The reviled “jobless recovery” of the U.S. economy won’t improve much in 2012, say the usual forecasters. But oil company executives and market speculators can break out the champagne now as the price of crude oil starts the year with a huge jump–soon to be reflected at a gas station near you. Really, if the richest can just keep getting richer, why worry about the middle class?
The price of gasoline in the U.S. set a full-year record in 2011, swiping $4,155 from the average family pocketbook, more than 8% of family earnings. Last year’s payroll tax cut that was supposed to stimulate the economy went largely to the pockets of OPEC, Exxon and friends.
Given the 4% jump in crude oil prices on Tuesday, the first trading day of the new year, 2012 looks like it could be even worse. What’s most shocking, however, is that effective government could put a stop to the price roller-coaster.
The news stories, parroting the financial analysts, blamed the mini-”Iran crisis” and economic growth in China, India and the U.S. for the oil price spike. But the truth is that Iran’s saber-rattling is nothing new and on-and-off embargos have already diminished the importance of Iranian oil in world markets. Just a week ago, oil prices fell slightly when the same analysts proclaimed Iran’s actions as “empty threats.”
Another truth is that growth in the U.S. and Asia is offset by the economic mess in Europe, where economies have shrunk and the risk of full economic meltdown persists. So worldwide oil demand is expected to be flat in 2012, and U.S. crude oil supplies are still well above what they were before the 2008 economic meltdown, according to U.S. Energy Information Administration data.
There is absolutely no supply and demand reason for crude oil prices to spike above $100 a barrel, or for families to fork over 8.4% of their income on gasoline to get to a worse-paying job than they had three years ago. The real reason remains speculation in oil markets, and a government so beholden to financial and corporate powers that it can’t respond in any effective way.
8. January 2012 at 10:47 pm
You’re blaming oil companies for high prices. This is like blaming home owners for selling their houses at market prices. Clearly you don’t understand commodity markets.
The same speculators you accuse of pumping up the price of oil can also trade in natural gas futures, and presumably infalte those prices as well. The same industry that pumps oil also produces natural gas. And yet the price of natural gas is down 12% for the year, and down 57% from its average in the final 4 years of the Bush administration.
Additionally, in the past year, while oil has gained 25%, a number of commodities are up even more: sorghum, pork, peanuts, wool, lumber, and rock phosphate among others. Many other commodities are down, including natural gas, lead, rubber, aluminum, cotton, fishmeal, and cocoa beans for example.
Your statement that oil price rises are not market based, full stop, but are the result of the machinations of speculators, full stop, fly in the face of commodity price volatility over the past year. Why would speculators want to make money on one commodity but not another? Why do they permit some to fall in price? Why do greedy oil companies and speculators team up to drive the price of natural gas down? Why have speculators and greedy CEO’s decided to drop gasoline prices to fall by 16% since last May? You offer no evidence for your claim that “no supply and demand reason” for prices exists, but then that would be expected, since you have no experience in the commodity or energy industries.
You then criticize the oil industry for higher profits. Many other industries increased their profits last year. If oil company profits are outrageous, and the oil industry controls oil prices, then wouldn’t one expect their P/E ratios to be astronomical? After all, an Exxon shareholder would know that Exxon can just increase the price of oil as desired, so the stock would be attracting hordes of buyers.
Below is the oil industry’s performance as found in the Yahoo Finance Industry Browser,
http://biz.yahoo.com/p/sum_conameu.html
Ranked by P/E ratio of 215 industries,
Oil & gas refining and marketing ranked #158
Oil & Gas drilling & exploration ranked #164
Major integrated oil & gas ranked #186
Ranked by net profit margin of 215 industries,
Oil & gas refining and marketing ranked #170
Oil & Gas drilling & exploration ranked #34
Major integrated oil & gas ranked #91
Ranked by ROE% of 215 industries,
Oil & gas refining and marketing ranked #65
Oil & Gas drilling & exploration ranked #115
Major integrated oil & gas ranked #42
Additionally, while the oil industry has outperformed averages over the past few years, last week the S&P 500 gained more than Exxon. The speculators and investors you blame for everything are saying, with their wallets, that they now expect the average American company to provide higher returns for them than Exxon will.
A very sophomoric piece of journalism, driven purely by political views and emotions without regard to serious and objective research, let alone basic facts that are simple to find. This is the kind of shabby writing that gives liberals a bad name in certain circles, and provides fodder for conservative critics.