Who to blame for rising oil prices? Here’s speculation.
You are paying about 40 cents more a gallon for gas than you would if the oil markets were behaving rationally.
Lucky for Houston oil companies they are not.
The law of supply and demand is broken in all things petroleum. Speculators are propping up prices citing geopolitical expectations that are not coming true. And it’s costing the American consumer.
If I wanted to be fashionable, I’d blame the whole thing on foreigners, specifically the oil ministers who run the Organization of the Petroleum Exporting Countries. The group and its allies promised to take 1.2 million barrels a day off the global market to soak up the current glut and drive up prices.
If I’m being honest, though, it’s the oil traders that are truly at fault. They didn’t wait to see if OPEC’s plan would work, instead they took it as gospel and immediately drove up prices to more than $52 a barrel, double what we were paying this time last year.
The latest data, though, shows that the OPEC cuts are not working. Oil, gasoline and diesel inventories are all higher than they were this time last year, when prices were much lower and more accurately reflected the supply and demand picture.
The Energy Information Administration reports that U.S. crude oil stocks rose 6.5 million barrels to 494.8 million barrels in the week that ended January 27. A normal build this time of year is 4.9 million barrels.
Written by Chris Tomlinson