“Transitory Oil: Greasing the Slide”

Turmoil in the Mideast is being blamed for high gas prices.

Americans are getting fleeced by big oil companies!

In his first ever press conference Fed Chairman Ben Bernanke referred to the rise in oil and gas prices, as well as food and other commodity prices, as transitory. Though these stifling rises aren’t permanent they are having an immediate impact on those that can least afford them. They continue to erode the middle-class.

Transitory or not, big oil companies are making a killing on the high prices.

Exxon/Mobil reported record quarterly earnings, $10.65 billion, for the first quarter of 2011. That’s a 69% improvement over the same quarter last year. They spend millions of dollars in television and radio ads telling us how great they are. How much they’re doing for our planet. How much they’re improving our lives.

But are they really improving our lives?

Chevron, BP, Conoco, and RoyalDutch/Shell are all pushing the same Samaritanism, while raking in record profits—propagandized ads touting their search for new, cleaner, more efficient forms of energy, patriotically working for the good of America and the planet.

But that appears to be nothing but a lie.

Is it fair to blame big oil for the current rise in oil and gas prices with all the turmoil in the Middle-East? Not entirely, but, the simple answer is yes—along with speculators, Congress, and greedy Americans.

Granted the dynamics of the price of oil are complex, but current supply and demand in the United States as reported by the EIA, dictates a much lower price. This is true of both oil, and gasoline. Given current imports, supply, capacity utilization, and domestic demand oil should be well below $80 per barrel and gasoline should be more than a dollar lower per gallon.

Unrest in the Middle-East has had minimal affect on input and output in the U.S. Most of our imported oil comes from Canada and Mexico and neither of them are experiencing major disruptions in supply.

We are also importing less oil than a year ago, 724 thousand fewer barrels per day. There are currently eight-million more barrels in storage than this time last year. Refineries are operating at 6.3% less production amounting to 364 thousand fewer barrels of gasoline per day compared to last year.

So what constitutes the extreme rise in oil and gas prices.

Absent another explanation, higher prices in the U.S. can be easily attributed to speculation, manipulation, and greed.

Speculators are playing a significant and destructive role in rising prices and soaring inflation all over the world. They are gamblers, betting on their ability to manipulate world oil prices in their favor. They have no intention of taking delivery of the commodity.

Outside players have no business in the oil market messing with what hard-working Americans should be legitimately paying for gasoline and products related to petroleum—rubber, plastics, cosmetics, etc. Their greed is destroying an already fragile economy.

Congress could stop it. But they won’t. Republicans are against any regulation that would help the people, instead, taking care of the corporations over their constituents. They claim that regulation would ‘stifle’ free-market-capitalism, and as a result have allowed predatory capitalism to flourish.

Big Oil could stop it. But they won’t. Speculators and speculation are good for their bottom lines. As long as Americans are addicted to oil the trans-national oil conglomerates have no desire to slow their money-making machine.

The question is how transitory is oil? Will it remain high until tensions ease in mess•o•potamia?

Gross Domestic Product (GDP) slowed in the first quarter to 1.8% from 3.1% last quarter as the price of oil and gasoline have risen. The rise of gasoline to $5.00 per gallon, or a long-term level of over $4 per gallon, would have an even greater negative affect on the economy and may throw us back into the recession. High oil prices are greasing the slide.

Some have cited growing demand in China and India for rising prices. Though their needs are increasing they still represent only a small fraction of global consumption. Still much smaller than consumption in the U.S.

World wide demand has been slowing. Last week Saudi Arabia stated that it was not necessary to increase production because of slowing demand.

There is a positive in this. If high prices persist an impotent Congress may finally get off their worthless asses, end speculation, curb manipulation, and punish greed.

And—if we’re lucky—move toward a greener, more efficient form of energy.

America could lead again, rather than follow.

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