02-01-10 by dugan
The major oil companies all made less profit in 2009, but mostly because they could barely make a billion on refining and selling gasoline and diesel fuel, with demand running from down to stagnant. Yet they made plenty of billions on drilling and selling oil, which has more than doubled in price from around $30 a barrel (42 gallons) at the end of 2008 to around $75 a barrel on Monday. Yet global oil consumption was also down in 2009 from 2008, according to the U.S. Energy Information Administration. Does this make any sense at all?
Oil prices are still driven by speculative commodity markets, which are far more linked to stock markets than to actual demand. The weak U.S. dollar can’t begin to account for the price increase since December 2008, especially since oil companies can’t even sell all that they produce. Gasoline prices at least respond to markets being awash in unsold gasoline. Oil prices rise on the mere hope that demand might return next year, or the year after. Dollars that might be invested in jobs or new businesses end up in the commodity markets.
What other product has doubled in price in this dismal recession? At a fairly distant second are prescription drugs, whose makers are accused of jacking up prices just in case they had to cut them later as part of a health reform deal. Things that we have some choice about buying, like cars, clothes and household appliances, are cheaper over the last year.
Just something to keep in mind as financial companies successfully lobby away any effective reforms, leaving in place obscene executive salaries, multimillion-dollar yearly bonuses for risky trading and complete disregard for what their profit-seeking does the the economy as a whole.