America Has Oil on the Brain

Americans buy ten thousand gallons of gasoline a second, without giving it much of a thought. Where does it come from? How far does it travel? Why does it cost so much? Who's making money along the way?

Lisa Margonelli traveled thousands of miles from her local gas station to oil fields half a world away. Along the way she stopped at the Strategic Petroleum Reserve, the New York Mercantile Exchange's crude oil market, oil fields from Venezuela to Texas, to Chad, and even an Iranian oil platform. I jokingly call her book, Fast Fuel Nation. She calls it Oil on the Brain.

I spoke with Lisa about her book, the economy of gas stations, and how oil money can hurt a developing country like Chad.

Terry McNally: What kind of car do you drive? Where do you normally buy your gas? How many miles per gallon do you get?

Lisa Margonelli: I drive a 2000 Honda Civic hatchback that gets about 35 miles to the gallon. I actually buy my gas at a Shell station that is quite cheap and relatively near the freeway entrance near my house. But ideally, if it were convenient on my route, I would buy from an independent gas station.

McNally: Why?

Margonelli: Because the independents exert pressure to keep the prices down, and I support the struggling independent work ethic. But the Shell station is extremely convenient, and normally I never think about gas until my tank is almost empty.

McNally: Where do independents get their gas?

Margonelli: They get it from wholesalers called jobbers who buy it on the spot market. It comes from all the same refineries that are owned by the chains. They put their surplus each day on the spot market -- it's exactly the same gas.

McNally: There's a major right now running commercials warning about low quality gas...

Margonelli: -- Chevron.

McNally: Chevron with Tech-Ron and their little talking cars...

Margonelli: -- "Avoid the hazards of low quality gas."

McNally: What are the hazards of low quality gas -- lower prices?

Margonelli: Yup. Techron is apparently a special additive, but we'll never know because it's a trade secret.

McNally: Of course.

Margonelli: I don't know of any statistics on Techron. But the independents sell their gas with a standard detergent package that is perfectly adequate to clean the car.

You know there are nice looking independents and then there are super crappy ones. When I started the book, I had this impression that perhaps the very crappy looking independents were putting water in it or something. Of course water and gas don't mix, so that's a very naive idea. No, it's all the same gas, all the tanks are inspected by the same inspectors, it all comes from the same big pot.

McNally: How much was gas going for when you started the book?

Margonelli: Gas was really cheap in 2001. In 2003 I think it was $1.61 a gallon. It's been an amazing time to watch the market.

I got to see was how all the different economic wheels are pushing against each other and meshing. We tend to think of the oil industry as this big monolithic thing, but in fact it's made up of so many moving parts and so many different agendas, that you can't really predict where it's going.

McNally: You could predict that sometime it's going to run out, and before that it's going to get more expensive.

Margonelli: But we had big oil experts in 1998 lamenting the possibility that oil was soon going to be $7 a barrel.

McNally: I'm guessing you didn't set out to be an energy policy wonk. Tell me a little bit about the evolution -- of you and this book?

Margonelli: In the beginning, I was fascinated by the world at the other end of the pike, in Iraq or in Alaska. I just wanted to hang out along this supply chain. I also really wanted to get into places that were off limits, onto oil fields and into refineries.

I'm really curious too about how huge policies or huge historic trends actually impact individuals, because I think that's the way we understand them. So I thought the way for me to do oil, was to get to know individuals along the way and see how they understood their place in the supply chain.