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Oil Prices Scam or Fair

OIL; a contrarian point of view

Gasoline sold for .87 the week before the US went to war. Keep that in mind. Oil has shot up in price NOT because of the supply of oil. NOT because of the cost of production. Not because of the new demand in India and China.

Oil has gone up because of speculators. Pure and horribly simple.

Am I against that? Yes and no. The U.S. already has components of “war profiteering” prohibition laws on its books. This means, in some manner or other, that if a firm is found to be enjoying excess profits because of a war, its profits can be garnished by the government. OR at least that is the idea. Few profiteers have ever been taken to court since most of them are buddies of lobbyiests who are buddies with lame duck officers of presidential administrations.

It is also a fact that India and China are buying more oil. However, a deeper review is applicable on these fronts.

Russia and Venezuela have very cheap oil. They sell some on the “spot” market. Thus, since the Chinese people can’t afford the real cost of oil, nor can most of India, subsidies come into play. Subsidies do not exist yet in the oil fields in the U.S., so, Americans pay full market price for oil.

It is also a fact that of the retail price per barrel, America only imports about 19% of its needs. We have age old-oil fields in Oklahoma, Texas, California and elsewhere and we were supposed to be enjoying the Alaskan oil but illegal agreements in that industry figured out how to swap–sell it to Japan and buy Mexican oil. That does not make sense since Mexico can sell their oil to Japan; that is the most convoluted process in the industry. At least this is the story Californians have been handed since the day that the Alaskan Pipeline was supposed to fill California oil refineries decades ago but instead, the oil went to Asia.

Thus, if India and China stopped buying oil, the price would drop like the price of housing but even more! People need houses, they don’t need oil. People need private means of transportation but those means do not need to have oil as a base of the fuel or engines.

So, while we saw, for 3-5 straight years, house prices in most of the US rise disproportionately to the values of the buildings and land and then, begin their current drop–the same could occur to the oil industry! The oil industry is being driven by the same type of speculation as the housing industry was.

Why do I feel a huge drop in the price of oil is inevitable? Because those components of business, politics, and plain old speculation, always come into play. Always. We already see people driving less. We see innovators making cars that use less gasoline and others that use no gasoline!

When a new American president brings home the Afghanistan and Iraq-located U.S. soldiers, U.S. oil prices will drop since our military won’t provoke or permit speculation in pricing.

It would not amaze me at all, if, instead of a monster price for oil, that its price will drop back to its price during the birth of the 60s’s; 25 cents a gallon of gas. Few people will be buying it because, like any other industry, it will have lived its life and customers will have moved onto different fuels and methods of propulsion.

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About the Author

Kevin Kemper, 2 firms; biz consulting and RE brokerage
Phoenix, AZ 85015

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