4-06-08 by dugan
It’s hard to be shocked these days about prices at the pump, easier to be shocked that Congress can’t do more than talk about it. Today’s $3.324 a gallon for regular, is just another new all-time record, with the rise over the past few days at a penny a gallon or more. California rose above $3.70, highest in the nation. As OilWatchdog predicted, refiners are cutting production–not because of a big refinery storm or Midwest tornado, but to boost the price at the pump. Oil companies raking in record profits selling petroleum are working now to match that windfall at the pump.
The price of cruce oil is also up again on speculative markets, at around $105 a barrel. In a Senate hearing on those markets last week, the nation’s top commercial oil market analysts mostly agreed that speculation is driving up the price, separating oil (and other commodities) from the old laws of supply and demand. Chinese demand for oil can’t account for it. Patches of unrest can’t account for it. Not even the weak dollar adds up to $100-plus oil, they acknowledged.
As Sen. Jeff Bingaman of New Mexico said at the hearing, "Twenty times more oil is sold in these markets than exists." Turning energy into a financial instrument has created a wild West of speculation. It’s Enron on steroids.
Now, a different manipulation is driving up gasoline prices. Americans are driving less, which kept the price of gasoline from immediately matching the rise in oil. Refinery profits fell for a few months to old-fashioned levels of 2002 and 2003. Rather than try to give drivers a break as workers lose their jobs and homes, and grocery prices rocket upward, refiners are cutting production purely to raise the price.
Maybe they’ll be happy at $3.50 a gallon on average nationally, but $4.00 is a certainty in California. Given the arrogance of the oil executives who testified at an earlier hearing last week, Big Oil feels no public responsibility for the pain that record fuel costs are inflicting on the economy. It’s up to Congress, unless the tooth fairy is a lot more powerful than i thought.