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Opinion

Opinion

Gasoline prices are a mystery

April 27, 2012

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Last week I paid 10-cents-a-gallon less for gasoline than I did the week before, at the same service station. While $3.79 seemed a bargain, it did cause me to wonder.

Last weekend, I noticed the price sign at the station showed regular gasoline dropped an additional 5 cents to $3.74 a gallon.

“What’s going on?” I thought, as I recalled how one of my friends and former colleagues used to argue with me routinely about the true causes of the rise and fall of gas prices in this country.

Then Monday evening I pulled up to the pump at this national oil company station/convenience store. The advertised cost per gallon was a full 20 cents less than I had paid just two weeks before, $3.69.

That’s when I really remembered my former colleague becoming frustrated every time I mentioned the American people were being suckered by “Big Oil” and “greedy, manipulating speculators” who were playing the oil market like Las Vegas high-rollers and we poor consumers were being bilked in the name of free enterprise.

“Supply and demand,” my friend/adversary would say each time we debated oil prices.

I would insist there’s no supply problem, and all demands are being met.

“Do you see any lines at the pump?” I would ask.

He would say something like, “You just don’t get it.”

And I admit, I don’t get it. I’m not an economist. I know very little about the oil industry beyond its record quarterly profits reports. But, I also know that over the past few years speculators have been driving the price of oil while the market analysts, media observers and so-called financial experts come up with some reason prices were rising.

It seemed every time Iranian President Mahmoud Ahmadinejad sneezed, the price for a barrel of oil would escalate. Even though the daily market values were for “future” delivery, the cost of gasoline would jump immediately. Why?

For months now, we’ve been told that Iran’s flirtation with nuclear power, turmoil in Libya and China’s demand for foreign oil were contributing to the increased cost of gasoline in this country. Adding to those troubles were refineries taken off line for maintenance or seasonal changes in formulations.

And we must not forget price hikes whenever a hurricane forms in the Atlantic (although 1,000 miles away) that forecasters say may hit offshore oil rigs in the Gulf of Mexico.

As I’ve driven around the past few days, I’ve noticed gasoline prices falling further. Some stations had regular unleaded priced at $3.64 a gallon. On Tuesday the website fortworthgasprices.com listed more than a dozen area stations with prices under $3.60; the lowest were several selling regular at $3.54.

Had I missed some national or international news that was drastically and rapidly affecting prices at the pump?

Ahmadinejad is as irrational as usual, although sanctions against Iran seemed to be getting the attention of Iran’s leaders. Libya is still unstable, and folks in China continue to buy more cars.

Analysts say that China’s economy, as well as manufacturing in some European nations, may be contracting, and there’s real concern over the recent presidential elections in France with a strong showing by a Socialist Party candidate. There also has been more oil production coming out of Saudi Arabia and even an upswing in U.S. production, they say.

But the speculators are still there, and I agree with President Barack Obama that there should be greater oversight over the oil markets to mitigate the over-manipulation by those who profit through speculation. It’s been a troubling trend for too long.

Maybe the president’s announcement had something to do with the current price drop.

Of course I can hear my former colleague, Jack Z. Smith, saying, “It’s supply and demand, Bob Ray. You just don’t get it.”

— Bob Ray Sanders is a columnist for the Fort Worth Star-Telegram. His email address is bobray@star-telegram.com.

Comments

autie 1 year, 11 months ago

It is clear that FalseHope knows little of the oil production; at least in Kansas. I've seen wells drilled over the weekend, logged and shot on Tuesday, fractured on Thursday and putting oil in the gun barrel that night. I don't know how in the world it takes five or six years to complete a well...unless he just likes to lie. Or the typical wingnut conversion of fact to fiction.

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Sharon Nottingham 1 year, 11 months ago

Yet another reason why building the Keystone Pipeline would make no sense. We need to be proactive instead of reactive and reduce oil dependency globally.

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George Lippencott 1 year, 11 months ago

I am perplexed. Who exactly are the speculators? Is it wall street? Is it the middle east equivalent? Is it Russia? Maybe Maxico? Seems to me as if there are a lot of speculators - the vast majority of whom are not under our control.

Is yerlping about "speculators" accomplishing anything except to amuse them? IMHO moving away from "oil" (rationally) and producing more of it domestically (energy independence) is a better solution.

To dampen speculation there is nothing compared to the potential of major new sources that will drop the price and leave the speculators holding a drippy brown bag

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its_just_math 1 year, 11 months ago

The Anointed One's freshly minted EPA thugs are not so "drill baby drill" unless you mean literally "drill, baby, drill". The EPA will "crucify" "drilling babies drilling" if they continue to "drill baby drill". The EPA is going to crucify anyone who even faintly utters the words "fossil fuel".

The EPA is The Anointed One's equivalent to The Third Reich's SS, imho.

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rockchalk1977 1 year, 11 months ago

"EPA official apologizes for call to 'crucify' oil companies, senator investigating".

http://video.foxnews.com/v/1594515119001/epa-official-under-fire-for-calls-to-crucify-oil-companies/?playlist_id=86858&intcmp=obnetwork

Drilling permits are down 37% in the last 3 years. Obama hates oil companies and that is why gasoline prices are up. Let's end this nightmare in November. Hopeless change is over!

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its_just_math 1 year, 11 months ago

It was no mystery when W and Uncle Dick were in office---you know, who the unhinged left referred to as "big oil men" and scattershot blamed it on them and their buds. Joke then; joke now.

Well here, if you don't believe me, the Matriarch of the nutty far-left movement, San Fran Pewlosi, lays it all out for you:

http://lonelyconservative.com/2012/02/flashback-2007-nancy-pelosi-blamed-bush-for-high-gas-prices/

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Flap Doodle 1 year, 11 months ago

The current regime keeps pointing out the same people as targets for the howling mob. The howling mob dashes furiously off in pursuit. Repeat as necessary.

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JackMcKee 1 year, 11 months ago

Comidities, in general, have been on a tear since the banking crisis. It doesn't take a rocket scientist to figure out why.

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FalseHopeNoChange 1 year, 11 months ago

s'il vous plaît ne pas écouter les trolls comme boz

“More and more oil producers will wake up to reality and demand higher prices to offset the dilution of yen, yuan, euros, pounds and dollars".

" The oil price is stable measured in terms of gold. But measured in dollars, the difference is remarkable: The U.S. dollar has lost more than 98% of its purchasing power versus oil.”" http://www.erstegroup.com/content/0901481b/8000b2a3.pdf

(d'une source)

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just_another_bozo_on_this_bus 1 year, 11 months ago

A carbon fee and dividend would reduce the demand for fossil fuels and hasten an end to the massive externalized costs of mining it, transporting it and refining it for consumption. And, it would also stabilize the costs for those who have no choice but to use it.

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Liberty_One 1 year, 11 months ago

Sigh. The tired attack on speculators. These people don't understand the vital service that speculators perform. If speculators foresee a future rise in the price of oil, they will purchase futures now in order to profit from that future rise in prices. The bidding up for futures causes current prices to rise to their anticipated future price. Those who purchase hold oil off the market for future sale in order to profit. The driving up of current prices causes demand to decrease--people take fewer trips, carpool, take the bus, buy more fuel-efficient cars etc. The rise in prices also makes oil production more profitable, thus causing more firms to invest in new production.

So let's see what happens--some oil is saved for the future, people start consuming less oil now, and new oil production and exploration is begun. All without government intervention, all with just the workings of the free market. This is why the market works so well--prices reflect information and cause people to change their behavior. The government doesn't have to force people to consume less, they just do on their own. The government doesn't have to force firms to begin working towards increasing production, they just do on their own. The government doesn't have to force anyone to set aside any oil for future use, they just do it on their own.

Interfering in these processes will only cause problems--problems which will inevitably lead to more government intervention to "cure" the problems caused by the previous intervention.

Laissez-nous faire!

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Michael LoBurgio 1 year, 11 months ago

Despite Backing Subsidies For Big Oil, Mike Pompeo (R-Koch) Says Wind Energy Doesn’t Deserve Financial Support

Koch Rep. Mike Pompeo (R-KS) — who is deeply indebted to Koch Industries for more than $100,000 in donations — is outspoken against clean energy investment. Recently, he celebrated when the Senate failed to extend the wind energy tax credit in a 49-49 vote. However, he is celebrating the threat to 37,000 jobs in the relatively young industry, when the production tax credit is set to expire at the end of the year.

Even as the oil industry enjoys $4 billion in subsidies a year, Pompeo lamented the cost of the production tax credit, claiming the wind industry would be fine on its own:

“The program has been around an awfully long time and it’s time to let that industry stand on its own two feet. And I’m confident that they’ll do it,” he said. “There’s great, creative engineers and innovators in the alternative energy field, and I’m confident they’ll be successful.”

It now costs the government more than $1 billion a year to hand out 2.2 cents per kilowatt-hour of wind power — and enough is enough, says Rep. Mike Pompeo (R-Kan.).

“We’ve been subsidizing some of these industries with tax credits for multiple decades, and every time they get to the end of the line, they get within a year, they say, ‘If you just give me’ — fill in the blank — ‘one more year, four more years, that’s all I want. Just a little more time,’” said Pompeo, who is leading a charge against the PTC and other energy subsidies.

“What history would demonstrate is they would continue to come back to the federal trough and ask for more time yet again at the end,” he added.

http://thinkprogress.org/climate/2012/04/25/470896/despite-backing-subsidies-for-big-oil-mike-pompeo-r-koch-says-wind-energy-doesnt-deserve-financial-support/

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Michael LoBurgio 1 year, 11 months ago

Last year, the 5 major oil companies raked in more than $260,000 in profits every minute of every hour of every day

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Michael LoBurgio 1 year, 11 months ago

Oil Price Increase Is Being Driven By ‘Gamblers Wearing Wall Street Suits’

Many experts, though, have pointed out that its not for a lack of drilling that oil prices are increasing, but rampant speculation in oil markets. Michael Greenberger, a former regulator at the Commodity Futures Trading Commission (CFTC) who oversaw the futures markets, told McClatchy that the increase is due to “excessive speculation” on the part of Wall Street:

“It is similar to the gambling Wall Street did on whether or not people would pay their subprime (below-market rate) mortgages in the mortgage meltdown,” said Michael Greenberger, a law professor at the University of Maryland and a former federal regulator of financial markets. “Now they are betting on the upward direction of the price of oil” … “It is excessive speculation, which is a fancy word for saying that gamblers wearing Wall Street suits have taken these markets over,” he said.

http://thinkprogress.org/economy/2012/04/05/458892/finance-expert-oil-price-speculation-wall-street/

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RoeDapple 1 year, 11 months ago

It's called "Futures Trading" and the fuel is paranoia.

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bozo_the_clown 1 year, 11 months ago

I'm with Jack on this one Bob, you still don't get it. And when our president makes similar claims as yours, you gotta realize his words are nothing more than political pandering.

There's a difference between speculation and manipulation. If you remember, it was about a month ago Iran was threatening to close the Strait of Hormez and our government and Israel were talking about preemptively attacking Iran. That poses a serious concern to oil shipments coming to us and the market reacted appropriately. When supply is threatened to decrease, price increases.

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