Price Gouging : The Pump & Beyond

I go to the filling station as much as most Americans and I’m kind of miffed over how much I have to pay for gasoline these days. I know that those in Europe pay double what we do here in the US, but we use more. Lots more. The Europeans have wonderful mass transit, a geographical proximity between regions, and newer technologies that reduce the need for oil are already in place. All facts that I’m quite envious of, but these facts notwithstanding, our enormous demand for oil should continue to keep the prices lower, being that this pricing is based on a supply and demand scale. Yet, I have to wonder, is this really true? Is it really the ‘market’ that dictates the supply and pricing, or, as I suspect, do the oil cartels and traders conspire to artificially create this spike?

It is easy to point the accusatory finger at OPEC. After all, they have their hand on the spigot, and control the flow of crude. There really isn’t anyway to force them into opening up the supply either, unless we are willing to use our military power to achieve this, and I’m usually opposed to military intervention for financial gain, though our country does have a history of doing it. OPEC does not operate openly and does in fact artificially create bottlenecks in the supply of crude oil. The cost ratio of production cost to market value is also troubling. See the link below for more information.

Monopoly Control Allows Price Manipulation

http://www.inq7.net/opi/2004/jun/15/text/letter_2-1-p.htm

Recently, I had a short conversation with a commodities broker and former employee of Goldman Sachs. I asked him point-blank, “I know that OPEC is playing a dirty game with us. One can expect them to do that. But, are there brokerage houses and American companies that play a part in this, too? Do they really manipulate the market on this end of the supply?” He didn’t answer the question directly. He simply began laughing hysterically, as if I had asked him if the moon was really a street lamp. I understood from his response that he thought I was living under a rock all this time to not notice what was going on around me. He’s right. I hadn’t given it too much thought, in spite of my suspicions.

Oil Prices Surge to New Records

http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/4399537.stm

“Crude oil prices hit record levels on Friday, with leading investment bank Goldman Sachs warning the cost of a barrel could eventually top $100. Goldman Sachs said that the oil market may be in the early stages of a "super spike", which could push prices as high as $105 a barrel. It said strong global demand, allied to potential instability in oil producing countries, could inflate prices. US light crude rose as much as $2.40 to $57.70 a barrel in New York.” Please go to the link for the full measure of bullshit from the investment analysts.

Notice the ambiguous language used by the shylocks at Goldman Sachs. They use words like ‘spike’ or ‘market’ and we just kind of give them a pass without asking them to explain what it is they mean. In truth, we don’t have to ask them, unless we are desperate for more of the same bullshit we get already. “Spike means that you’re going to pay more, and ‘market’ means, “Because we say so.” There are no natural, supernatural, ethereal, or philosophic forces behind the steady rise in gasoline prices. It is more of the same manipulation, intended to produce outrageous profits, even where the supply, beneath the sand, or already in barrels is more than adequate for our needs. This is but another shameful result of deregulation of the market. It gives the purveyors of greed an open license to steal from the American people.

Finally, we have some investigatory work from the office of Senator Carl Levin of Michigan, confirming all of the above.

http://levin.senate.gov/newsroom/release.cfm?id=209139

Here are few choice excerpts. See the above link for the full article.

(2) DOE ACTIONS INCREASED OIL PRICES AND HURT CONSUMERS. DOE ignored warnings by career staff that filling the SPR when oil prices were high and oil supplies were tight could drive oil prices higher and hurt consumers, did not conduct a cost-benefit analysis of the new policy, and did not attempt to estimate or track consumer or taxpayer costs. A case study of a one-month period in mid-2002, found crude oil price increases caused by SPR deposits spiked the US spot price of home heating oil by 13%, jet fuel by 10%, and diesel fuel by 8%, costing US consumers between $500 million and $1 billion.

(7) UNAVAILABILITY OF INFORMATION MAKES DETECTION AND PREVENTION OF PRICE MANIPULATION DIFFICULT. Crude oil prices are affected by trading not only on regulated exchanges like the NYMEX, but also on unregulated over-the-counter markets which have become major trading centers for energy contracts and derivatives. The lack of information about these over-the-counter markets makes it difficult, if not impossible, to determine whether traders have manipulated crude oil prices.

Senator Levin also provides some remedies for the problem.

The chain of deceit in the oil market costs the consumer extra at every step of the way. Monopolies have been outlawed for reason, and yet, the oil cartels and the major oil companies continue to operate in an almost clandestine fashion, lacking the transparency necessary to allay the fears of a disgruntled American public, tired of paying higher prices and not ever knowing why. I do not believe that gasoline should be free, but c’mon! I know price gouging when I see it. Do the math.

It is time to bring back honesty and decency to our markets! Maybe it means Socialism, maybe it does not. Please write your Congressman on this issue. Alternative energies are very important, but they are far off in the future. Right now, we should at least be demanding accountability and honesty from those we do business with, all the way from the oil derrick to the gas pump. An economy without a moral or ethical conscience is a tyranny, no less than that of a military despot or insane monarch.

It is even more disturbing, though not surprising, that the Bush Administration, top-heavy with former oil executives and lobbyists, has a hand in this. They alter and avoid regulations to benefit their constituency, with little or no regard for the long-term damage done to the American people. We have corporate fascism at work here.

Help me get the word out. Awareness is key to change.