It's the headline, "Oil Company Executives Defend Profits". Before we get started, look: nobody was happy with paying ~$3 a gallon this summer, and nobody is going to be thrilled with paying 40% more this winter to heat the house. Nobody. I can't think of anyone -- and if you're happy about it, you should leave a comment here. Gas at $3 a gallon, or over $45 a barrel for crude, is an absurdity. But the solutions to the price of petrolium products is not Senate hearings.
Let's think a minute here: what's driving up the price of oil? Is it supply -- that is to ask, is the actual supply of oil down versus demand? Reporting today, USAToday says that crude stocks are about 13% higher than they were a year ago. 13%! Even with the supply chain issues distillers had due to the hurricane activity here in the US, that means that on an annualized basis, our rate of production outpaces consumtpion by 6-3/4 weeks.
That same story reports that demand for gasoline is down vs. last year. Supply is not the problem.
Right at the end of that USAToday story, we get this:
PVM Oil Associates in Vienna said it expects "fundamental (price) support in the mid term."So what's driving "price support"? Speculation. Guesses at what will actually happen in the future, not guesses based on the current trend line. And this problem has been extant since we invaded Iraq and peple lost their minds regarding what Al-Qaeda was going to do to the ability of OPEC nations to provide petrolium to the world.
Because of hurricane damage, "the loss of production in the U.S. Gulf is substantial, recovering only yesterday to more than 50%," it said. "PVM is also skeptical concerning non-OPEC supply ... (and) additional capacity to be expected from OPEC will (be) limited in the next three years."
And in that, the oil companies made a LOT of money. When it is profitable and reasonable to sell oil at $45-47 a barrel, and the idiot speculators drive up the price to $59 (for those not so quick on the calculator, that's 25% more than the profitable sale price), the suppliers make a wild amount of money. Thus, the oil companies make a wild amount of money.
Only a dolt who has not been watching the oil market and does not understand why things cost what they cost and does not read what market analysts have been saying about alleged fears over increased Chinese demand (which has not crippled the global supply system), U.S. Oil refinery capacity being crippled (which has not happened), and the alleged impending doom that Al-Qaedo was/is going to rain down on oil suppliers (which has never happened) could possibly think that somehow the Oil Companies were the ones who were gouging prices.
The price of gas is bad -- it doesn't thrill me to spend what it used to cost to fill my minivan to fill my Nissan Sentra. But what's worse is blaming the guys who are selling oil products for the market price when it is market speculation and fear that has driven the price up in the first place.
Give it a rest.
UPDATED: There is also this story from UPI to read about this topic which underscores the plentiful supply of oil in the marketplace. It's a Drudge link that's getting battered at lunch, but wait until later in the afternoon and you should be able to get an eyeful.