Saturday, February 19, 2022

Gas and oil prices rise, but it isn't due to supply and demand

Oil and gasoline prices are the latest example of my theory that a lot of the price inflation we're seeing in this country is nhothing more than good old fashioned profiteering. This week, we saw oil futures rise as high as $95 a barrel as tensions rose between Russia and Ukraine, but even before then, oil was running at 8-year highs, with complaints about "tight supply."

Gasoline has also jumped, with the inflation-adjusted price in 2021 being about 30% higher than it was for 2019, and those prices are likely to go higher through the first half of 2022.

While gas consumption in America has bounced back from last year’s COVID Winter, the outbreak of Omicron blunted gas usage a bit, and January and February consumption is still slightly below the pre-pandemic rates in the Winter of 2019-20.

There was a tighter gasoline situation as people traveled in December, which would warrant higher prices at that time. But by early February, that had been relieved, and the availability of gas in the US is more plentiful than it was in the late 2010s, and isn't any different than it was in early 2020.

In theory, gas prices could rise in the import-heavy sector if the US dollar dropped, making foreign products more expensive. But the relative strength of the dollar is stronger now than it was a year ago, and isn't much less than it was in 2019.

Then combine it with this story from December, courtesy of the Guardian.
The largest oil and gas companies made a combined $174bn in profits in the first nine months of [2021] as gasoline prices climbed in the US, according to a new report.

The bumper profit totals, provided exclusively to the Guardian, show that in the third quarter of 2021 alone, 24 top oil and gas companies made more than $74bn in net income. From January to September, the net income of the group, which includes Exxon, Chevron, Shell and BP, was $174bn.

Exxon alone posted a net income of $6.75bn in the third quarter, its highest profit since 2017, and has seen its revenue jump by 60% on the same period last year. The company credited the rising cost of oil for bolstering these profits, as did BP, which made $3.3bn in third-quarter profit. “Rising commodity prices certainly helped,” Bernard Looney, chief executive of BP, told investors at the latest earnings report.
Oh, I'm sure those higher prices did help, Bernie.

This supply and demand information tells me that the price increases in oil and gasoline are largely speculation of “global instability” at best and price-gouging at worst. That should make us all suspicious, and should demand harsher oversight, as well as another reason to reverse the GOP Tax Scam that made profit-hoarding all the more lucrative.

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