Expect oil prices to rise

I may be wrong here, and God knows I’ve been wrong before (ask my wife, she has a litany) but I suspect we are about to see oil prices rise. Again. Why?

Everyone’s first knee-jerk reaction is to blame Washington, PINO (boy, isn’t THAT title appropriate since the Kamala Koup!) Joe. Well, he may have cancelled a lot of drill leases back when he took office, but in actual fact, Joe affects oil prices ‘way less than you think.  As does any president. Price changes occur during their presidency, and we like to bless or blame the incumbent… but the sad truth is that most of the time, they don’t do jack.

What does affect prices? Well, most of the time, it is simple. Fear.

Not whether someone made a big strike in Bumfuckistan, not climate change, not whether Big Oil and Bigger Oil decide to spin off a Lateral Oil…but fear. The REAL people who govern your prices are the traders and analysts who watch the industry and world  news, and when they see something which might affect pricing: they raise their projected prices. They see a missile launched in New Zealand, they worry, so they hedge their buying, which kicks up demand a little – and anyone who ever took Basic Econ knows, when demand goes up, so does pricing. The analyst sees even a fragmentary doubt of a potential hitch in what they have been saying could affect supply – they hedge their bets and prices go up. They may come back down, but for the nonce – any news causes a price rise. Even if Israel and Iran sign a peace treaty and exchange hookers…expect prices to go up. Because analysts will worry that somehow this will lead to a supply issue, or worse, make their predictions look off. Prices will rise on any instability, just due to fear.

It’s ironic – they worry that their supply may be affected which causes them to say “I don’t care if it’s a little higher” and the market says “well, if someone is willing to pay more, we’ll charge more” and away we go to slightly tighter supplies due to higher demand – and higher prices. They CAUSE the instability…but we pay because we have no choice.

The oil companies? They are in the enviable position of being able to raise prices seemingly at will with no consequences, aren’t they?  I love their justifying higher profits as “we still only make the same margins” – yeah, but when your margins are higher than most countries’ GDP? Really? –   Politicians posture, consumers complain…but no one actually does the one thing which would rein any of these folks in – buying less. (I have a regular, separate  rant about how in the ’80s, when margins were tight and fuel economy was important, car companies noted a) truck sales drew far higher margins than car sales b) started asking “How do we make trucks sexy and attractive to folks who wouldn’t buy one. Ah, SUVs…” Now you can’t even BUY a normal car from many companies. )  But we keep buying trucks we don’t use as trucks, giant SUVs “because they are safer” – yeah, but if every other car on the road wasn’t a 6000 pound truck that equation would be moot – well, they have us by the short and curlies, don’t they?

Israel strikes Hezbollah because Hezbollah attacked Israel because Israel retaliated…it’s a hot circular mess and uncomfortably close to oil fields which feed the world. So analysts get scared…and despite importing less than we export (it’s twue, it’s twue – export about 3.5 million barrels per day versus importing 2.4 million a day per Forbes Forbes) it’s that foreign fear that will bounce our oil prices. Again. And, we will buy it. What was it Walt Kelly said in “Pogo”?

But don’t blame Joe, or Trump, or give them credit – because most of the time they have nothing to do with it.

Okay, rant over.

Category: Op-Ed, Society