I ran across an intriguing columnist today who described in plain language (not analyst-speak) the real story of gasoline prices–it’s not market forces, and it’s not global unrest or even demand. The article is in the Traverse City Record Eagle, a little paper in the most frozen part of Michigan. It prompted me to call the the writer, Stephen Sutherland, and it turns out he spent 30 years in the oil business, mostly on the marketing end. That time in the trenches honed his bull—- meter. To wit:
"I’m starting to believe that the major oil companies have a new
"creative profits" division. One week the economic fundamentals are
back, and the next the fundamentals are out the window, replaced with
some new fairy tale. …
"For decades we’ve all heard certain information to get us to
believe in the law of supply and demand, or two plus two will always
equal four. We have all grown to expect that if supply is low and
demand is high that prices will go up, or conversely that if supply was
high and demand was low, the prices would fall. That seemed to be the
truth, the whole truth, and nothing but the truth for many decades.
"But somewhere over the past couple years, things have changed. While
supply and demand still exist, someone has been messing with the
formula, and two plus two equals four is no longer the whole truth. …
"Although the information from the local and national media is
basically true, their conclusions are very wrong. No, I’m not claiming
to be smarter. I just look deeper and follow the money.
"The [oil company] majors have been posting record profits for many quarters now.
This did not happen when supply and demand was the truth, the whole
truth and nothing but the truth."
Oil companies think the regular folks are fooled by their blather about Venezuelan politics and Chinese demand for oil as an excuse for record prices, record profits. Not always, and not in Traverse City.