Sunday, June 8, 2008

Here We Go Again!, April 24, 2006

WHOSE FAULT IS IT ANYWAY? Once again the American motoring public is facing three dollar a gallon gasoline. If you've filled up lately, you undoubtedly know the various feelings anger and frustration with the situation. Who do you blame? The most obvious target would be the oil companies. Guys like Bill O'Reily jump on that bandwagon real fast and incite lots of other people to do the same. Who could blame them when you see retiring oil execs walking away with almost half a billion in retirement benefits? While it's true that the big oil companies are definitely taking advantage of a volitile situation to fatten their bottom line, the problem DOES NOT START with them.

Some Americans with a deep sense of nationalism that borders on protectionism make the leap of blaming the OPEC cartel. While OPEC member nations and other oil producing nations can affect the global price of oil based on their daily output, all current indications are that those countries are producing at (or reasonably close to) capacity. When we see photos and video of the mansions of the Saudi Royal Family, it isn't hard to understand why Americans would want to blame them. But in reality, they aren't to blame either. Like America's big oil companies, they are taking advantage of a situation that was not of their creation.

The one group that you hear no one blame for high oil prices is the group of men and women who trade at the different comodity exchanges here in the United States. This group is the one responsible for setting the market price for a barrel of oil. There are many factors that are considered in the process. Things like geopolitical situations, civil unrest, a nations stablity or lack there of are just a few of the things that might affect their decision making process. There are also other factors that figure into the mix. Some of those factors (justified or not) are terrorism fears, concerns about the upcoming hurricane season, fears where countries like Iran are concerned, and then there is the plain old human greed that is so often associated with Wall Street and comodity traders.

This is where the spiraling costs for oil and gasoline starts. It doesn't necessarily end with them. However when you consider that it cost the most oil producing nations an average of 5 or 6 bucks to pump a barrel of the stuff out of the ground and we see these guys set the daily price of a barrel at an average of 70 dollars this past week......well it becomes just as frustrating as the 3 dollar a gallon gas prices.

If you have the desire and patience to learn more about the process, there are documents online that explains the process. CLICK HERE The documents are rather dry and technical, but interesting nonetheless. It's a real eye opener if you are inclined to check it out.

Who do you believe to be responsible for the high gas prices? (closed poll)
OPEC 1
OIL COMPANIES 2
COMODITY TRADERS 8
GOVERNMENT OFFICIALS 3

(originally posted 4-24-06 on Yahoo 360)
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