Tag Archives: oil

2016: Oil Prices Near $5/Gallon?

12 Monday Oct 2015

Posted by in About Reno, Business, Ethics, Government, History, Management Practices, Politics, US History

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Oil prices have more excuses than a meth addict. Demand in China, oil refinery fires or in maintenance, OPEC restricting supply, Saudi Arabia flooding the market, etc. Reality in oil pricing is elusive; however, despite what some experts say, next year will likely see the price at the pump jump based on current factors and on politics.

Minor Influence:  Supply and Demand
We have always been told that supply and demand rules the capitalistic market. Most people mistakenly assume that free market means the market can’t be manipulated, but a free market is ripe for manipulation, especially for the unethical business person.

A prime example of market manipulator is Saudi Arabia. Big oil producers are constantly seeking a bigger piece of the oil market, and fracking in the United States has revitalized US oil production. The Saudi response has been to flood the market with oil to bring down the price/barrel, leaving US producers with increased expenses and less revenue.

World oil supply carefully follows demand (Graphics credit: Yardeni.com)

Graphic 1.0:  World oil supply carefully follows demand (Source: Yardeni.com)

Despite temporary manipulations of the oil supply, the ratio of world supply and demand has not significantly changed in recent history. Demand has steadily increased (See Graphic 1.0,) and supply has increased just slightly less than demand. In fact, the supply of oil carefully follows demand so perfectly that it seems unnatural. It’s almost as if oil companies knew that an over supply would force oil prices down and oil shortages would lead to high gas prices, which would stimulate the development of alternative fuels.

Monthly imported crude oil price (1980 to 2014) Source: Energy Information Administration (eia.gov)

Graphic 2.0:  Monthly imported crude oil price (1980 to 2014) Source: Energy Information Administration (eia.gov)

There is no obvious correlation when comparing the wild deviations in crude oil price (See Graphic 2.0) to the world supply and demand (See Graphic 1.0.) This raises the question: If supply and demand doesn’t control the price of oil in the United States, what does?

US and Europe Oil Demand

Graphic 3.0:  US and Europe Oil Demand. The 2008 recession-triggered a drop in demand (Source: Yardeni.com)

The Game of Oil Pricing
World oil demand has been on the increase, but not in the United States and Western Europe (See Graphic 3.0.) The Recession of 2008, pushed demand down in the United States and Western Europe, but as the world economy collapsed, the price of crude oil rocketed up, then dropped dramatically for six months, then returned to its pre-recession price and resumed a steep climb for the next five years. The price of crude oil didn’t coincide with pre-recession, recession, or post recession demand.

Interestingly, retail gas prices (See Graphic 4.0) make even less sense than crude oil prices, as the price at the pump spiked while crude oil prices dropped. This deviation between crude oil prices and retail gas prices would be repeated, in 2012. The common denominator? The Presidential election. 

2016
Some experts are saying oil prices will remain low in 2016. The problem with these predictions are that the demand for oil is increasing, Republicans are self-destructing, and the economy is in good shape. Low prices at the pump in 2016, would be death to Republicans, and that is not what conservatives in the oil industry do in an election year.

October 2008 and 2012 pricing show a dramatic deviation from past years

Graphic 4.0:  October 2008 and 2012 pricing show a dramatic deviation from past years (Source eia.gov)

Since 1980, oil pricing just prior to Presidential elections in the United States follows an interesting pattern. According to the Energy Information Administration (eia.gov) the average retail regular unleaded price has a strong correlation to the  imported crude oil prices; however, during the last two Presidential election years, the October retail price jumped dramatically, while crude oil prices fell (See Graphic 4.0.) The rare deviation in the price of retail regular unleaded gasoline just before an election again indicates that the market was influenced by political, not free-market, forces. 

Oil pricing during Presidential election year follows a consistent pattern

Graphic 5.0:  Oil pricing during Presidential election year follows a consistent pattern

As 2016, is another election year, and as the Republican party is in deep trouble, the conservative leadership in the oil industry will likely follow the past pattern of attempting to create an economic crisis through manipulation of retail oil prices. Based on the Presidential election years since 1980, the average at-the-pump price of regular unleaded (See Graphic 5.0) will be about $270/barrel or around $4.91/gal.

(NOTE:  Personally, it’s hard to believe we could see $4.91/gallon next October. Despite what the trendlines suggest, I would expect the price to be closer to an average of $4.50/gallon. However, I’m confident that the average price of regular unleaded gas will be over $4.25/gallon.)

This is Why (2015 vs the 1970’s)

15 Sunday Mar 2015

Posted by in Aging, Business, Crisis Management, Education, Ethics, Generational, Government, Health, Higher Education, History, Honor, Politics, Pride, Public Image, Taxes, Traditional Media, Universities, US History

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The 1970’s – American Implosion

The Decade of Oil Domination

ENEMIES DOMESTIC AND FOREIGN
America was rocked by the internal conflicts during the 1960’s, and the 1970’s did little to sooth the hearts and minds of the citizens. Inflation slowed slightly in 1970, only to be followed by recession. Then the White House was rocked in 1972, by an ever-growing scandal called ‘Watergate’ after the place where Republican operatives attempted to break into Democratic headquarters. Over the next year it would be revealed that the Republican party, including President Richard Nixon played dirty politics during the President’s re-election campaign and then used power tactics to cover up their misdeeds.

In the Fall of 1972, the world was shaken by a group of Palestinians that took Israeli athletes hostage in Germany’s Summer Olympic Games. The Palestinians were given logistical assistance by German Neo-Nazis which helped them penetrate the athlete’s living area and capture eleven of the Israel delegation (two of the eleven were killed during the invasion of the Israeli rooms.) As the world watched, the Germans eventually attempted a botched night rescue as the hostages were moved to an airport. The German snipers were untrained and had no night vision equipment. Every aspect of the German rescue plan was flawed and the Palestinians eventually made a decision to kill all hostages during a stalemate in the fighting.

In October of 1973, Israel responded to a surprise attack by Egypt and Syria (the Yom Kipper War) with a counter attack. The United States and Russia quickly began resupplying their allies (US/Israel and USSR/Syria-Egypt) with arms and materials. In response the Organization of Arab Petroleum Exporting Countries (OAPEC, later OPEC) began a six month oil embargo that created massive fuel shortages in the United States. This caused the price of oil to rise from $3/barrel to $12/barrel and sparked a new round of inflation.

OUTCOME: American Politics
By the late 1974, the Watergate scandal had ended in resignations by the Vice President and President. Gerald Ford, who had just replaced the Vice President, became the President and limped his administration through the end of Nixon’s term. By the 1976 elections people were done with the Republican party and Jimmy Carter was thrust into the job of restoring faith in government.

OUTCOME:  Oil, Greed, and the Middle East
The OPEC oil embargo and the Munich Massacre sent a message that America should be focusing on the Middle East, but the Watergate scandal had caused an information overload, so many Americans still saw Russia as the main foreign threat. However, because the Middle East had massive oil reserves it became the most strategic region in the world for oil consuming countries. This caused the governments of Russia and the United States to attempt to secure the region for each country’s own self-interest.

The questionable tactics of unscrupulous American oil companies opened new wounds in the Arab world.  Our public image had been defined by U.S. business and political interference in internal matters of many Arab countries. Americans were caught off guard by the festering hate for America in the Middle East.

OUTCOME:  Economic Instability
The roller coaster of inflation, recession, inflation left Americans with a sense of fear about the economy. The typical American was caught by surprise in 1973 when the oil embargo practically put the United States on its knees. The pride America had after beating the odds in World War II and putting a man on the Moon were all erased by one unethical President and our country’s economic vulnerabilities.

THE NEW HOPE EXTINGUISHED
Jimmy Carter’s election in 1976, brought a new hope to America. That produced a new fear for Republicans. Nothing could hurt conservatives more than to have a Democratic President restore America’s self-confidence. President Carter focused on peace and humanitarian initiatives that conservatives said made America look weak. Fortunately for conservatives, the Middle East would be what they needed to derail the Democrats and return to power.

In 1979, Russia invaded Afghanistan and students in Iran overran the American Embassy and took hostages. At the same time a mythical oil crisis (world oil supply dropped by only 4%) drove oil prices up to $39.50 per barrel in one year. The events dominated the news and overshadowed Carter’s re-election campaign. Republicans successfully used political ads to paint Democrats as out of touch during the worst political crisis of Carter’s administration. The events of 1979 could not have been more perfect for the resurgence of the disgraced conservatives.

NEXT:  The 1980’s

THE SERIES:  The 1950’s    The 1960’s    The 1990’s    2000’s    Epilogue

Gasoline Pricing Coincides With Conservatives Political Agenda

30 Tuesday Oct 2012

Posted by in Business, Ethics, Opinion, Politics, Public Relations

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The issue that is clicking with voters during this Presidential campaign is the economy. Despite the fact that America is in a Recovery while the rest of the world struggles economically, conservatives are working hard to maximize the fear of another economic disaster. There is one factor that helps Republican agenda and that is oil prices.

8 Year History of US Gasoline Prices

The cost of oil is a major factor in our economy and conservative oil executives are acutely aware of the impact the price of gasoline has on the psyche of the American consumer. Oil companies (exploration, refining, distribution, and trading of oil products) cannot completely control oil prices, but they can artificially set prices high or low for periods of time to influence the market and our economy.

Cut the revenue for the government, while increasing spending causing a massive debt, starting two wars, and wrecking the economy. George W. Bush MISSION ACCOMPLISHED!

A historical look at the past eight years of oil prices indicates an interesting correlation to a conservative agenda. Shortly before the 2004 Presidential election cycle average U.S. gas prices were under $2.00/gallon. That worked well for the re-election of George W. Bush who needed the economy to seem well-managed under his administration. In 2005 and 2006, gas prices peaked during the summer at just under $3.00/gallon, but prices dropped rapidly just before the 2006 Congressional elections which boosted the image that conservatives were on track with the economy and the two wars in the Middle East.

In 2007, oil prices jumped up again during the summer and then continued to go higher during the Presidential campaign. Oil companies made massive profits and high oil prices reminded skeptical Americans that we needed to have a military presence in the Middle East to keep oil supplies under American control.

This strategy backfired on conservatives as unregulated banking practices brought the American economy to the brink of its second Depression. As it became obvious that is was conservative’s worship of private business and lack of government regulation that caused the disaster, high prices at the pump just made the problem bigger. President George W. Bush was looking incompetent and Republican candidate John McCain was sinking fast in the polls.

Suddenly the U.S. average price of a gallon of gasoline dropped from almost $4.00 to just over $1.50. This occurred in the middle of the summer when gas prices are usually the highest. The historic drop in gas prices didn’t rescue McCain’s bid for the Oval Office, nor did pulling Sarah Palin out of obscurity.

However, low gasoline prices did help to thwart the rapid growth in hybrid and fuel efficient cars that caused a significant drop in the demand of oil in America. Low gasoline prices helped derail many efforts to make alternative energy viable causing losses to those who took a big risk in trying to end dependency on oil. 

If you want to make the economy look bad, gasoline prices are the way to do it

While oil prices increased in the Spring of 2008, gasoline remained steady at around $2.75/gallon with little variation between summer and other seasons until after the 2010 Congressional elections. It was also at this time that the worst of the economic fallout hit the United States. Unprecedented job losses and business failures seemed to stem the up/down cycles of gasoline prices.

That steady trend ended after the Congressional elections with gasoline prices climbing and remaining over $3.00/gallon for the duration of the 2012 Presidential campaign. This coincides with conservatives efforts to put the worst possible face on America’s economy.

Billionaire Oil Refiner David Koch with spouse Julia

Conservative oil executives like David Koch have worked hard to influence the outcome of this year’s elections. Oil executives are spending hundreds of millions of dollars to elect conservatives, and gasoline at almost $4.00/gallon serves their agenda well, and gives them a ready supply of cash.

The problem is that gasoline prices at the current levels will allow alternative energy blossom again, so after the election gasoline prices must come down. If President Obama is re-elected the oil companies will be forced to help improve the economy or face a continued decline in demand. David Koch certainly doesn’t want to be put in that position.