How about those gas prices?
March 1, 1999
By Scott Lewis
If you are reading this column you must be aware of the low price of gas today. If fact, I cant remember ever being able to buy "premium" unleaded gas for under a buck at a major chain gas station.
How low do you think they can go? I would be very surprised to see it go much lower than it is right now. For starters, you have to worry about the government adding taxes to it to keep the price artificially high. Clinton did this during his first few months of office (the first term before all the scandals). He raised the price 10 cents a gallon just as regular unleaded gas went under a dollar. He did it again a shortly after when the price continued downward.
I remember one of his campaign promises for his re-election was to remove 17 cents from the gas tax. I wonder how haw many people besides myself remember that he was responsible for the 20 cents from his first term. I also dont think our current low prices are due to him keeping that promise.
This is always a problem. The government is worried that if gas gets too cheap the auto manufacturers would not have enough incentive to build even more fuel efficient cars. And it is true.
I used to work for a gas station for 4 years after high school. I worked my way through college pumping gas. When I started this job back in 1982 premium unleaded gas was close to $1.50 a gallon. I watched it go over $1.50 a gallon and slowly drop back down. Those were tough times for the auto industry.
One of the things I found most interesting back then was the true difference in the price of the different grades of gas. Back then I worked for Shell. They sold three kinds of gas. 1) Premium Unleaded 93 Octane, 2) Regular Unleaded 87 Octane, and 3) Regular (with lead) 89 Octane. Yes we still had leaded gas at the pumps in the mid-eighties.
I handled some of the invoices from the truck driver. The station basically bought the gas from Shell, and could sell it for whatever it wanted. The owner was pretty good at driving prices to keep up business. On the invoice from Shell the price of 87 octane gas was only 2 cents less than the price of 93 octane gas. Obviously, Shell didnt spend that much money to further refine the gas to the 93 octane level.
The interesting part was that the station was charging 12 to 15 cents more for the good stuff, yet only paid 2 cent more for it. All profit. Add to this that premium unleaded out sold regular, and regular unleaded combined. Talk about a misconception on the part of the consumer. Back then few cars needed 93 octane fuel. The mid-eighties was only starting to see the return of true performance cars, and most cars would run just fine on 87 octane.
But people swear up and down that they need premium gas. Heres the real deal. If it never knocks or pings with low octane gas then you dont need high octane gas. This is especially true for non-performance factory stock vehicles.
Flash forward about 7 to 8 years. I was working in an Oracle RDBMS shop. My boss used to attend all the Oracle User Group meeting for the South Texas area. They were mostly one day affairs every two or three months. He was a master DBA, and had a lot of contacts at Oracle. He got to know a DBA that worked for one of the major oil companies. That guy said his company could sell gas for 1/3 what they were getting for it, and still make a profit. At that time gas was around $1.20 for premium unleaded.
Can you imagine? There is so much tax in the price of gasoline it is hard to know what the oil companies are getting for it. But you can be sure they are making a killing. What do you think? Does anybody work for an oil company, and want to tell the real cost for them to sell this stuff?
Just to put this in perspective, gas is going down in price overall. Look at it this way. You could get a nice Camaro in 1969 for $2,500-$3,000. Gas was around $0.35 a gallon. Today a nice Camaro (with V-8) will cost between $25,000-$30,000. By those numbers we should be paying about $3.50 a gallon at the pump. Think about it.