A Paper on Gasoline Crisis
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by: nakuru
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Date: Tue, 16 Feb 2010 Time: 4:14 AM
Gasoline crisis has been caused by various factors. Reports reveal that the gasoline crisis is greatly linked to some sociological theories. This paper gives a clear illustration of the situation concerning gasoline crisis. There is also an explanation of the conflict theory which is one of the sociological theories.
It is very clear that there is a gasoline crisis in United States. Many consumers in this nation actually pay high prices for this commodity irrespective of falling or rising of prices of crude oil. As a matter of fact, the situation has been like this for the past eight years. The government in United States through the revenue service changed the rules concerning oil exploration.
As a result the entire capital of investment dried up and this resulted in adverse effects in the industry. Most of the tank tracks were later on cut and then used in roads as culverts. This led to gas stations closing and the government raised taxes charged on gasoline. Further analysis reveals that in the year two thousand and two, many consumers paid more for a gallon of gasoline by approximately twelve cents. This was a very common case for the drivers in many states. (Stark, 2007)
This report is according to the research carried out by Energy Department in United States. It is asserted that the difference was due to tax payments. Research indicates that from the year two thousand, motorists actually paid $ 5.8 billion more for this product. These charges were much higher than what was initially charged for gasoline.
The situation is even worse in the businesses sector. This is due to the fact that of all the gasoline available in storage facilities, businesses actually consume a third of it in every year. This report is according to the Energy Commission in United States. The payment made for gasoline in every year is approximately $ 638 million premium. These charges have made it very hard for businesses to operate smoothly.
Research carried out in two thousand and three the month of April, revealed that there were great discrepancies in gasoline prices among different states in U.S. This problem comes about due to minimal competition in the entire market. This issue has highly affected the pricing of gasoline in a negative way. The entire gasoline wholesale market in U.S is controlled by major refiners therein. In fact it is estimated to be approximately ninety seven percent of the wholesale market therein.
The refiners of oil that were independent based were closed down. The oil refiners were quite significant in influencing the prices. The gasoline market is also influenced by major oil companies. There is a prominent oil company called West Coast whose profits surged significantly. (Otomar, 2002)
According to the energy commission in U.S and the Administration in charge of Energy Information explain the scenario. They assert that United States’ refinery margins are always high. In fact at the moment they are the highest. It is also worth noting that many marketers of gasoline that are independent based were shut out completely from the entire retail market.
This was carried out by the large refiners of oil that are in the market. This resulted in reduced competition. Monopoly increased in the market and therefore the few companies that are in operation manage to keep the prices of gasoline very high. It is known that fifty percent of the gasoline is supplied to prominent states by marketers who are independent based. There are some states that receive very little gasoline that is not enough for consumer needs.
Stations that sell oil in this nation are locked into binding contracts with many prominent companies that manufacture oil. This means that they are not free to buy any cheap gasoline. This enables the oil companies to effectively manipulate the oil prices in the market. This is according to a report that was released by the Attorney General in relation to increased gasoline prices. This means that retailers are highly restricted to get any gasoline at fair prices. This means that they cannot also charge prices lower than their buying cost.
Analysis of the gasoline crisis makes it very clear that the problem is caused by prominent oil companies’ vertical integration. This is due to the fact that these companies generally control the whole capacity of refining. They are known to control all the arrangements of managing gasoline supply in the market. This implies that there is lack of free market in the gasoline business. This is clear from the distribution system and the system of pricing gasoline that is wholesale based. This results in poor competition in relation to pricing of gasoline product. (Luis, 2005)
There are various remedies for the crisis involving gasoline. One of them includes making necessary changes in the market so that monopoly is highly minimized. This will increase competition and supply therein. This can be done through the following measures.
- Introduce both retail and wholesale competition in the market
When the market has both retail and wholesale competition it means that there will be freedom to get low priced gasoline. This includes the freedom for the stakeholders to get the product from any source whatsoever as long as it is branded.
- Instant refining
This is where there is streamlining of the environmental impacts. It also involves the stakeholders investigating the various options available and then making viable decisions.
- Checks and balances
Checks and balances need to be introduced in relation to franchise reforms of contracts. It is very clear that major oil companies are overly undermining their own dealers. This is the scenario though they don’t agree to this fact. It is important that an independent body be started in the market.
This will keep on checking on the policies that oil companies put in place that can undermine their dealers and then influencing the price market of gasoline. There is great need to restrict key companies in this region from setting retail prices. This is due to the fact that they are affecting the prices of gasoline indirectly through limiting supply of the commodity in the market.
Conflict theory
One of the sociological theories is the conflict theory. It was invented by Karl Marx but later on it was developed by Max Weber. This theory accentuates power and force. This is where an individual or a group of people exercise their power over other people. All this is carried out in the name of influencing social order in a society. This theory states that an organization operates so that every person therein can maximize their benefits. This automatically affects the various changes in the social set up. The changes include various revolutions and politics. (Stark, 2007)
This theory is quite feasible and is mostly used to explain any conflict that arises among people at the grassroots and the high class people in the society. This theory is also highly used in explaining ideologies like socialism and capitalism. This theory also greatly explains the various struggles that exist among stakeholders in a society. This happens in a continuous nature.
Unlike what is commonly believed, the struggle doesn’t necessarily have to have violence incorporated. This struggle can simply include the overall struggle by each group to see to it that its benefits are highly enhanced. This theory emphasizes that societies mainly function so that individuals therein can play their roles accordingly.
It is highly compared to the human body and the various parts that function independently. This theory mainly says that there are different classes of people in the society. That is the high and low class. Conflicts are mainly caused by the power and force exercised by one group over the other. (Douglas, 2004)
In conclusion, the gasoline crisis is quite prevalent in U.S. This problem has been caused by various factors. One of the major reasons is that the main oil producing companies give retailers and stations restrictions on the contracts of doing business with them. This includes the issue of the dealers not getting any cheap gasoline from other sources. The major oil companies are also known to limit the supply of gasoline hence resulting in increased prices.
The scenario is highly related to the conflict theory. This theory says that the society has got various classes of people. These are the high and low class. These groups are always in struggle where each group aims at maximizing its benefits. This is where individuals or even groups of people use there power to undermine the other people in the society. Nevertheless, there are viable solutions to the crisis including having an independent body that can put a check on the companies’ actions.
Reference:
Douglas, G. (2004): Sociological Theory; Sixth Edition; McGraw Hill
Luis, S. (2005): Gasoline Crisis has been building for years; New York; Prentice Press
Otomar, J. (2002): Using Conflict Theory; New York; Cambridge University Press
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