Who's Really to Blame for Rising Oil?

This might be the worst kind of oil spill. The bubbly high price of oil has spilled over into food and the damage appears to be life threatening. Somalia is the latest to join the growing list of African countries where rising food prices have led to violence. A sack of rice that sold for $32 only one month ago is now going for $52. Over one billion Asians are requiring assistance to weather the effects of the soaring price of food around the globe. Haruhiko Kuroda, the Chinese bank's president, said an erosion of purchasing power has put Asia's poor at risk of hunger and malnutrition and could “seriously undermine the global fight against poverty and erode the gains of the past decades.”

Food prices have an extremely high dependence on oil and oil-based products. Food processing, storage and distribution are all extremely energy intensive processes. In order to curb food inflation, we first need to lower oil. World leaders have no control over pricing and don’t know what to do. The price of oil has become inelastic, it no longer reacts to increased supply. OPEC President Chakib Khelil recently announced that US gasoline reserves are at five year highs but prices continue up and up. If you watch the news, you will see commentators scratching their heads trying to explain the relentless phenomenon.

Allow me to enumerate the latest stream of excuses for high oil: supply shortage, investor speculation, terrorist activity, low dollar, Venezuela, China... it’s practically turned into a fad to try and come up with the explanation for high oil. All the while we turn our backs to the real reason. Oil continues to go up because it can. There it is, the cold, hard truth. Sellers don't dictate the bid, buyers do. Oil is simply moving towards its market value. The energy sector is finding the max price that consumers are willing to pay for a gallon of gasoline. Record profits of oil companies give them no incentive or evidence to halt gasoline price hikes. During 2007 the largest oil companies were bringing in an astounding $1,300 per second! If I were them I wouldn’t lower prices either.

Most analysts laughed when Goldman Sachs predicted two years ago that a barrel of crude would rise to $100. On Friday, crude reached a new high of $126. Oil prices have doubled in a year and risen six fold since 2002. Goldman’s oil gurus are out with a new forecast. They think we will see $150 a barrel this year and $200 a barrel next year. Scary. Paying $5 or $6 a gallon for gasoline will become common unless we do something about it. Food inflation will intensify. As for you and me...well, consumers will be stretched to the max. All our hard earned money will be sitting on the books of Chevron (CVX), Exxon Mobil (XOM) and Conoco Philips (COP).

Consumers are raging mad so the question that needs to be asked is, what can I do about it? I can do nothing but we can. Imagine what would happen if we made the collective decision to dramatically decrease our gasoline consumption oil one week out of the month? A 20% reduction in demand would send shivers through the futures market and not only oil, but oil and food prices would slingshot back to historical norms. Are consumers able to organize themselves on such a grand scale? Are consumers willing to sacrifice? If consumers unite in conservation, we’ll be amazed how quickly the commodity bubble will burst.

Here are a few ways consumers can cut back on gasoline consumption:

• carpool
• combine errands and reduce trips to the store
• choose leisure activities closer to home
• use public transportation
• sell your gas guzzler
• avoid rush hour
• avoid aggressive driving by obeying the speed limit
• get a tune up to ensure efficiency

Stop debating about Chinese demand and the low dollar and all the other high oil rationale that we hear. Who’s really to blame? Take a look in the mirror. It’s time for consumer’s to walk the talk. Period.

Disclosure: Author has a long position in DUG

Comments

[dzida]

I think you're right. Oil is going up because it can. But limiting gasoline consumption is not the answer. Your comment about elasticity is interesting, but it's gasoline demand that is becoming elastic... it is reponding to higher cost (whereas it never used to), but that is having no impact on price. Why? Because demand for the middle of the barrel is going up. Just like Goldman say, there is a rush of demand for diesel, jet, heating oil. This is due to the dieselization of america. Europe, which is already a major middle of the barrel consumer, has been having to export its excess gasoline to the US for years. But there's no demand anymore. But you can't get the diesel without producing gasoline as a by-product. That's why the gasoline stocks are building, and yet there's no impact on oil prices.
So to make oil prices go down we actually need to increase demand in gasoline, so that there's a balance one more in demand for all the parts of the cracked barrel. IT's more demand for one bit than the other that is causing the oil spike.

[fatcat]

Here's where you are wrong...sellers and buyers on futures contracts are speculators,they are not taking possesion of the oil.Some contracts are for hedging but the vast majority are not.The oil producer don't want prices to go so high that it disrupts demand because that would in turn disrupt their production,storage and shipping etc.If their were any fundamentals in this you would not see any pullbacks at all.Its a market bubble,plain and simple..

[shopa]

The only way to get very high miles per gallon is to have cars with less mass. Unless you use exotic materials, this means a small car.

I have invented a way to make small cars much safer. Please look at my website safersmallcars.com. The auto companies have rejected my idea. Tell them you want safer small cars.

[taojones]

this is so important . if we collectively did not buy gas for say the July 4th weekend, the supply lines would overflow. We carry in our 62 million cars (# of registered vehicles in the us) 868 million gallons of gas in our tanks at 6 pounds a gallon thats 5 and a half billion pounds of gas we haul around and store for the oil companies. if after the 4th of july every american motorist carried only half a tank of gas not only would your milage increase because your car weighs less but the gas you do not buy would be counted as inventory on hand by the oil companies. BUY NO GAS AT ALL FOR A COUPLE OF DAYS AND BUY ONLY AS MUCH AS YOU NEED FOR A DAY OR TWO AND WE SEND A MESSAGE. I personally believe if i was a cash rich oil sheik i would bid up oil futures at a cost of a few cents on the dollar and deliver the oil at the higher price and chuckle all the way to the bank. Let them drink it!

[JREwing]

Well, at least a bit of improvement over your last article.

First, considering, that the only thing you read for at least two years, is: Oil is a bubble - there is no reason for oil to be that high- blablabla..
so, considering this makes it almost impossible for oil to be a bubble.

Dude, I am not that old, but come on..

'Somalia is the latest to join the growing list of African countries where rising food prices have led to violence.'

Are you serious, man? I can't remember a time, where there was no violence in Somalia.

The reason for the rice shortage in Asia is that there are price controls in place. Come on, when you are a rice farmer, you not gonna sell your product for the set price. You want to sell it for the maximum. When you don't get the maximum, you sit on it. Field work is pretty exhausting, those guys really deserve a decent price for their product.

Another great example, why governments should not interfere in the economy.
Or like Jim Rogers put it in a German newspaper interview: How many of your college buddies are farmers? None huh? That's because being a farmer sucked for the last 30 or 40 years.

Just as almost every raw-material and energy business sucked for the last 25 to 30 years. Looks like they are gonna be great for the next 25 or 30 years.

About this oil inventory data last week. It was not bearish, it was BULLISH.
Even if most folks don't get it.

I will try to explain again, because it is Sunday and I am bored.

1. Inventories may have been up, but they are still lower than last year.
2. Imports where up compared to last week.
3.(important part) Refinery utilization was a very low 85%

Hmmmm. The simpler minds among us may think: Why the hell goes oil up when inventories are up and refineries don't work as much?

Here it comes: Refiners know that driving season is coming (and yes: this year again people will drive across the country and visit folks and stuff), so they try to get there refineries in good shape. That's why refinery utilization is down now. But imports are up. Why is that? No it's not for fun. Refiners order that oil, because they know they need that during driving season.

And on top of that: Distillates inventories are really low and demand around the world is very strong. Seems more and more vehicles around the world a diesel powered. The Goldman guy explained that pretty good last week: Gasoline is not the most important factor anymore. (Yes things change.)

About your oil company jealousy.

First, when you are convinced that the oil majors are practically printing money. Why don't get a piece of that action by investing in them?

Second, did you even look at their earnings? If you did, you would know, that their downstream business (the one that ends at the pump) sucks and the consumer doesn't pay as much for gas as the oil companies would like. Their input costs (oil) rose faster than the price of gas.

So consumers are raging mad. Here is what consumers really should do, because cutting back on stuff like you are suggesting sucks:
Invest in the companies, who profit the most from high prices for all the stuff you mentioned.

I am thinkin' about a BHP, RTP, RIO, ADM , POT, MOS, OXY, APA, APC, RIG, NE, SLB, HAL,...........

Lots of money to be made.

[Jersey]

If only it were that easy. Jason, when it comes to Americans volunteering to change or more specifically, lower their standard of living, it's simply not going to happen, it never has and it never will, at least not on a voluntary basis. As far as Crossingthe's comment, I like it, I like it allot and it makes sense, it has always worked in the past. But the past is the past and a new wind is threatening to huff and puff and blow down Wall Street. Sure we have gotten through tough times before but these times may prove much, much tougher for everyone, including the capitalist and investor than ever before. At this point, I believe this Presidential election will have a great deal to do with what becomes of Wall St; if the Republicans win, it will if nothing else guarantee more of the same hard times, should the Democrats win, I think we will become fond of the times we have today as difficult and challenging as they are. Maybe I'm totally wrong, maybe I'm a small investor saying my peace among financial giants. But if any of you can honestly tell me the possibility and even the strong likelihood of personal income taxes approaching 50% plus along with capital gains more than doubling doesn't trouble you, doesn't somehow kink your investing plans, then perhaps it the establishment of the very real Reasonable Profits Board that should trouble you more. People want change, will times are changing and they are changing in a very big way and very quickly. Beware and good luck as there is a new wind blowing on Wall St and it is going to huff and puff and blow down the Wall St we all once knew and loved.

[WayneS]

Tomorrow, the U.S. Congress is voting on a resolution that will cure all.
They are adding excise taxes, punative taxes and instituting double taxation on all of the profits American oil companies make overseas. Once the American oil companies (over 500) are destroyed, they plan on suing OPEC and forcing them to make gasoline cheap again.

[e2800]

Sellers don't dictate the bid, buyers do. Finally. They should say that on the news at night instead of the ridiculous justifications they come up with one day, which are non existent the next.

[e2800]

Crossing the T. Famous last words, "This time it's different"

[TomCaracciolo]

What is wrong with our FTC? They can impose price controls. Why are they sitting on their hands?

[CLH]

Oil has not gone up when measured against gold. static.seekingalpha.co... This means oil is not high priced. When interest rates go up, the dollar will go up and oil tanks big time. All this garbage talk about people getting together and going without oil is just that. Garbage. Those who raise taxes will not stay in office long.

[JREwing]

e2800's last words: 'Why did those chinamen have to get the same standard of living, we have...?'

[WayneS]

The U.S. dollar is tied to oil and someone else controls the oil.

[farmer448]

Accessing blame never solved a problem. So here are some suggestions:

How about increasing margins on oil/gas futures contracts?
How about increasing Federal and State Fuel taxes to fund Transportation Infrastructure Upgrades? (kinda like the Interstate System)

Improving the rail sytem n moving goods long distances around the country? (Rail is overly regulated and needs a good review top to bottom on what is necessary and what works).

Improving manufacturing in the United States to cut supply time. (American Apparel is a good example)

[richjoy]

Well Jason, your rant has caught my attention.

OK, gasoline prices are high, and I certainly didn't like paying $3.45/gallon at Walmart yesterday. But your rant about "scary" gasoline prices would be more credible if you can convince us that future gasoline prices of $5 to $6 a gallon are scary...in view of the fact that gasoline prices are already $8/gallon in many other countries (most of which have less disposable income than we have)?

Yes, it is not a good situation and will lead to more food inflation, but we can do as others have and accommodate it. Certainly for those complaining the most (if they really, really, mean it), your lifestyle change suggestions can be helpful to them.

p.s. Now that you have joined the ranks of "big oil haters" and cited their large sales and profit numbers without perspective...how about you now provide some perspective -- compare big oil's net profit margins (perhaps the last 3 or 5 years) with those of GE, Microsoft, IBM, Apple, who also have impressively large dollar sales and profit margins?...let's see how the net profit margins of XOM, CVX, and XOP compare to others.

I think Congress has provided oil companies large and small some unreasonable/inappropr... incentives in the past (and I think they should be carefully examined and adjusted or eleminated). But also please tell us how more taxing of oil companies is going to increase supply and lower prices (since it has never worked in the past)?

[JREwing]

richjoy, it is a joy to read your comments.

[galewhitaker]

Jason
This is a stupid article. The world has run out of cheap oil. There was a finite supply of "easy to get crude" and we humans, being stupid, greedy and unwise, have pumped it out of the ground and burned it in our cars (currently 600,000,000 worldwide). The traders know that oil is a declining resource and that that there is essentially no risk to being long in oil futures. The price of gold is a declining resource and the price of that commodity is skyrocketing also. Since the price of everything in our civilization is a function of the price of crude, rising oil prices are going to cause starvation, chaos and financial depression. This cynical view of the future is shared by some of the greatest scientest in the country. Because of the way oil futures work the refiners and manufacturers have yet to pass on the cost of $100 oil. When they do our ecnomy is going to be sucked down the flusher.

Good luck to you folks that think that high energy prices are a temporary bump in the road and can be solved by shooting the commodity traders.

[poet1]

gale- u got it.

[Freeranger]

Lot's of good comments and a few dumb ones but let me add my $.02. The market senses that current usage trends cannot be sustained for many reasons, so it is attempting to ration usage. So far, it's had little impact, but it will. Fuel demand is fairly inelastic so it takes a gigantic price move to reduce demand. The market will do it.

[sawgill]

Average oil company profits compared to S&P average profits are within 1% of each other.

[Trader T]

Increase supply!
We need an intensive oil exploration and drilling effort off both coasts of the US, in the Gulf of Mexico, and Alaska. This effort needs to be as intensive as our program to put a man on the moon was.

[NormanLepoff, M.D.]

Great article and comments. Thanks.

[bearfund]

Other than the down-with-big-oil BS and the "consumers' union" nonsense, the conclusion is quite correct. Prices will rise until people start pricing themselves out of the market. With crack spreads low and many oil consumers relying on past hedging, there's plenty of room for fuel costs to rise even if oil falls back to $100. This problem will be solved when people get out of their cars and start walking, cycling, and using fuel-efficient mass transit vehicles to get around. Until then, the sky's the limit. Exhorting them to do so is pointless and will not work. Let Mr. Market do the persuading; he's much better at it.

[sawgill]

Backward thinking: we need to find more oil

Forward thinking: we need to conserve and be more efficient with our usage. Alternative sources of energy need support and development. Ethanol should NOT be subsidized. Wind, solar, methanol, biofuels from non food sources, plug-in hybrids....all these and more can contribute. Even nuclear once we solve our long term storage problem satisfactorily.

Ultimately the world needs to reduce it's carbon footprint. Developing countries want to grow and that is putting pressure on commodities and the climate. How can we satisfy emerging economies' desire to grow without adding to the pace of climate change?

Time is running out.

PS
adds for Cross T's list: ETF's MOO, DBA, DBC

[paultaut]

The Public needs a hammer between the eyes every once in a while to figure out the truth...

They are in control...stop buying Plasmas and LCDs, they use twice the energy of their refrigerators...no more minivans and SUVs, no more plastic bags reuse cloth bags, stop buying new computers every 3 years.

Make it more expensive to buy a new item VS repairing the old item...stop topping off your gas tanks...stop corn ethanol production...ethanol is good...corn ethanol is bad...besides, nitrogen fertilizers combined with our water tables remove oxygen...not a good idea if you want fish....

I could go on and on but I would be spitting into the wind...In the US, its always someone else's fault.

Politicians cater to this rather than look for the general good. Good ol' Barack Hussein Obama or BO for short is catering to creating a devisive America...

He is calling for change...my pocket change, your pocket change? Change from what to what?

Hillary...ditto...McLa... than the others but nothing to write home about either...It would be better if we had a None Of The Above BOX and be able to vote for the Person who has a voting record on things important to us...Don't listen to what we say, look at what we did...computerize the records, put in whats important to you and you get a list that you pick from...the person with the most votes wins and then chooses a VP.

Remember that the Supreme Court ruled that it was okay for politicians to LIE when campaining.

WTI has peaked, there is plenty of the stuff which can't be refined easily...."not in my back yard" and the EPA have created the mess we are in and will create a crisis in the near future.

[paultaut]

CrossingtheT...ever go to Jim Kingsdale's site...
Jim has my Email address...or do you go anywhere to chat online?

[SHOOTER94]

Seems amazing that the many good responses did not mention one company that is producing a lower-cost alternate to diesel, Sasol (SSL). I think they call it a gassification process for coal. So essentially you get a liquid fuel with lower cost to replace diesel.
This would definitely have been better than the ethanol idiocy.

With nothing going but the blame-game and a lot of way out there tooth-fairy hopes for greening, what is wrong with this alternative?

[Pedestrian]

Get rid of all the SUV-s and make it illegal to Mfg and Sell anything that uses more than THE AVERIDGE CAR USES or goes for less than 25 miles/gallon. It is a total waist what is going on, when I see a 95 Lb lady driving an 4000 Lb vehicle to go to the Supermarket for 5 Lb groceries.
The Irony is that because of millions of such a waistfull use of energy I have to pay the high price for energy. This last Saturday on May 10th I have paid $3.99/gallon of Mid -octain gas.

[Jersey]

Again ...when it comes to Americans volunteering to change or more specifically, lower their standard of living, it's simply not going to happen, it never has and it never will, at least not on a voluntary basis, we're American's we always get the biggest piece, we don't know anything else and we don't want to know anything else.

[jmmx]

Let's face - this disastrous war in Iraq is a major cause of the fall of the dollar and the rise of oil. Notice how the price rise began with the invasion.

Come on all you conservative types out there - I thought you guys hated the deficit!!! This is a major part of the dollar down/oil up equation. And the deficit is driven more by the war than any other factor.

If we keep up with the Republican borrow-and-spend mentality, in another 20 years we will be the United States of China!

IMHO

[jmmx]

Here is one solution:
-----
AP
Gas prices knock bicycle sales, repairs into higher gear
Sunday May 11, 1:07 pm ET
By James Macpherson, Associated Press Writer

biz.yahoo.com/ap/08051...

[pharma]

Nobody speaks about a free-market system any more. Well, we did not have for a while.

I understand the frustration of all democrats and republicans: they can do nothing about oil prices. They can not create oil, gas, gold, etc., by "printing it" or out of taxing it. The best Congress can do is to create shortages...

In old good time, USA colonized almost all oil producing countries. The USA robed them and were happy calling ourselves a democracy. The rest of the world was poor and did not use much oil. Yes, it was good!

Now, the USA does not control the world oil supply. Russia, Iran, Venezuela are in control of their own oil. On top of it, China, India and the rest of world would like to enjoy good life too.
On top of this, the USA military is not in a position to dictate to the world how they suppose to live their lives and how be nice to America.
Adding these three together and the USA and EU have a problem.

So, get used to the reality!

[WinstonKotzan]

This article is nuts. We're out of the cheap, easy processing oil and are now moving to the sulfurous stuff that's difficult to extract. Processing costs alone are a reason that oil won't go down. Why is it so hard for people to understand that we have a finite supply of oil? There just ISN'T ANYMORE in the ground.

All Americans care about is being able to go on their summer road trips and take their kids to the soccer game. Now a billion Chinese people are warming up to the same idea. Oil scarcity is a mega disaster in the works.

[WayneS]

Pedestrian
Don't judge a book by it's cover. I got rid of my 95 Toyota clone (Geo) because I get better mileage and pollute less with my one-ton dually diesel truck. I get over 60 mpg and last put 20 gallons in on Feb 28th. I might make it to after Labor Day, when the price is suppose to go down. I carpool with several other people and drive sensibly, i.e. obey the law, and don't brake or accelerate on the HOV.
Trains are 3 times more efficient than trucks. Outlaw semis between major cities. Outlaw racing and tractor pulls.

[jitterbug]

IMO last week's story by Dr. Perry gave a Good analysis or defense why not to blame the oil companies...take a look at his chart...you can catch it here:
seekingalpha.com/artic...

[richjoy]

Well Jason, as you know, at 12:02pm, I responded to your posting in which you cite "astounding" $1300/second revenues for the "largest oil companies"...you went on to say "all our hard earned money will be sitting on the books of XOM, CVX, and XOP". (You also said big oil has the ability to lower gasoline prices, and you would not if you were them).

I asked that you provide us some perspective comparing big oil's % of net profits to those of other large companies (like GE, Microsoft, IBM, and Apple) over the last 3 or 5 years, so we can all better determine if big oil's profits are as outrageous as you have told us to believe.

At 01:22 PM Sawgill added that "large oil company profits compared to S&P average profits are within 1% of each other".

So, we now have cause to wonder if you know what you are writing about...therefore, it would seem reasonable for us to expect that your next posting will address a perspective comparing the profits of these oil companies to other large companies.

Thank you.

Isn't that fair?

[Ivan theCredible]

>The price of oil has become inelastic, it no longer reacts to increased supply

I'm not sure that this is true. If supply did increase relative to demand the price would come down. The problem is that supply is not keeping pace with demand globally.

[US MicroGrid]

You Forgot the single highest return action drivers can take to reduce consumption: Proper tire pressure.

Before you laugh, check the numbers. They are staggering and I invite you to interrogate the calculations

energyviews.blogspot.c...

We should be all over this opportunity. Its real. Simple solutions exist today. The Impact is huge. The issue is that advocating simple conservation measures doesn't get anyone elected, even if it represents smart policy. Pass on the word.

[oiley]

Among other investments, I have 1.5 million dollars in energy exploration and production stocks. They are going up almost every day. I also have a 2000 Solara @ 23 mpg and a Ranger @ 17mpg. For now I drive the one most practical one for my activities, say a date or to haul some stuff around. BUT, I just put $99 dollars down with Roger Penske to order on of his SmartCars. 34-45mpg. I will integrate that into my driving. You peni riding in your dualies and SUV's have skrewed yourselves. Go file chapter 7.

[william]

the average american is plain stupid! the dems think by taxing the oil and gas industry that that is going to increase exploration? All 3 of these have little understanding of capitalism---Obama is the worst--all you dems don't understand if he gets in we will all be paying higher taxes on stocks, dividends, federal income tax, fuel and anything else that the dems can think of.. The rich will be paying for all of the losers--More illegals flowing over from Mexico will continue to cost all of us a bundle--Would invest in Russian Oil -Putin said yesterday that taxes on Oil and Gas will be lowered-- iec.l, sbe.l, axc.to, kaz and abg.to are just a few opps. in the international oil and gas industry--visit nasdaqstocksrus.com and review past email alerts from the letter that has been in biz for 24 years

[Katy Texas]

Except for Trader T, most of the comments have been as enlightened as the US energy policy for the last 15 years. The US needs a balance policy of (1) exploring for new oil reserves off all the coasts, not just Texas and Louisiana; (2) renewing the energy conservation tax credits - the democratic congress let them expire in 2006; and (3) supporting new technologies such as coal to liquids which was mentioned as being used in South Africa. Once the US establishes an energy policy that encompasses all of the above methods plus others to reduce our dependency on imported oil, the futures market will begin to price in the new "future" and crude will drop.
The US consumes 1/4 of all crude produced on a daily basis - we have a very large impact on demand. Unfortunately, nothing seems to impact the incompetence in Washington.

[rber]

I don't know what everyone is worried about. Surely helicopter Ben is burning the midnight oil right now, putting the finishing touches on his next free market attack.

[PROFIT INCHAOS]

ONE SIMPLE SOLUTION CAN HELP. WE HAVE A LARGE SUPPLY OF NATURAL GAS. NATURAL GAS WILL FUEL CARS, AND THERE SHOULD BE A BIG PUSH TOWARD CNG FOR CARS. MY ADVICE, QUIT COMPLAINING AND SWITCH TO CNG. NATURAL GAS IS SELLING ABOUT ROUGHLY HALF OF THE PRICE OF OIL WHEN THE BUT EQUIVALENT IS COMPUTED.

[xander]

oil price speculators have had the advantage of knowing that cheap oil can not be developed in the usa as long as the democrats control congress. note well that the price of oil has risen 90 percent since the dems took over congress 16 months ago.

[JREwing]

You do have a point.

[SailDog]

The author of this article needs to learn Economics 101, then read a but of Herman Daly, then some Hartwick, even some Harold Hotelling. He knows nothing.

To point out the bleeding obvious supply is static and demand is such that all will be taken up at what ever the latest high price is. It is inelastic. No one will care if you do not buy gas on a Monday.

[Indyphil]

I disagree with the article
"The energy sector is finding the max price that consumers are willing to pay for a gallon of gasoline. Record profits of oil companies give them no incentive or evidence to halt gasoline price hikes."

The price of gasoline at the pump is basically wholesale + tax + tiny margin for the owner of the store.
Wholesale price is basically crude oil, + processing cost + refiners margin.

There is every incentive for an oil company to reduce the price of its wholesale gas - TO COMPETE!

Lets say "the bubble bursts" or whatever and the price of oil starts to fall. The author of this article suggests that the price of gassoline wont come down because they have discovered that we are "willing" to pay $3.70 a gallon or more for gas.
But with lower raw materials it only takes one company to price itself 10 cents less than the competition and every consumer will rush to buy it. the fact is there is more than one oil company and they must compete for the business. The fact that margins are so slim is evidence that there is still plenty of competition.

The price of oil is not set by Exxon, BP or shell. Its set by Global factors, and the majority of the worlds remaining oil is owned not by private companies but by national oil interests. The traders know this, look at the long term contracts. Why is it so hard to face the truth? When you point the finger of blame three fingers point back at you.

Oh and the "lets not buy gas on one day" ideas.
Boy I still get a chuckle from those! Skipping your gas purchase on Sunday only to buy more on Monday - yeah a real revolution!

[ashok]

Problem lies with the economic incompetence at the White House and the American Congress.If they can be taught the numbers game then they can take steps to remove the ban on drilling in the areas which has the largest reserves and also stop speculation in commodities.

[surgcare]

Very simple minded approach ,must be a democrat .The reason oil is going up is because demand is out-stripping supply because the easy oil is just about gone . If people ration gas , the price will come down then dramatically rise because oil companies and drillers will stop producing oil .WAKE UP EVERYONE It cost a lot more to drill new hard to get to places and squeeze the last drops out of current wells . Keep this in mind . The Alaska pipeline originally was producing 200000 barrells a day . Now its producing less than 80000 barrells a day and it cost more to get because of technical factors involved in squeexing the last drops of a well .SAME PROBLEM IN OPEC . If anybody believes OPEC can produce more oil then they are or were producing needs to buy land on the moon .As long as we follow DUMB democratic ideas like the author we will continue to pay more and more for gas and energy and food and....

[WayneS]

Gasoline has never been a product that anyone has ever made money. Gas stations sold gas so they could get you in and sell you oil or tires or fix your brakes. Now convenience stores and grocery stores and discount stores sell gasoline at a loss so you buy their other products. Refiners margins are typically low and have gone lower as crude goes up. Gasoline is at the present undervalued.

[taojones]

I can't believe what in reading here, we have millionaires (oily) who are buying their third car (a cute tiny one) to work into their travel schedule and a bunch of fox network pundits who are actually trying to lay this mess on the democrats. The Russians learned that they could never beat us but they could buy us. Bush never got it that arab countries are patriarchal tribal organizations and democracy is as use-full to them as giving up bribes would be to a mexican federalli (spain ruled 400 years by the Moors). Invading a sovereign (though unpopular) arab country on a false pretexts, destroying the infrastructure and not fixing it for 8 years than rattling your sword at another one and thinking this is not going to have any consequences. this is the war they will bleed us dry and oily with his "i got my millions screw you suckers" attitude will go along with us. politicians lie to the press and believe what they read. all of you astute republicans saw with your own eyes colon powell holding up a picture of a tractor trailer with some shitty lettering clearly labeling it a "mobile chemical weapons laboratory. you actually think that nobody ever actually takes delivery on a commodities future and you think the dems are the problem. you plan a war and take our boys off of the air craft carriers and plant them on the sand where any camel jockey can take a pot shot at them and you trade 4 thousand of our bravest for 1100 victims and declare mission accomplished! if we don't change to a solar and hydrogen economy soon you will not need to worry about your millions there will be nothing to buy here worth having. we are reaping the whirlwind the republicans have sown. it will change soon and if thier is a god there will be some jail time for the lot of you. we have had enough of short sighted inarticulate dumb as a post people looting our treasury and lining their pockets. in this case they weren't even smart enough to get the lions share, the sultan of Brunei has that. the way their fighting us is making them richer, our fight is bankrupting us as sure as Afghanistan bankrupted Russia. Open your eyes! want to find more oil stop driving armored humvees and tanks around in circles bring the navy to a safe anchor
and stop invading every country that ticks us off. and simply refuse to pay any price for oil. every poster who has said its undervalued here smacks of some oil companies publicity department. how bout oil employee disclosures here.

[WayneS]

Taojones I am an oil employee and this is a finacial blog. The idea is to make money for the share holders. If I were the CEO of my company, I would quit making gasoline and make more of the profitable products I supply. I would close all gas stations with my company's name on it so people would quit thinking my only business is to provide them with gasoline.

[farsighted]

these high prices will eventually get people to find some other alternative energy source. Don't laugh, it will happen.

americans can be very innovative.

the reason we are stuck on oil is because of a strong oil and gas lobby... our president is an oil man, for heaven's sake! The vice president ran Halliburton...

we can come up with something else to run our cars, get small, efficient cars that get 50-100 miles per gallon; it's coming, the more the price goes up the faster it will happen!

People with SUV's are crying at the cost of running those gas hogs.

Bicycles can get you where you want to go, and there is no fuel!

Take the bus!

Move closer to your job...

[gatormn]

The last post made a little sense.
But did you know that every time they come up with a gas saving car the price of that car is so steep that the average joe homebody can not afford to buy it.
Thus the lower income families struggle to survive.
The key is the lousy law makers
If they get off their dumb asses and start thinking of the American people instead of how to make them selves richer then and only then will it have an affect on the economy.
In the past back in the 70s when the gas crises were at hand
There were some private organizations that came up with gas saving devices to improve the mileage and they only went as far as the oil companies buying up the patents.
So they have nothing standing in their way to greater profits.
Now here we are in the same situation and you can bet that our President will do nothing just because the more the oil prices rise the more he will make.
There is a lot to the whole story of rising oil profits and it is only because of their GREED$$
When the Government starts thinking of how to help the average citizen then and only then will things start to change.
If you look at example automobile factories being closed and opened in Mexico you do not see a cheaper price for their cars and trucks but they are building them cheaper.
They pass no savings to the American people.
Their is other countries out there that use sugar cane for alternative fuel but our government says wow maybe we should look into it.
Like I said before it will not happen until we vote out the people in charge now and start over.
But who can you trust in the big question.