Oil Market is Rigged

12.06.08 | Comment?

Oil will still burn us in the long run
Oil prices will still burn us all in the long run if we don't act now

In mid-July I penned an entry that gasoline prices would be $8.59/gallon by this time. Well, the last fill up I had was $2.21/gallon. By now I should know better than to predict a rigged industry. I find it very curious that gas prices are functionally the same now as when oil was $18/barrel a few years ago. It’s now around $50/barrel.

The relationship of oil prices to gasoline prices is in no way relevant or predictable. The economic collapse coupled with the backlash of US consumers from the summer peak has led the fixed market (which starts with OPEC and rolls forward through the oil companies) to provide price relief temporarily. This will happen just long enough for the pressure to move from an oil-dependent economy and then they’ll screw us again. We’ve seen this movie, we know how it ends.

I’m hopeful that unlike the 1970’s where we took our eye off the ball, that we stay the course and turn the middle east back into the giant sandbox it is and stop enriching mad men with our addiction. I’m hopeful, but I’m not optimistic. Why? Because we can see that the oil cartel and companies are toying with the market and have found the tolerance range. As long as gas is below $3/gallon for a sustained period of time, people will lose interest in oil independence.

BTW, at $50/barrel the raw price of a gallon of fuel should be $2.55/gallon.

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