Wednesday, May 10, 2006

Gas Prices Will Not Go Down, Ever

Sorry to sound so pessimistic today, but all the news surrounding the oil industry is postive.

Yes, that's right positive.

Wednesday is the day that the total amount of POL (Petroleum, Oil, Lubricants) is added up nationwide and the numbers are released and analyzed by Wall Street. This gives investors and idea about how much supply is out there so they can set prices accordingly. Ever since Katrina last fall supplies have been low because oil platforms and refining capacity were knocked offline.

However, during the past two weeks supplies of crude and gasoline have risen above expectations, an act that normally forces prices down. In addition, it was reported today that gas consumption was slightly lower during the past month then during the same time last year. Another good sign, in that Americans are finally cutting back a little on their driving when faced with $3.24 a gallon gas. This also didn't do much for the over all price of crude, which went up.

However, when the opposite happens, say supplies drop or are not quite as high as predicted by Wall Street then prices jump immediately. If Iran rattles its nuclear saber prices go up. Nigerians threaten to disrupt supplies, prices go up.

But when even the smallest amount of good news comes out nothing happens. Instead the analysts say it's not enough.

Despite the headline of this CBS MarketWatch story, prices were up one hour after it was posted. The story may not intend to, but it does detail all the reasons why prices will not drop. That reason is to many people are making money off $72 per barrell oil. The oil companies, their investors, the countries with the oil and commodity speculators are cleaning up right now and since they have the ability to control prices, and thus how much they make, there is no logical reason for them to alter the current pricing levels.

After all, what would you do if you were in charge of giving your own raise at work?

So get used to paying $3 or $4 or $5 per gallon. Until the American people decide enough is enough and force the issue through massive conservation efforts this is what we are in for.


Post a Comment

<< Home