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Conflicts of Interest between Companies and Customers Regarding Oil and Gas Prices: Essay
Oil is a commodity that is desired by multiple players and is essential in order to sustain the needs and lifestyles of consumers, businesses, and employees that depend on the natural resource to heat their homes, transport their products, and generate their paychecks. The top oil and gas companies in the world include Phillips 66, ExxonMobil, BP, and Royal Dutch Shell to name a few. The companies that profit from oil include the oil and gas companies, utility companies, and other organizations that utilize oil byproducts to produce plastic for their goods. The goals of these companies are to increase profits, create jobs, and supply the demand for gas and oil. However, the consumer’s interests are to reduce the cost of oil, reduce the environmental effects of oil by seeking alternative energy solutions, and lower the demand of oil through the creation of renewable energy. These conflicting interests between the two groups have created a situation that is unwelcome by consumers because the gas and oil companies have been raising prices to benefit their pockets and the effect is impacting the consumer negatively. Understanding the issues surrounding this topic will not only help to identify the issues, but create an effective solution to protect the interest of the consumer.
A recent interview conducted by Spectrum News 1 with Jamie Court, president of the Consumer Watchdog, an advocacy group, highlights the prevalent issues with oil refineries and how they impact the consumer. He explained that refineries control the gas supply and they are often owned directly by those that dominate the retail gas market. The refineries sell gas to their own stations and then charge more to purposely keep prices high. When a refinery goes down, the price increases because demand increases and cycles back to increase refinery profits. However, Jamie Court was missing some information in his analysis. According to the U.S. Energy Information Administration, “18% of gas prices are from taxes, 17% is distribution and marketing costs, 12% of the price is refining, and 53% is crude oil” (U.S. Energy Information Administration, 2019). Most individuals would not consider marketing to be a key factor in the gas price makeup however, there is competition amongst gas stations and large retail brands like Costco, Walmart, Kroger, and Sam’s Club for the consumer to use their pumps. There are multiple factors that go into getting the oil from the refinery to the consumer’s gas tank including the employees at the refineries, businesses that store the gasoline in tanks, and the individual delivering the resources to gas stations to be sold.
Even though taxes, marketing and distribution, refining, and crude oil are the four major components that make up the current gas prices, the consumers role in this cannot be overlooked when demand for the product is high and essential for society to function. The consumer has to commute back and forth to work every day and depending on their job, traveling may be a large component of their day. During the summer months, families tend to increase their fuel consumption on vacations and holidays. When gas prices get too high, consumers will attempt to conserve their spending or decide to spend a vacation with their family in a way that does not involve traveling far, ultimately hurting the economy because less money is being spent. When the gas prices rise, big oil companies are immediately to blame. It is not socially responsible to sell fuel to your own gas station and charge 40 cents more for the consumer to purchase the fuel when it is essential to function. It is not cost effective and society cannot support the inflation for long without the economy suffering. However, there is also the social responsibility of the consumer and businesses to find alternatives to rely less on fuel and encourage the development of energy efficient alternatives.
One solution to consider is educating consumers on what changes they can make in their everyday lives in response to the rising fuel prices. Purchasing a more fuel-efficient vehicle can support more miles per gallon and have an idle stop that automatically turns your engine off when you are stopped at a red light. Routine maintenance on vehicles, such as keeping the air in the tires at the correct pressure and changing the air filter will help cut costs in the long run. There are multiple apps that consumers can download on their phone to find the best gas prices in their area, the most popular is GasBuddy. If consumers live in the city, utilizing public transit when commuting to work or carpooling with other individuals can help them save money. The value in this solution is that consumers will evaluate their fuel usage and attempt to reduced their need, which reduces demand, and ultimately lowers the price. Having consumers utilize apps that advertise real time gas prices will keep the local markets competitive. The challenge that this solution presents is that it only works if the community is participating as one entity and individually responsible for conserving their fuel usage.
Another solution to consider is forming a partnership with an organization, such as Greenpeace, to lobby for the environment and more fuel-efficient alternatives in a civil manner. Greenpeace is currently collecting signatures for a petition to stop offshore drilling. Supporting this initiative can help put pressure on the government to take in active role in regulating the demand for energy. The government can then encourage the major oil and gas companies to consider their social responsibility in the cost of fuel for the consumer and the impact it has on the economy and environment. Creating a membership with this has the potential to create a long-term solution and has the power to generate donations to help fund future hurtles with the oil and gas companies. There is even an opportunity to lobby for research in developing different sources of energy. However, this solution does not have an immediate result for the consumer who will still be struggling with the hardship of the fuel prices in their budget.
The best option to pursue is a combination of both solutions and pursue an environmentalism approach, which is “an organized social movement of citizens, businesses and government agencies to protect and improve our living environment” (Levens, 2016, p. 42). It is important to increase your network to increase the impact of the demand for change. This can be accomplished by creating a membership with active groups worldwide, like Greenpeace, that support a solution for the gas and oil prices. In addition, establishing a brand and marketing on an online platform through social media, such as Instagram, Facebook, and Twitter will be a way to gain attention and educate consumers on how to incorporate fuel efficiency into their lives. Marketing on how the solutions will help the environment and economy will add value and credibility to the organization.
References
- API Global. (2019, January). Wells to Consumer. Retrieved October 6, 2019, from https://www.api.org/oil-and-natural-gas/wells-to-consumer
- Co, A. R. R. (2019, July 31). 11 Different Sources of Alternative Energy. Retrieved October 6, 2019, from https://www.renewableresourcescoalition.org/alternative-energy-sources/
- Foundation, S. (2019, March 22). The Link Between Fossil Fuels, Single-Use Plastics and Climate Change. Retrieved October 6, 2019, from https://www.ecowatch.com/fossil-fuels-single-use-plastics-2565595371.html
- Greenpeace. (n.d.). Membership FAQ. Retrieved October 6, 2019, from https://www.greenpeace.org/usa/membership-faq/
- Levens, M. (2016). Marketing: Defined, Explained, Applied (3rd ed.). New York, NY: Pearson Education Inc.
- Loris, N. (2014, September 4). What Contributes to Gas Prices and Solutions to Help. Retrieved October 6, 2019, from https://www.heritage.org/environment/report/what-contributes-gas-prices-and-solutions-help#_ftn3
- Schoen, J. W. (2005, August 15). Who Benefits from Rising Gas Prices? Retrieved October 6, 2019, from http://www.nbcnews.com/id/8670108/ns/business-answer_desk/t/who-benefits-rising-gas-prices/#.XZvKB-dKi-x
- (2019, October 3). Retrieved October 6, 2019, from https://youtu.be/sOPdu-Y-YXM.
- U.S. Energy Information Administration. (2019, October 7). U.S. Energy Information Administration – EIA – Independent Statistics and Analysis. Retrieved October 7, 2019, from https://www.eia.gov/petroleum/gasdiesel/
- Vara, V. (2019, June 13). Largest Oil and Gas Companies: Ranking the Top 10. Retrieved October 6, 2019, from https://www.offshore-technology.com/features/largest-oil-and-gas-companies-in-2018/
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