Huge Gains Just Whet Companies’ Greed

Over a period of 40 days ending May 3, the price of a gallon of regular unleaded gasoline that my neighborhood service station buys from its major oil company has increased by 13.6 cents - an astonishing climb, considering the summer driving season has not yet begun.

Traditionally, it has not been until Memorial Day that the motorists have begun getting soaked by the oil companies under the guise of “supply and demand” - an annual pretext for jacking up prices just when the family is preparing to drive off on summer vacation.

And most likely, the prices will soar again - abetted by a new pretext that President Clinton’s ban on trade with Iran, including oil, has created a shortage, and despite the less-than-prominently disclosed news that oil sources in Saudi Arabia say they easily can step in to supply the difference.

Saudi oil sources reported last week they have been producing as much as 400,000 barrels a day below their OPEC quota and can more than make up for an approximately 369,000-barrel shortfall of Iranian oil.

Motorists who grumble at service station operators need to understand just how retail gasoline prices are determined.

With almost alarming regularity, the major oil suppliers notify their dealers of wholesale price increases through overnight electronic messages. The service station operator often begins his day with notice of an increase; sometimes 1.5 cents a gallon, sometimes 1.7 cents and, on May 3, a whopping 2 cents a gallon.

At my neighborhood station, the price of a gallon of regular unleaded gasoline from supplier to dealer rose to 75.25 cents on May 3. Add to that local, state and federal taxes - almost 50 cents where I live in Florida - plus a reasonable 3.2 cents profit for the dealer, and the bottom line is in the vicinity of $1.28 a gallon.

Search as I can, short of listening to self-serving jingo from oil company flacks, I cannot find a justification for these whopping pre-summer price increases.

Recently released first-quarter earnings reports of the big oil companies, whose chestnuts we pulled out of the fire with our sons, daughters and dollars when Iraq invaded Kuwait and threatened Saudi Arabia, showed huge increases in net income over the previous year.

Exxon, the nation’s largest oil company, reported a net income gain of 43 percent over the first quarter of 1994; Texaco had a net income increase of 49 percent over the same period; Mobil was up 19 percent; Arco reported a 50 percent increase; Amoco was up 31 percent, and Chevron gained 18 percent.

Despite those hefty gains, the oil companies inexplicably raised wholesale prices mercilessly beginning in late March, the closing days of the first quarter.

Within their earnings reports are caveats that the chemical rather than the refining divisions of their companies made for the gains in net income. The reason for this is that the mild winter diminished the retail need for heating fuel. But the bottom line is that the oil companies and their stockholders had a robust gain for the quarter.

Why the oil companies are picking our pockets this far in advance of their usual summer hi-jinks is obscure and suspicious.

At the rate of increase in fuel prices, auto insurance rates and new car prices, Americans will soon realize that personal transportation costs may climb out of reach for many of us, as they already are for the lowest economic rung.

That has to be realized before the rip-and-slash Congress all but destroys Amtrak and state and local public transportation services by doing away with funding.

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The following fields overflowed: CREDIT = Howard Kleinberg Cox News Service