June ’08-Who’s to Blame for these Gas Prices-The Truth?

I read it on the Rush Limbaugh website and other respected commentators share the view: the problem we face is not with the big oil companies, it’s with ________ (oil producers, speculators, etc.). Are they correct? Partly.

Let’s examine the chain of ownership and the profit centers for oil. First there are the oil producing countries. They extract or pay one of the big oil companies to extract the oil and sell it on the market. Their control is limited to the market and what it will pay. Moreover, their control is based on production. If they raise production the futures market expects the supply to rise and the price falls. If they lower or maintain production in an ever increasing demand market the price goes up. They are partly responsible.

Then there are these somewhat invisible traders and speculators. They ‘bet’ on whether the price will go up or down based on market factors. This trading should be eliminated as it is nothing more than fuel for a fire that is artificially induced. They are partly responsible.

Next in the chain is the Big Oil Company. They pay the going price for a barrel of oil, refine it into products such as motor oil, transmission oil, gasoline and diesel fuel. For this discussion we are only going to talk about gasoline and diesel fuel. Once processed they use it in their retail gasoline stations, sell it to their branded dealers or sell it to each other under reciprocal contracts or on the wholesale market.

Herein lies the culpability of the big oil companies. This is where the journalists and congress miss the oil barge (boat) when drilling (pun intended) the execs about their excessive profits. When you see the business news and the price for a barrel of oil has shot up in the financial markets (futures), the oil companies seize this opportunity to raise the retail price almost immediately. Is this right? No! The price for that oil you saw on TV is not for the oil here today, nor for the oil in the tanker waiting to be unloaded at the refinery, nor for the oil just leaving Saudi Arabia. It is for the future oil sales. That price you saw today won’t really affect the gasoline that reaches the retail gasoline station for 30 days! That is where the gouging and profiteering is taking place. Selling yesterdays gasoline at tomorrows prices! It is immoral, unethical and moreover, illegal.

I have been told that the price you see on the market close is for a barrel of oil from a tanker that won’t reach the U.S. for 30 days. What does that mean? Well, when the oil company is processing oil under contract for, say, $90 a barrel that they bought at the price 30 days ago, and when the price today, 30 days after their purchase at $90 a barrel is at $130 a barrel, they raise their price to the $130 a barrel price. You are buying yesterdays $90 oil for todays $130 price. The big oil company is making a whopping 45% added profit on the backs of the consumer. This results in record profits for the big oil companies. Yet when I see the execs before congress they just talk about ‘pass through’ increases to the consumer where they are only the middle man. What a load of bull. And no one presses them for the truth!

Is this illegal? I am no lawyer (thank God) but I can tell you this. Testifying before congress that your company is not gouging but only passing through the oil increases is definitely illegal. Why do we stand for it?

Hey interviewer: ASK THE HARD QUESTION. IF YOU ARE JUST PASSING THROUGH THE INCREASE WHY ARE YOU SHOWING RECORD PROFITS QUARTER AFTER QUARTER? The answer is quite simple really: the consumer is paying record prices so the oil company can make record profits.

Immoral, unethical, illegal? What do you think?