Wednesday, September 7, 2011

Oil Companies Looted Way Before Big Easy Criminals -- Sept. 8, 2005

As Hurricane Katrina was about to devastate America’s Gulf Coast states last week, the price of crude oil neared an all-time high of $70 a barrel. The oil companies, at last, had a legitimate reason for raising gasoline prices because they had to abruptly evacuate oil rig workers in the Gulf of Mexico to safety, resulting in an unexpected, albeit logical, drop in oil production.

But what about the weekly increases throughout the summer that left the average nationwide price of regular gas at almost $2.60 per gallon when there wasn’t an imminent hurricane? As a matter of fact, I can’t ever recall when hurricane season was used as an excuse to increase gas prices until this year.
Nevertheless, even when crude oil prices seemed to level off, prices at the pump continued to surge. Guess that’s the consequences consumers pay for living with a free market where prices change at the whim of suppliers.
Whenever the terrible situation along the Gulf Coast gets adequate attention, sufficient assistance and flood waters that inundated New Orleans are pumped back from where they came, Congress must conduct a meticulous investigation to determine why there were recurring price hikes before and unlimited spikes after the hurricane. After all, only a small portion of the nation’s oil comes out of the Gulf, yet 100 percent of gasoline prices soared after Katrina hit.
The Category 4 hurricane reportedly knocked out eight refineries, which accounts for 10 percent of the nation’s capacity. So, why did prices at the pump abruptly spike 50 cents and more in certain areas?
One day my local filling station was selling regular grade for $2.79. Two days later it was a whopping $3.49 before it came down to a still unreasonable $3.29, where it’s been for a week.
Some drivers interviewed on local news stations reported the price changing within a few hours. Fill up in the morning at one price and later in the day it was 30 cents-a-gallon more. Gas station attendants could have used a chalkboard with all the price changes of late!
This summer, like never before, drivers have been pounded at the pump. Looks like motor vehicle-loving Americans will have to get used to at least three dollars a gallon from now on, but the public knows there’s little that can be done. And that’s got to make oil company executives very happy. In fact, recent business reports indicated oil company profits were up 20-30 percent BEFORE the August increases and the hurricane.
Economists say the rise in gas prices will likely result in an unexpected increase of at least $1,000 per car, per family over a one-year period. Come winter there’s going to be another rude awakening when home heating oil prices are projected to reach record highs. And let’s not forget parallel price increases for goods delivered via motor vehicles and other residual effects.
When will it end? WILL it end? Will owners of gas-guzzling sport utility vehicles (SUVs) buy new models when the time comes to trade in the old one when they have to shell out $75 — or more — each time they top off their tanks?
In an attempt to contain the ever-increasing prices, President Bush has ordered the release of some of the nation’s strategic oil reserves. Experts said the crude oil from the reserve would help control prices but that it won’t increase gasoline supplies until it’s refined. But that’s nothing more than a stopgap measure that won’t last long because there’s still a need to keep those reserves replenished.
Oil companies like Texaco, Exxon-Mobil and Shell rarely need an excuse to raise prices. They seem to do it when the mood strikes just to increase profits. But, when the price of crude oil drops, as it has recently, there’s never a corresponding drop in prices at the pump.
Time and again it seems that no sooner is there a news report that oil prices rose, and then pump prices creep up a few cents. How is that possible? The oil hasn’t even been taken from the ground and refined yet, but consumer prices increase.
One of the basics of economics is the law of supply and demand. Since American motorists haphazardly guzzle gas it is disproportionate to dwindling supplies as demand nationwide and around the world, including places like India and China, also increase, allowing prices to remain at record levels.
Will Americans become more conscientious and conserve as gas prices continue to rise? Will they stop buying gas-guzzling SUVs? Will the federal government ever develop a rational, long-term energy policy or continue to let the oil companies run amok?
I guarantee you that before any of those questions are effectively answered, gas prices will continue to spiral, defying the law of physics that says whatever goes up must come down.
As long as we keep driving the kinds of guzzling vehicles we like, we’ll grumble about inflated gas prices, but, inevitably, we’ll pay whatever price the market demands to satisfy our habit.
This predicament — suffice to say — is nothing more than a pain in the gas!