buy, if he could get it at all. Worst of all, because of the zoning redlines, he could easily find all of the major brands near his store legally selling at 98 cents a gallon!
A few munchkin independents will be allowed to remain in business so that the oil companies can go to the next legislative session and plead for repeal of the divorcement law. The indies can serve as proof of a vigorous free market which will flower like springtime if only enlightened lawmakers will let in the sunshine of deregulation. The crocodile tears will flow as oil company lobbyists in charcoal gray, three-piece uniforms make the case for company owned stores as necessary for a competitive future for consumers. Don't you love they way they're always thinking of our best interests?
In a few years, you would see all retail gas dispensed by an oilogopoly of company-owned stores. The only difference would lie in the curious absence of the poor individual retailer. So cut your gas station some slack. Frontline operators are taking the brunt of quite legitimate public anger and skepticism, but are totally blameless.
BOHICA IN BLACK AND WHITE: The motoring public has good reason for distrust. Last Thursday's Wall Street Journal reported how the Organization of Petroleum Exporting Countries (OPEC) is leaking like a sieve. Only Moamar Ghadafy's Libya is staying within agreed production limits. Even Saddam Hussein is trickling a bit into the market from Iraq. So if mighty OPEC is flooding the world market with crude, why such cruddy prices at the pump? Can they go on blaming the weather forever?
An artificial energy crisis convinced us, the great unwashed, to accept dollar-a-gallon gas in the 1970s. OPEC stopped shipping to the west in the infamous 1973 Arab oil embargo. It was caused by the Shah of Iran's greed and lust for high-tech weaponry. Our stooge bit us in the ass.
As it had done in so many other countries, the CIA overthrew the democratically elected government of Iran in 1953. Prime minister Mohammed Mossadegh had the balls to insist upon more money for the Iranian people from big oil's exploitation of his poor country's oil reserves. That really pissed off the seven sisters, as big oil was affectionately known at the time. Acting in the finest fascist tradition, Mr. Mossadegh was ousted in a U.S.-run coup.
We installed the brutal Shah Reza Pahlevi, who was himself overthrown by the equally cruel Ayatollah Khomeini in 1979. But someone had mercy on the Shah. Chase Manhattan Bank CEO David Rockefeller, of the same family that gave us Chevron, Mobil, Exxon and all the other Standard Oil spinoffs, went to his brother Nelson's former international affairs adviser. The guy had clout as a former secretary of state.
Henry Kissinger pursuaded President Carter to allow the Shah into the U.S. for medical treatment. The U.S. embassy staff in Tehran was taken hostage as a result, and gas lines once again snaked around every street corner in the nation. All of this still served big oil's interests, because prices continued to rise. We got used to dollar-a-gallon gas.
Then came Cowboy Ron. The Reagan administration allowed us to substantially increase our dependence on foreign oil. The domestic U.S. oil industry fell apart and will never recover from the Reagan years.
Texas oilman George Herbert Hoover Bush did us no favors by taking us to war in 1991 after his ambassador, April Glaspie, gave Saddam Hussein permission to invade oil-rich Kuwait. President Bush left Saddam in power, but did manage to save his family's choice Persian Gulf oil leases — which would have expired had not Saddam been quickly kicked out of Kuwait. There is justice, however. Last I heard, the Bush family's underwater oil field produced dry holes. And about a half-million deaths, so far.
BOHICA YOU CAN BREATHE: Adding insult to injury, big oil is using this current phony pricing crisis to get California clean air laws weakened. Shameless bastards. No matter what happens, they twist it to their advantage and win just about every time.
BOHICA IN THE BANK: Have you seen the latest perversion of welfare reform from Wisconsin? Under new laws just signed by Republican Gov. Tommy Thompson, people will be forced to work for $2.98 to $3.19 an hour. Isn't the federal minimum wage set at a whopping $4.25? What's next? How about repeal of the 13th Amendment banning slavery and involuntary servitude.
BOHICA IN BLACK AND BLUE: Drink a quiet toast to that flaming liberal, Richard Nixon. April 28 is Workers Memorial Day, which commemorates all those injured or killed on the job. A quarter-century ago today, President Nixon signed the Occupational Safety and Health Act, creating the Occupational Safety and Health Administration (OSHA).
I'll grant that OSHA has done some nonsensical things, but there is one testament to its necessity: Newt and his Zootsuits have targeted it for extinction. However, I can see the GOP's point. If we want to compete with fourth-world sweatshops, we have to be prepared to cash in enough lives to make it worthwhile for companies to keep the jobs stateside. Otherwise, they'll use their U.S. government tax incentives to move production overseas.
We've just got to get our priorities straight. Maybe Newt needs to hire some oil company lawyers to educate the public on its responsibility to maintain proper levels of corporate profit. I hear ex-Exxon Valdez Capt. Joseph Hazelwood is looking for work.
Workers are disposable, but we've got plenty to spare. The actual unemployment rate last February was 10.7 percent, nearly double the official 5.5 percent. The Bureau of Labor Statistics now publishes an alternative rate, which takes into account discouraged and "marginally attached" workers, plus those working part time. Could that be one reason why people are feeling so economically insecure?
Not to worry. They can always move to Wisconsin and go on "workfare" in exchange for $2.98 an hour. Next thing you know, the mad cow state will legalize gambling to entertain all those new, highly paid professionals. What a country.
Be well. Raise hell.
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Copyright © 1996, 2005 Andrew BarbanoAndrew Barbano is a member of Communications Workers of America Local 9413 and editor of U-News, where the past four years of columns may be accessed. Barbwire by Barbano has originated in the Daily Sparks (Nev.) Tribune since 1988.
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