As regular readers of this blog know, I have been a staunch defender of the right of oil companies to make a good profit, without government interference, for their shareholders.
The American people, a majority of whom are invested in oil companies through their various pension programs, also deserve to get a good return on their investment as they face retirement.
On the strength of oil company profits, our pension programs have been prevented from going broke in the wake of the poor performance of many other industries.
That being said, price-gouging is wrong, period. And many local gasoline vendors in the Southeast and the Deep South are guilty of it following Hurricane Ike.
As we have mentioned many times, the price of gasoline at the pump is largely determined by 'oil futures.' On the open market, the price of oil is determined by what investors, or 'oil speculators,' think the price of oil will be in the future.
The oil companies have stated over the weekend that there was no major disruption of oil production in the Gulf due to Hurricane Ike. They experienced a one-day shut-down at most, along with minimal damage.
Oil speculators have determined that the price of oil will be the lowest in over a year, with the price of crude dropping to just below 100 bucks per barrel--down over 20 bucks a barrel from just a few weeks ago.
Thus, there is no good reason for gasoline prices at the pump currently standing at 4 bucks per gallon and higher in the Southeast. Some have even sold gasoline for $5.60 per gallon.
With crude going for the cheapest prices we've seen in over a year, and with oil speculators bidding downward on the value of oil, we should be paying the lowest prices at the pump since the summer of 2007.
Unless the oil companies and their vendors on the local level bring this about, then the patience of the American people will run out, even among their fiercest defenders, such as myself.
Price-gouging is a despicable practice, and appearances mean everything. If the oil companies fail to act in good faith in response to market forces that are driving the price of oil DOWNWARD, then the American people will most definitely lose faith in the oil industry.
The time is NOW for gasoline prices to plummet if the oil industry expects to salvage what's left of its tentative reputation.
Monday, September 15, 2008
Subscribe to:
Post Comments (Atom)
1 comment:
Investment and speculation are totally different beasts. There are myriad reasons to engage in energy futures trading, beyond simply placing a bet that things will swing wildly up or down.
Higher prices temper demand. If there is scarcity for an item like gasoline, even for a day or two, it is natural and proper for prices to rise. Anyone who actually needs some will buy only what they require. Anyone who can do without will bow out of the market, and hold off for prices to decline again.
If customers take offense at temporary price spikes, let them vote with their wallets by not buying, and by boycotting after the fact. Deploying the coercive power of the state is wholly inappropriate. And the assertion that localized price spikes are being dictated by the oil companies themselves is completely unfounded, and ignores the entire architecture of the complex, multi-layered energy market, which ends at the gas pump.
Post a Comment