20 July 2013 - Rising Oil Prices & Oil Company’s Poor Excuses

I recently received an e-mail from a radio listener who listens to my daily reports on commodity and stock markets. The listener was upset with me and said . . .’Why don’t you quit wasting your time and my time by talking about the price of wheat, corn, cattle, hogs, and stocks on Wall Street, when all you need to cover is the price of crude oil and its relationship to the price of gasoline and diesel fuel?” He said. . . “That’s the only market that counts because that impacts and drives prices of everything else you talk about.”

Well, if he’s a regular listener, he knows that I, for the past fifteen years, have said frequently. . . “I’ve given up trying to understand the relationship between the price of crude oil and the price of gasoline and diesel fuel. It is not uncommon here in the Chicago area and other parts of the country to watch gasoline prices jump 20 or 30 cents a gallon over night, regardless of what the price of crude oil does.”

There seems to be no reason for it. Forgive my cynicism but I now think we see that kind of a quick jump in fuel prices because the big oil companies simply want to put a little more on their bottom line.

As I covered the world economy during the recession years, I cannot recall one quarterly earnings report from a major oil company that showed a loss for the quarter. As a matter of fact, I saw some record high earnings reports from the oil industry while other companies were posting quarterly losses during that period. But it seems to me more often than not, that oil companies jack up the price whenever they feel the need to put a little more on their bottom line at the expense of consumers who must buy their products.

Now, to add insult to injury, the oil companies are blaming ethanol for the increase in gasoline prices, saying the mandate requiring them to sell E-15 will mean even more gasoline price increases because there will be a shortage of ethanol when we move from 10 to 15%. I don’t buy that explanation, either. Had big oil not spent billions of dollars fighting renewable energy over the years, the ethanol industry would have grown to meet the demand. And while they fought ethanol, they were strangely silent when asked about the billions of taxpayer dollars they receive annually to fund exploration.

You know my feeling, I’d much rather see American farmers grow the crops and American workers process those crops into renewable energy than send our dollars overseas to buy oil from foreign producers in countries who hate America.

My thoughts on Samuelson Sez.