Oil and gas
There was a great deal of discussion about the falling price of oil and gasoline, coming as it did in the weeks prior to the mid-term elections. People moderately inclined toward the misguided belief that oil companies have no control over prices, claimed that all of this was just a natural ebb and flow of the uncontrollable free market. While not claiming the fix was in, I certainly offered up abundant evidence that the fix could be in, if there were desire for it to be so.
Let's recall the situation then, which you can see in the graphs to the right. In July, 2006, the spot and futures price of oil was topping $77/bbl and gas was sloshing into tanks for $3+/gal. Oil prices then began a precipitous drop, this being explained away as the natural fall in demand at the end of "driving season." Gas prices likewise began to tilt downward, dropping from over $3/gal to less the $2.25/gal, a decline of 25%.Shortly after the election, the numbers started to crawl back up the charts, though oil has remained rather stable lately, hovering around the mid-sixties for sometime now. Today, in fact, the Brent spot price dropped 1% to $65.02 and the NYMEX futures price remained at $63.19.
But there's something happening to gas prices that dependence on oil prices does not explain: they are rising. Nationally, gasoline has again topped $3/gal, while oil prices remain stagnant have hovered in the low to mid sixties since January.
Here we are now, with oil prices at $63/bbl and gasoline hitting $3/gal. when nine months ago, $77/bbl was bringing in $3/gal. gasoline. Oil that is almost $15/bbl cheaper is rendering the same $3 gasoline.
Now, tell me again that gasoline prices and oil prices track closely. They don't and there is a lot of wiggle room. There are other reasons for gas price fluctuations and all of those are under the control of the gasoline distributors, i.e. oil companies.
posted by theBhc at 12:04 AM
3 Comments:
Price fixing, anyone?
Subsidies in other countries keep prices high:
http://tinyurl.com/2zoxyf
(Via The Oil Drum)
Well, the reasoning is entirely specious. It looks plausible, as the best of specious reasoning does, but those countries cited consume oil at a rate an order of magnitude less than the United States, which also heavily subsidizes its only oil companies. Blaming the price of gasoline in the US on what on subsidies in Saudi Arabia is perhaps one of the most patently absurd bits of nonsense I've ever come across.
The point was that the price of oil on the market is down almost $15/bbl and yet the price of gasoline here is rising and is at the same level it was when oil was $77/bbl. This has far more to do with the refinement and distribution of gasoline within our own borders than whether the Saudis have cheap gas.
Oil companies make enormous profits on a barrel of oil and far more than the "8%" they would have you believe. I suggest a reading of Raymond Learsy, former commodities trader, who has been at the forefront of exposing the actual price gouging oil companies engage in here.
Another crucial aspect to China's subsidies, specifically oil, is that, as Learsy points out, indirect subsidies of Chinese exports via oil subsidies keeps US inflation down. If China charged nominal fees for gasoline, US imports from China would necessarily jump and US inflation would skyrocket.
Things are nowhere near as simple or clear cut as this silly article would have you believe.
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