Posted By:
warshawlawI do not want to get into this political debate but there are a bunch of very ill-informed statements in this thread.
The first of these is the naive assumption that oil costs naturally affect gas prices. They do not. The price of oil quoted every night on the news is a spot market price; what can you buy it for right then and there. The price of gas at the pump is dictated by the prices charged by the major oil refineries for delivery of their products. The actual gas at the pump today was purchased as crude oil some weeks or months before by the refiners from the extractors, who in turn purchased it even before that from the producers (if the company is vertically integrated, it may be a bunch of subsidiary transactions designed to strand profits outside the USA tax system; that is a story for another thread). If the spot price of oil jumps to $100 per barrel tomorrow based on, say, investor panic over a pipeline explosion or hurricane, the price of gas does not HAVE to jump correspondingly because the cost of the gas in the tank isn't affected by that event. The fact that it does jump is indicative only of price gouging by the refiners by virtue of their linking the price they charge service stations for their products to the spot market. The only way to prevent this gouging is to institute a windfall profits tax that discourages the refiners from using spot prices to jack up prices at the pump or by regulating what they can do when setting prices. And before the free-marketeers cry foul, I suggest they get over the asinine assumption that the market is free; it is an oligopolistic structure without meaningful competition.
The other thing that the defenders of the status quo fail to account for is that the price of oil on the spot market is not necessarily directly tied to what the extracting companies pay for the oil they send here. The Saudis don't take hold of a nozzle and ask the major oil companies, China, etc., to place a bid on the product like at auction. They enter into contracts over long terms granting concessions to explore, develop and extract crude. There is all kinds of forward purchasing, hedging and other arcane betting done by the oil companies to limit their exposure to the swings of the market. I think a few of our board members are in that business and could better explain it.
The other misstatement I see over and over is the treatment of oil prices as fact-based. No one can say why oil prices are where they are with any certainty. As with any other commodity, the price of oil on any given day represents only the sum of the "bets" of the buyers and sellers that day. Just like a card's "value" can swing wildly from auction to auction.
The point that a lot of folks also miss is that because gas pricing is artificially tied to the market for oil it is possible for producing nations, oil companies, refiners and politicians in power to manipulate the gas prices in the USA virtually overnight. The real reason for the Iraq invasion (as explained in the Neo-Con position papers on Iraq and setting aside all the rhetorical niceties that the pols and their devoted followers mouth) was to prevent Hussein from further open efforts to use the world oil market to manipulate energy prices in the USA. Ditto for the attempted coup against Hugo Chavez; he was openly advocating for using Venezuela's position as the #2 reserve in OPEC to reprice oil on a market basket of currencies or Euros rather than in dollars. The same kind of manipulation has been used by the Bush administration. In 2004, for example, according to Bob Woodward, the Bush administration made a deal with the Saudis to open the spigots in advance of the election to try and dampen consumer anger over energy prices by lowering gas prices. I am not surprised at all that oil prices have relaxed lately; Bush and the Republicans have been very good to the oil companies and oil producing countries. In addition to their $120 billion a year in subsidies, tax breaks and credits, since Bush implemented his foreign policies, the value of the oil companies' proven reserves has risen by over 2 trillion dollars, their profits have broken all records, and the do-nothing congress has refused to consider a windfall profits tax. Do you think they want a change in leadership when it means an end to that giant sucking sound in your wallet? I think not.
Can I prove a quid pro quo? No, but the inference is there.