Many of us are suffering today due to high gasoline prices and home heating costs and it may get worse this winter, at least with the cost of home heating oil and natural gas. I have heard like most of you that the BIG OIL companies are reeking lavish profits during this time of severe energy problems for the average Joe. It is very easy to point fingers and jump up and down, crying foul. The Energy giants are gouging us, profiteering at it's worst is being spouted all over the news and at water coolers around the country. Blogs and webpages also mimics these ideas.
So, I am going to try and explain why this is not as bad as some would lead you to believe. First of all we do live in a capitalist society where companies are allowed to sell their products in a free market where prices fluctuate up and down. Any company has the right to charge what it can get for it's product as long as it does not break any laws in the process. BIG OIL does not have much competition so unlike the Walmart's of the world no one is going to slash prices to out sell the other guy. The oil market is a global market where prices are generally set by OPEC and by trading of oil on the world stock and futures markets. The BIG OIL companies from the USA use these prices as well to sell each barrel the pump out of the ground. The price of a barrel is way up now and that leads to profits that are way up.
In addition to this we are in the midst of a refinery crisis due to the latest batch of hurricane related weather disasters. Many refineries were damaged and pipelines were shut down so this proposes a large problem for those companies and for the end users of the products. Our refineries normally run at near full capacity so this kind of interruption creates supply and demand issues that drives up prices in a hurry.
Why do we not have enough refining capacity? You can thank congress and the environmental movement in the USA for that situation. There has not been a refinery built in the USA for nearly thirty years due to the pressure put on politicians to keep the BIG OIL companies from building these behemoth plants in any given city or town. Nobody wants one in their backyard yet everyone screams now that the price of gasoline as well as home heating energy is out of control.
What can we do about it? Well this is the question. Individuals can now buy smaller most fuel efficient vehicles if they choose to do so. You can also cut back on energy consumption around your home in a myriad of different ways. You might even carpool or ride a bike or bus to work. However if you are not so inclined to do these kinds of things you can invest in the markets and buy stocks or mutual funds with energy related holdings. This way you might pay more at the pump but you reap the rewards on the back end in dividends. Keep in mind too that the longer the price of gas stays high the more car companies will invest in alternative technologies to give you the consumer more viable alternatives to the gas guzzling SUV's you have grown accustomed too.
I will continue with this subject in the next blog!
Until then please feel free to give me some feedback on your ideas about BIG OIL and their windfall profits!