Fuel Pricing: Those Simple Answers...Aren't
Chain letters urging boycotts are missing market realities.
Doug Condra
President/Publisher
Today, as this is written, the allies control most of Iraq and crude oil prices have tumbled. By the time you read this, pump prices for diesel and gasoline may be lower than they are now. Or higher.
As we've gone through this, outcries and finger-pointing by both public and private interests have abounded, as they always do when oil prices jump.
And, as might be expected, lots of proposed solutions are flying around by email.
One such proposal urges the U.S. citizenry to boycott any companies that import oil from the Middle East (you can find them, and how much oil they import, in Department of Energy data).
The sender says he's emailing his message to 30 people. He urges each of them to forward it to 10 more, which would get it to 300 people, who would each send it to 10 more. The sequence would continue, he says, until, you guessed it... "THREE HUNDRED MILLION PEOPLE!" would presumably be primed to boycott oil companies that buy from the Mideast.
Then there's the guy who thinks if no one buys fuel from the two largest oil companies, they will drop their prices. That, he says, will drive everyone's price down.
Another suggestion: Fuel rationing by the federal government because, the sender says, "Gas rationing in the '80s worked, even though we grumbled about it. Why didn't George W. think of this?"
And another, from a trucker: "Boycott both Washington D.C. and New York City.... refuse to deliver [freight] to these cities until the federal government steps in and takes control of the cost of fuel from the oil companies."
We know a guy who directs the fuel buying for a major international airline. It's not the kind of job I'd want; make a penny a gallon mistake and you could bury your company.
Here's his take on the world oil market.
Oil is a commodity and will flow from the lowest-priced market (currently the Middle East) to the highest-priced market (that would be us). If you replace Mideast oil with other oil - say from Russia - it will probably cost more.
And, he says, many of the companies that DOE lists as not buying oil from the Mideast really are buying there. The Venezuelan oil workers' strike cut into U.S. supplies, and is largely responsible for higher fuel prices here. It also forced more buying from the Mideast to meet demand.
That, apparently, is the real world of oil. Add to that the fact that current inventories of diesel fuel are the lowest they've been in years. That's not conducive to holding prices down.
To maintain our standard of living, we burn far more fuel than the rest of the world. Most major oil fields are far away, controlled largely by unstable governments. At the same time, we are not allowed to drill in many of our own potential oil-rich areas.
Boycott Middle East oil? It doesn't appear that's an option.
Even if it were, how much of that standard of living are we willing to give up?
