The Gas Scam

The gas scam is back.  What is happening today is the same thing we went through in 2008.  The price of gasoline is on the rise because of “paper oil”.  Paper oil is the term that comes from Wall Street traders that drive up the market price.  It is called “Paper Oil” because they never actually take control of a single barrel of oil.  They simply bid on it and drive up the price so they can sell it and make a profit without ever getting their hands oily.

The bottom line is that once again Wall Street and the major oil companies are putting profits ahead of anything else. How many billions did the oil companies net last time and of course we can thank Wall Street for a major part of the recession. 

 “Paper oil” may be un-American, un-patriotic, and un-ethical but it is not illegal.  Although it seems to me what the “paper oil” traders are doing smacks of price gouging similar to raising the price of a needed commodity such as ice or water just after a hurricane or natural disaster.  Just like an unscrupulous price gouger post hurricane, we can always count on Wall Street Traders and oil companies to gouge the American consumer with higher gas prices when there is any excuse of turmoil in the middle east.

The latest price surge comes as “paper oil” buyers, fearful of even higher prices, have swarmed the market.  The “paper oil” traders are taking advantage of what is going on in Libya.  The fact is the loss of Libya’s oil output — even all of it — would remove a relatively small percentage of total global supplies. In any case, Saudi Arabia is believed to have enough spare capacity to cover any shortfall

I also know that there is a huge reserve of oil in the northwestern part of the United States, mostly in Montana, Wyoming and the Dakotas.  This is being protected from drilling at this time by environmental laws.  The problem with saying that this protected oil could cure our problems is two-fold.  In the first place, if you started drilling tomorrow, it would be years before that oil product got refined and to the gas pump.

But the main problem is that all oil is traded on the world market.  The price of oil is universal.  Texas oil or Montana oil doesn’t sell at a different price than foreign oil.  Oil is oil.  We produce quite a bit of oil in United States right now; do you see it selling at a different price than oil from the Middle East?  I don’t think so.

The price of a barrel of oil or a gallon of gasoline has little or no connection to the cost of producing it and we have plenty of oil on hand.  As of last week, there was some 346 million barrels of oil in American storage, according to the Department of Energy, comfortably above the five-year average range for this time of year.

Gasoline prices have also surged in the past month, even though roughly 234 million barrels of it were sloshing through the system as of last week, well above five-year averages. The average price of a gallon of regular gasoline hit $3.51 last week, up 13 percent in a month.

The sad fact is there is not much we can do about high gasoline prices until the Middle East settles down.  The one thing I do know to do is quit buying gas or anything else from a major oil company.  I have not spent a single dime at Exxon since the Valdez.  I know it has not had any effect on them but it certainly makes me feel better and it is very easy to do.  I have to make no sacrifices as there are plenty of smaller stations and convenience stores to buy gas.  But if we were to all do this, it would have a major impact on the large companies like Exxon, Mobile and Shell that have such a control over this industry. 

Stay tuned for future adventures.