10. May 2007, 16:38 | by WD Milner | Full Article |

Not that it will come as a surprise to anyone that has recently filled their vehicle with gasoline, but a study by independent researchers has found that Canadian consumers are paying gasoline prices far higher than can be justified by production costs or historic profit margins.

The Canadian Centre for Policy Alternatives, an independent, non-partisan research group, studied gas prices before and after Hurricane Katrina in August 2005 and found that in the following autumn the way producers did business had changed radically.

An economist with the Centre, theorizes that prior to Hurricane Katrina the industry was afraid that consumers would revolt when the price of gasoline hit $1 per litre (approximately $4.50 per gallon). When they discovered that in time of a crisis consumers would pay whatever the going price was, they took advantage. Events such as the hurricane and recent disruptions at Canadian refiners have provided a pretext to raise prices.

The Canadian Petroleum Products Institute, which represents major Canadian refiners, dismisses the arguments. They indicate that while profit margins have increased, the reasons are increased demand, speculation and the fact that many refiners postponed upgrades in the uncertainty following Katrina.

Now it seems to me if refiners are doing upgrades then their costs go up, if their is increased demand then sales go up (not necessarily prices). Speculation of course can mean whatever you want it to mean. If profit margins are increasing despite increased costs then we all know why - prices are raised so that the increase in sales will not only cover the costs but generate bigger profits which they hope pass unnoticed in the scramble. And of course there is always another “crisis” around the corner. Note that it isn’t just the total dollar profit that is going up, which could be accounted for by increased sales, but the profit margin which means that more money is made compared to costs than before.

Making money is what business is all about, but to quote a line from a movie (surprisingly enough one about oil producers) “How much is enough? How much money is enough?”. For those infected with the virus of greed, there is never enough, and the ruthless exploitation of people and the world is acceptable so long as the god Profit is diligently and abundantly served.

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Categories: ,
Keywords: gas,gasoline,prices,gouging,profit,Katrina



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