Jun 12, 2008

Gas prices good for Chevron but bad for cabbies

By Bil Paul

Pollsters keep tabs on what Americans are most worried about. They help politicians know which buttons to push to get elected.

Back in the 1950s, people were concerned about atomic bombs and built bomb shelters. Then there were fears that the country was coming apart after the assassinations and social upheavals of the '60s. A couple of recessions reared their ugly heads. After Sept. 11, terrorism and national security were No. 1. During the last several years, there have been alarms about global warming and the housing meltdown.

Now, all of a sudden, the fast-escalating price of gasoline has become the latest fear factor. In the past, we've had gasoline shortages, but this time increasing demand is apparently bidding up the price along with speculative maneuvers. Local gas cost a mere $1.65 a gallon at the beginning of 2004; now it's headed for $5.

People haven't taken to ramming gas pumps with their SUVs, but in the fall elections the Republicans could pay a steep price for this and other economic maladies.

Russell Fetter's San Mateo-based Luxor Cab is hurting more than most. As with many cab companies, Fetter's drivers are independent contractors buying their own gas. With fares held constant by contracts with the city, his drivers' profit margins are dwindling and they're depending more and more on tips to make a decent living. There's also the potential for drivers to leave for better-paying jobs, and to help head that off, he's given them a better split of the meter fares. Luxor and another San Mateo cab company are urging the city of San Mateo to allow them to increase fares, but so far, no luck.

The Postal Service, UPS and other delivery operations are big users of gasoline, and the post office has a rule of thumb: Every time the price of gas goes up a penny, it costs the organization an extra $8 million per year. SamTrans and Caltrain budgeted this year to pay $2.40 per gallon of diesel fuel and now the price is double that, bringing up the possibility of bus and train fare increases.

If there's a silver lining to this storm cloud, it's that people will stop buying so many gas guzzlers and consider fuel economy to be sexy. They might even drive slower on the freeways to get an extra five miles per gallon and they are more likely to seek out the lowest-price gas stations.

Here's a few petrol-facts:

_ The U.S. extracts more oil from its own turf than any other county except Saudi Arabia and Russia. Venezuela is number nine and Iraq is number 15. However, because we use far more oil than any other country, we perpetually have to import it.

_ As people who get around California know, we have producing oil wells down around Bakersfield and in the Los Angeles Basin.

_ Oil from America's largest oil field, at Prudhoe Bay, Alaska, for 23 years had to be used within the U.S., which kept the selling price low. During the 1990s, Alaskan politicians convinced the Clinton administration to allow the oil to be sold internationally, at higher prices, giving Alaska more tax revenue.

_ Because many countries add higher taxes to gasoline than we do, our gas prices are still low in comparison. Most European motorists pay twice as much for gas as we do. However, you might want to move to Venezuela, where you'd pay 19 cents per gallon, or Iran, where it's 42 cents (a surefire way to make a regime more popular).

_ The Bay Area has no less than five refineries in our Petrochemical Alley: Chevron in Richmond, Valero in Benicia, the Martinez Refining Company at Martinez, Tosco in Rodeo and the Golden Eagle Refinery at Avon. To have so many refineries close to populated areas isn't exactly a boon to health.

Chevron, the nation's second-largest energy company, is headquartered nearby in San Ramon, where it's a lightning rod for environmental protests. If you've seen the recent Oscar-winning movie "There Will be Blood," you're aware of some of the raw beginnings of the oil industry. Nowadays, these companies are global, and the lengths they go to fill our tanks with that nearly clear liquid called gasoline are impressive. Americans can take pride in the engineering know-how that companies like Chevron provide to drill down as deep as seven miles - even initially through ocean water - looking for crude oil and natural gas. These companies have to secure agreements with foreign governments such as Nigeria, Libya and Thailand to drill, and then pay them lease fees and/or a share of the profits. Whether or not those governments share the wealth with their citizens is another matter.

The quality of crude oil being extracted from the earth these days is generally of lower and lower quality, as opposed to the high-quality "sweet crude" that's easier to refine. Thick crude with a low percentage of hydrocarbons, along with oil extracted from shale and sand, is becoming more attractive to refine as the price of oil skyrockets. But it's a fact of life that each year since 1980, the volume of oil being discovered lags the amount of oil being consumed - so it's wise for nations to pursue alternative energy sources. The era of fossil fuel will necessarily wind down over time.

On the negative side of the slate, Chevron for years dominated the city of Richmond, where the Chevron refinery is located. Only recently have the city council members coalesced into a team that has the city's best interests at heart, as opposed to Chevron's. Chevron wants to expand its refinery to process more low-quality oil, but it's presently a tough sell to the council.

If Chevron pours its high profits into oil exploration and extraction, alternative energy projects, and into philanthropic projects in the nations where it does business, fine. But if it hoards its earnings, its oil is going to get cruder yet.


Bil Paul's column appears Thursdays in the Daily News. Reach him at natural_born_writer@yahoo.com.