Amidst the current kerfuffle of Republicans and Democrats blaming each other for ever higher gas prices, focusing on issues ranging from oil company tax breaks to impediments on new drilling, the most significant item of information extant is barely focused upon.
Last week in Congressional hearings none other than the Darth Vader of all things oil, Rex Tillerson, CEO of ExxonMobil bravely informed his Congressional interlocutors that the price of oil should be no higher than $60 to $70 a barrel. He attributed the difference from the plus $100/bbl current at the time of his pronouncement, to speculation and trading on the commodity exchanges. It is a position that this corner has promulgated for years. Well and good. But coming from Tillerson, that is truly from the horse's mouth.
In addition, there was another core nugget of information coming forth at the hearing. That the average cost of producing a barrel of oil is circa $11/bbl. Thereby, and for once giving oiligopoly credence to the enormous profits at hand in the oil sector. It is as though General Motor's Chevrolet Volt was being built at a cost of $25,000 and selling for well over $200,000, and with much less fuss and bother.
And yet, and yet, this news barely reached the headlines of the business press and the forever endless parade of talking heads on our television screens.
And all this within the recent flood of attention to manipulated pricing with the formation of the Oil and Gas Pricing Fraud Panel under Attorney General -- "there may well be lawful reasons for increases in gas price given supply and demand" -- Eric Holder. This after endless months/years of hearings and blather coming forth from the forever ineffectual CFTC.
And there, in recent weeks, was President Obama himself taking up the cudgel of speculation -- blaming it for rising oil prices in a recent address to a community college.
Well, here for once we have smoking gun evidence of one piece of the high oil/gas price puzzle -- the impact of speculation. There are many others such as OPEC manipulation, crude oil hoarding by bank holding companies and oil traders, reckless judicial interpretation of sovereign immunity, thereby precluding antitrust legal proceedings in this country against the national oil companies of OPEC nations. The list goes on. But with this piece of evidence in hand will the government act forcefully, or will oil interests once again prevail!?
Exxon EARNS 7 cents PER DOLLAR on THEIR PRODUCT, THEY MADE, REAL PEOPLE like YOU and ME, not some GHOSTLY CEO behind a curtain.
Dems have turned so soft, too bad.
It's always interesting to me how little we know about our financial markets, what they do, and how that translates into what comes out of our pocket. We pay an enormous price for this ignorance. When oil went to $140.00 during the time of the financial crisis from the low $70's a year earlier, I was confounded beyond belief. Demand falls off a cliff, no change in supply or costs attributed to supply, and the price doubles??
I had my intuition and watched closely to see financial returns of Goldman and the other too big to fail banks some months later. Shocking: losses tied to loans were significantly pared from their "success" in the commodity market - ie oil trading/speculation. No one contected the dots. TARP, unfortunately, wasn't the only mechanism used to fleece Americans into correcting the gambling addictions of the few on Wall Street.
I accept it now - Republicans and Wall Street are just too smart and we're too dumb. Obama: Win re-election...and please turn this one sided, one-hand-tied-behind-your-back beat down of average Americans around...or just release our right arm through regulation.
In the meantime, let the kids from Enron out of jail. Their little kerfuffle is a pimple on the a$$ of what Goldman and too big to fail banks have done without one conviction. I love this country!
It's speculators who are causing the spikes and, I believe, the reason the price of oil recently went down, a little, was because of the call for an investigation!
Still, regardless of the reason, we taxpayers are being gouged all along the way and subsidies and tax breaks should stop and be returned going back to at least 2000!
Do you even have to ask?
Make a mass transit system so good that you don't need to buy a car - and gasoline prices would be the least of it. No more car payments, insurance or repair bills.
A third of all Americans live in cities of 50,000 or more - build decent mass transit in those cities and watch the oil industry collapse.
The new jobs being created don't come with benefits or a big enough paycheck to afford a new car. Mass transit will win by default.
Met a person yesterday on the train - wrecked her car and could not afford a new one - so she has a bicycle and rides the train now. Rents a car when she takes a trip.
It cost an average of $8K per year to own a car - it is the easiest big expense to live without - all we need is mass transit.
Also, people will save money by riding transit. Most people think the cost of driving is only gas, parking, and tolls, but this is a gross underestimate. Look at what the IRS allows for business driving--50 cents a mile this year PLUS not only parking and tolls but also depreciation on your car. Even at $3 per gallon, you would have to be getting only 6 mpg for gas to cost you 50 cents a mile.
153 billion dollars of trades take place a day. multiply that by 260 trading days and you get 39,780,000,000,000 (thirty nine trillion seven hundred eighty billion) Half of one percent of that would be roughly 200,000,000,000 (two hundred billion)....
Our public debt is about 14 trillion. We could pay it off over decades this way alone...without changing anything else at all.
The problem is that the financial geniuses of our times like the casino environment of the current situation with the ridiculous 15% capital gains tax. People can sit on their keisters every day trading stocks as they move up and down for small profits on each movement, never paying taxes that in any way reflect the fact that this very activity takes money from average consumers (their 401K pays the extra half penny when it buys, average American's buying stock for its value pay higher prices etc etc)
Let those who are crippling the economy at least pay for the privilege of doing so.
The con played on us that Wall St. provides a market and makes capital available to business is just that.
What societal good is provided by a few guys shuffling electrons in order to profit in the billions at the expense of the rest of the population?
Remember, Wall St. instigated the offshoring of jobs and manufacturing to increase "shareholder value".
A few extremely rich people have us by the jewels, they're gonna keep squeezing until we do something about it.