Its Saturday morning, May 7, 2011 and oil settled yesterday at $97 per barrel. Less than a week prior we were at $114 a barrel and told that explained a .30 cent a gallon jump in one day the previous Friday. Yet, as oil has fallen like a rock this week, my local pump prices have barely budge down. Who is kidding who here? Did you like that article on Yahoo about gasoline costs across the globe? Our middle eastern friends pay less than a $1 a gallon. Don’t they understand supply and demand economics around the globe we hear about? Of course our southern neighbor who controls a major gas pipeline makes sure its fuel costs stay beneath the cost of renting a grocery cart at Aldis.. ( You know, Venezuela)
People far smarter than me are trying to explain the price of gasoline is not truly correlated to the price of oil. The factors are too complicated for the common man to really understand. We have currency exchange rates, fuel blend switch over, refinery shut downs for “maintenance”, supply concerns from big oil nations like Libya and Nigeria (would we really miss their oil if they didn’t exist?). Of course don’t forget the hedge funds making money off our backs who really have no need for the underlying oil supposedly being purchased via their swap-option, hedging “blah blah blah” contracts. This, however is true. Big Oil profits are directly tied to whatever they can get away with at the pump for however long they can charge it. Simple as that. Therein lies the need. Rightly so, the price at the pump in a truly efficient, reflective market would have already dropped about .80 cents a gallon.
I have written my congressmen, senator’s and president. For his role and preaching, he still finds the money to drive a very fuel efficient limo where ever he goes. Not to mention all the other vehicle apparatus. Yet I am supposed to ditch my fuel sucking, impossible to fill up with out charging twice 2006 F-150. Maybe I could take care of my business with that smart car I see? What is the towing capacity of that car? All of this complaining doesn’t fix the reality though. As I stand at the pump, I don’t see any smiles, no one nods or waives. Just frowns and hurried people watching their grocery and clothing budgets busted right before their eyes. Gasoline was $3.00 at the end of February with oil not much below its closing price today. Go figure. So explain to me the correlations in the words of Denzel “like I’m a two year old.”. You can’t without severe “smoke”. I believe our former president had more courage as a leader than our current one with the exception of managing big oil. Our current president can only meekly offer to form a “study committee” on the whole topic. At least hauling them before congress, that would be good for 75 cents of relief.
Here is reality. My car has a 30 gallon tank. Since February it now costs an extra $30 per fill-up. Due to my requirements, I fill-up about 6 times a month. That’s $180 I have to find. Or not spend on those jeans my daughter wants, shoes for my son, or simply just saving my money for the next repair bill, college or retirement. The final reality, people are getting frighteningly rich at the expense of me and my family every day, the people “we” elected will do nothing about it. Could I fix it? Would it get fixed if something equivalent to these people was being drained away? Can a president making almost $2mm a year really understand the impact a $1 a gallon in extra fuel prices hurt? I don’t really know what world the reporters live in where things are getting better? I live in middle America, in the country. I am price sensitive to milk, water and bread. Thankfully I can chose, there is no monopoly and chains work for my business. Gas stations don’t work for my business. They don’t have too and really aren’t allowed. Where I live Aldi’s sold milk at a $1.79 while the next door Walmart tried to dump it out at $4.07 a gallon. Guess what, the elephant finally got scared of the mouse and I can buy $1.79 milk at Walmart.
I would fix it this way: 1) No party is allowed to purchase oil, oil contracts etc. unless they actually have a business purpose exclusive of trading gains. Such as airplane businesses, farmers. Not the hedge fund manager living in Greenwich who wouldn’t notice if gas was $20 a gallon. 2) Price competition – If Kroger wants to offer $3 gas today with $100 of groceries, let them. 3) The price of gas is (dare I say) regulated under a very direct formula correlated to the inputs. 4) Pricing at the pump is limited in its swings to once a month basis – with an upside and downside cap. Let Big Oil buy those hedging contracts if we really have “supply” issues or conflict in Libya. The bottom line is this – Gasoline/diesel fuel are the life blood of our country and economy. Until reality sinks in and our governing officials address this stronger than any budget issues, we are all being drained, slowly but surely with economic growth and prosperity a distant mirage. By the way, surcharges and excess profits taxes don’t put money in my wallet Mr. President. Big Oil still collects it and then it goes to you. None of that allows me to consider those shoes or jeans my kids need.
My credit card finally reached $100.00 and I got 23 gallons of fuel during our conversation. I personally didn’t look at anyone, offer a smile or hello and barely noticed gas went down a nickel across street while I was pumping. Bummer I could have saved 80 cents if I was 15 minutes later. Do you think for all the money they make we could at least have clean bathrooms available to us to puke in after each fill up?