Wednesday, February 20, 2013

Why the price of gas is so high

I don't drive that much lately. The last time I filled up my car was about a month ago. Still I noticed this mysterious spike in gas prices:
The average price of a gallon of regular gasoline has jumped 45 cents in the past 31 days, according to AAA, the fastest run-up since 2005. [...]

Analysts differed widely on the causes of the increase.
They blame lower output from OPEC, investor concern about potential oil supply disruption and US refinery shutdowns for routine maintenance but none of it makes sense under the usual "supply-and-demand fundamentals."

Indeed, the price rise makes no sense at all. As West Wing Report noted on the twitter, "U.S. demand (EIA data) at 2000 levels for November." However, international demand is high. WWR gones on to tell me the price spread between U.S. oil (West Texas Intermediate) $95.64 and Brent Sea $117.51 is driving up U.S. exports of refined products. Obviously, "U.S. refiners are exporting as much as they can because foreigners are willing to pay more."

Which brings to mind the idiocy of the drill here, drill now conservatives. Republicans promise them if only we drilled more of our own oil, the prices would magically go down a couple of bucks a gallon. If only that were true. In fact, at this very moment we have so much oil backed up in the supply chain, America has run out of oil storage. The refineries can't process it fast enough to move it out.

But the real reason the prices aren't going down is pretty much market manipulation. Big Oil is shutting down refineries. And why, when prices are so inflated, would they do that you ask?
“Atlantic Basin capacity closures have improved refining fundamentals,” the nation’s biggest refiner, Valero, said in a slide presentation at a Credit Suisse conference this month. It estimated that nearly 1 million barrels a day of refinery capacity has been closed on the East Coast or in the U.S. Virgin Islands in the past two years, which Valero said allowed it to increase profit margins.
Profit margins. It's always about the profit. Cheaper gas would help our economy recover for everyone, but artifically manipulating the supply chain boosts the corporate bottom line quicker. Corporate welfare above country. Meanwhile, Republicans are fighting tooth and nail to protect Big Oil's tax breaks while insisting we need to shred the social safety net to save the Republic. And the GOP's useful fools embrace this sociopathic corporate con because, pisses off liberals. Crazy.

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Blogger Steve M. said...

Cheaper gas would help our economy recover for everyone, but artifically manipulating the supply chain boosts the corporate bottom line quicker.

It also gets Democrats blamed for being Prius-driving hippies who hate the oil industry, and thus elects more Republicans. It didn't really work in 2012, but midterms are coming up....

6:57:00 AM  
Blogger Libby Spencer said...

True enough Steve. GOP built this lie and made it stick. But it does look less effective than it once was. A little.

9:56:00 AM  
Blogger Capt. Fogg said...

I have to laugh when they beef about high fuel costs as though they weren't set by the same unregulated, unfettered and corrupt free-market forces they praise every day.

Fair weather capitalists -- all for it until prices go up.

11:37:00 AM  

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