Black Gold, Texas Tea

Living on the eastern end of Long Island is a lot like living on edge of the earth. We are a scant 100 miles from New York City and obviously on an island where there is no escape save a couple ferry routes.  About 25 miles from here is an offshore oil download platform.  It was owned by the Conoco oil company and now, well, I don't know, but it is operational.  It remains a distribution point for this end of the Island.

Regular gas at our local pumps is about $3.60 a gallon now - well above the national $3.12 reported today.  When the rest of the nation spiked $.03 a gallon this last week due to the cold, we went up $.10.  The petroleum downloaded at Conoco was purchased months ago at a far different price but that is another story.

My dad retired from Gulf Oil in the early 70s.  Before he retired, Gulf Oil was hauled into Federal Court to testify to price fixing by the oil companies in Michigan.  Gulf owned reserves in the middle east and the entire supply chain that stretched from there to the gas stations in his district.  Soup to nuts as the saying goes. Big cheese lawyers from Chicago were sent out to defend Gulf Oil and I went with my dad to the federal courthouse as we were going trout fishing and this was only going to take a minute. Actually a 9 day minute.

That was nearly 50 years ago.  The sum total was that oil companies have about a zillion different places where they can add on costs and they can blame everything from the weather to Ma and Pa Kettle as to why the cost at the pump is what it is.  It is so complex that no one.... no judge...no federal court.... no one...NO ONE can get through the smoke screen.

Traders who are either on big oil's trading floor or operating somewhere in the world are trading up prices - speculating.  This upward price push isn't opposed by big oil. Not one bit. The oil on the tanker heading into the canal was purchased a long time ago and at a price a lot less than the speculation price. But when it is offloaded from the tanker it will suddenly and miraculously be at the new price which goes through the same refining/distribution system but at the new cost with all the markups and percentage add ons in place.  It is then just math and you are paying the new price on old oil.  It is very simple really.  If the price goes down next week it is ok - the oil companies will claim that it was purchased at the higher price and the new oil will be at the lower price although you won't remember and they don't care.

If you want proof of the price boondoggle, look at profits - up generally over 50%.  If the profits reflected a high price for the product at the wellhead the profits wouldn't be there.  Refinery profits are stagnant.  The corner station isn't making more on a gallon. It is all this manipulation of product costs that is driving it.

There is a lot more nuance to this than I am saying but the root of it is spot on.  What is galling is that the crude oil price seems to be fixed as if it comes from one source - one well - in the middle east...when the truth is just a fraction of our oil imports - not to mention our own oil production - is or could possibly be effected by events in that part of the world.

Get out of the way America. Big oil has spotted fresh food in the pig trough and you should know better to get between the swine and the feed.