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What’s up with oil, gasoline prices?
John W. Schoen, MSNBC
A look at some of the forces behind the rising cost of crude
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With crude oil hitting record levels and gasoline prices nearing last summer’s highs, a number of factors are affecting what you can expect to pay at the pump.
What are the main factors behind the rise in oil prices?
The price of oil is set by a global market of buyers and sellers – each look at a variety of factors before deciding how much they are willing to pay or accept for a barrel of crude. Some of those factors are short-term trends, such as weekly statistics on oil supplies in storage. Traders also look at economic trends that may indicate changes in demand for oil.
But since some traders have no intention of ever using the oil, prices can also move on just the potential for future changes in supply or demand. With continued signs of strong economic growth, and multiple hot spots in key oil producing countries, many of those traders make bets on little more than a news flash. And many are betting that prices will go higher.
(20 April 2006)
MSNBC senior producer John Schoen is one of the better writers on energy in the media. Recommended by Super G at The Oil Drum, followed by many comments.
CBS: Making sense of the oil mess
Christine Lagorio, CBS News
American drivers in some areas are seeing pumps run dry. Others are forking over more than $3 per gallon of gasoline – the pumps have returned to post-Katrina prices, with crude oil barrels briefly reaching a record high of $73 Friday.
News of the price surge is accompanied by an often-baffling barrage of futures, stock figures, utilization percentages, inventory comparisons, consumption rates and the stock market’s reaction to all of that.
Amid this confusing fog of numbers and statistics, a couple of simple facts stand out: Oil stockpiles in the U.S. are hovering at an eight-year high and the post-Katrina price shock is long gone. So why are gasoline prices skyrocketing?
“It’s very odd,” said Morris Adelman, an emeritus professor of economics at MIT. “But if you credit people with some sense of the future, then it’s not odd at all.”
Global fears and gloomy predictions that often lack a soild factual foundation drive up prices, market analysts, economists and scholars tell CBS News-dot-com.
Apprehension about instability in oil-rich nations – including al Qaeda attacks on Iraq’s pipelines, fears that Venezuela will nationalize its oil industry and friction between the U.S. and Iran – combined this week to drive up the price of oil.
Also in the global fear matrix were rebel attacks on foreign oil companies in Nigeria that have produced a 20 percent drop in production, according to Bloomberg News.
(21 April 2006)
Reporter Legorio hit on most of the explanations in vogure for the rise in prices – except for geological constraints (i.e., peak oil). Time for the newspaper reporters to do a little more digging! -BA
Profits, not crude oil prices or ethanol are driving pump price spike
Foundation for Taxpayer and Consumer Rights
Santa Monica, CA — The Foundation for Taxpayer and Consumer Rights released a new study today of rising gasoline prices in California that found corporate markups and profiteering are responsible for spring price spikes, not rising crude costs or the national switchover to higher-cost ethanol, as the oil industry claims.
Click here [PDF] to download and read the study.
Independent petroleum consultant Tim Hamilton analyzed gasoline price increases from January to April to find that:
- Increases in the “spot” market price of crude oil — which is the highest price a major oil company would pay for crude oil — accounted for only 12 cents per gallon. California’s percentage sales tax increased fuel prices by another four cents per gallon. More than 40 cents of the 60-cent increase in gasoline prices over 3 1/2 months is attributable to increased refinery and marketing profit margins for the oil companies;
- Neither the MTBE phaseout nor the substitution of ethanol is a serious part of the increase. If the MTBE phaseout or ethanol blending specifically increased costs for oil companies in California, other states in the West using conventional unblended gasoline should be much less affected. Yet Washington State, which uses only conventional gasoline and has similar refinery capacity and crude oil sources, mirrored California’s increase;
- The profit increase of 42 cents, on top of record profits last year, means California gasoline will cost consumers approximately $546 million more in April 2006 than in April of last year.
“While oil companies continue to blame crude oil prices and ethanol additives for the recent gasoline price spikes in California, the chief cause is increased profiteering by oil companies that have previously posted world record profits,” said Hamilton.
(18 April 2006)
Submitter David E. writes:
New Gasoline Study Shows Profits, Not Crude I believe such articles divert attention from the dire importance of Peak Fossil Fuels. Not to mention the foolishness of promulgating the notion that “we the people” can vote their way out of being exploited by capitalists.
Ain’t gonna happen!
As usual, the focus is on maintaining our non-negotiable way of life rather than lifting our heads out of the literal and figurative sand.
Gas price gamble
Proposed windfall profits tax would finance alternatives and efficiency
Tyson Slocum, TomPaine.com
…In August 2005, President Bush signed into law the most expensive energy legislation in our nation’s history. This energy bill adopted most of the May 2001 recommendations of Vice President Dick Cheney’s energy task force, which, you may remember, relied solely upon the input of energy company CEOs and their lobbyists to write up a report that-surprise!-concludes that America must provide bigger incentives to oil and gas producers.
Indeed, Bush’s energy law spends $5 billion in new tax breaks and government spending programs that benefit oil companies, and exempts a wide range of oil and natural gas drilling from the Safe Drinking Water Act and the Federal Water Pollution Control Act. The bill does nothing to increase energy efficiency, such as through improving fuel economy standards.
Campaign contributions from the oil industry ensure that the bulk of public subsidies continue flowing to oil companies. After all, ExxonMobil and the other major oil companies have nearly $1 trillion in capital invested in drilling, refining and selling petroleum products. They are not about to let the government start funding renewable energy projects on a scale that threatens their ability to squeeze every last dollar of profit out of this investment.
Public Citizen proposes an alternative: a windfall profits tax on oil companies, with the proceeds used to finance clean energy alternatives to fossil fuels, increased investment in mass transit, bigger incentives to individuals and small businesses for energy efficiency and enforcing stronger fuel economy standards.
One way to solve our addition to oil is to use less of it: America consumes one out of every four barrels of oil in the world every day, yet we are the third biggest producer of crude-only the Saudis and the Russians produce more than we do. Even if we doubled domestic production-physically impossible, but just assume it for argument’s sake-to match that of Saudi Arabia, we would still be forced to import half of our oil.
Tyson Slocum is the acting director of Public Citizen’s energy program.
(20 April 2006)
