The price of oil…

For the past couple of days, I’m hearing all of this news about the OPEC oil production cut and how the US government is politicizing the event. In most of the news stories I’ve read/heard (SF Chronicle & NPR), it sounds as though the Saudi’s and other Opec states are ‘not being nice’ by trying to keep the price of oil up. It is made to sound like the US govt. isn’t doing the right thing in it’s negotiations.

This annoys me because the price of gasoline is much more complicated than the price per barrel of oil. Yet, this is not reported. All we here is that this is a “hot button” issue for the presidential candidates right now.

First, there are the refineries in the US. There aren’t that many of them and they haven’t built any new ones in nearly 30 years. (In fact, there was even a fire at a BP Amoco refinery south of Houston yesterday). If they have a limited capacity, which they are begining to have, then the price of gasoline will go higher.

Second, there are the new environmental regulations that continue to come into effect. These definitely cause the gasoline sold to consumers to cost more.

Third, why should OPEC have to listen to the US Govt? Seriously, they have no power over this organization. Why do all the news sources make it sound like some guy in Washington DC isn’t doing his job?

Fourth, it’s not that expensive. Compared to some other recently inflated items, the hit is marginal. (see Real Estate). I doubt people or businesses will change their consumption considering that it is not a major percentage of their personal spending. Think SUVs.

Fifth, what about the other people in the oil business. What about the ships carrying the oil? I remember reading that there are only a few companies controlling these fleets.

Sixth, bought any petrol in Europe lately? It’s quite a bit more expensive than here. Why is that?

Ah, I can go on. It’s complex, and the journalists out there should do a better job describing why this is an issue. Maybe in the process, they will find that it really is not an issue.

Note: I don’t get the Wall St. Journal, or the Economist, but they probably have a better description.

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