Thursday, March 13, 2008

$111 Oil

Over the past couple months, the price of oil has skyrocketed to an all time high of $111 per bbl today. This has caused many motorists to cry out in frustration and accuse oil companies of collusion. These ignoarnt accusations and hasty conclusions made by the general public are simply not true.

I have had a number of people say to me anumber of times, "how the oil companies are ripping everyone off". I then proceed to press them for an explanation, where they proclaim, "gas prices are so high they have to be". In my book, using rationale like that falls well short of conclusive proof.

I then proceed to to counter their arguments by explaining the recent record breaking prices of gold and platinum (perhaps the weakness of the dollar is an issue?), and that over 1,000 new cars are on the streets of Beijing everday (increase in Chinese and Indian oil demand?).

Then, out of frustration, these people proclaim that "the oil companies are all crooks". Little do they know, that they could very well be benefiting from the record profits ExxonMobil has been making. According to a recent article written by Ben Stein, 52% of outstanding XOM shares are owned by pension and mutual funds. These are commonly owned by common people.

My advice to those complaining about increasing gas prices, if you really think the price of oil will continue to climb (which it very well could), quit crying and go buy oil futures. If you think it's not fair that the oil companies are making so much money, quit crying and go buy energy, and last, but definately not least, do some homework on basic petroleum economics, and maybe you won't sound like an ignorant conspiracy theory spouting nut job.;_ylt=Au3_03aaGEFQKztQ.Oys78.AsnsA


Candide said...

You are certainly right in that there are a number of reasons for the increasing oil prices: weakening dollar, increased demand, inability to increase supply. However, all you did was set up a straw-man argument for collusion. Also, record oil prices and profits do not directly correlate with share prices. Not only did you fail to evaluate the possibility that oil companies are gouging the public, but you managed to sound totally biased in your own free-market capitalist ideology.

~Cliff Barnes

JR Ewing said...

There isn't a correlation between high oil prices and high profits for oil companies? Ha! Maybe you should do a little homework on this buddy.
I guess the low oil prices in the mid to late 80's had nothing to do with numerous oil companies going under and a great deal of people within the industry being laid off? Now, I'm guessing these record oil prices have nothing to do with record profits?
As far as the possibility that oil companies are gouging the public, it would be great if you could enlighten me as to how exactly "gouging" and collusion are occuring. The price of oil is high right now for the reasons I explained in my previous post. They are not high because of some back room plot hatched by ExxonMobil, George W Bush, and Halliburton. (Halliburton is actually not an oil company, but maybe we should throw them in too since they're also evil, right?)
The general public is not happy about high gas prices, and it is very unfortunate that some people insist on portraying themselves as victims, and making baseless accusation of gouging. If you could tell me how exactly the oil companies are gouging the general public, I would be greatful. The argument that "prices are so high they have to be gouging people" will not suffice, as it's the one I hear over and over from people with little understanding of economics and the oil and gas industry.