This seems to fly in the face of popular opinion these days.
With the partial shutdown of Prudhoe Bay last week, motorists who have felt the pain at the pump had more to moan about as the simple dynamics of supply and demand kept the prices hovering at a level that seemed unfathomable a few years ago.
This is the other side of coin that's got people griping about the price at the pump.
Bill Cosby used to do a routine called "Oops". This would qualify too.
The latest target of drivers’ venom is BP PLC, which admitted it failed to properly test and maintain pipes that became corroded and leaked twice this year near the edge of the Arctic Ocean.
Not good. And of course when it rains...
While BP considers installing temporary lines to bypass trouble spots in leaky pipes, the loss of more than 200,000 barrels of Alaskan crude a day will continue to contribute to the high price and $3-per-gallon gas is likely to become the norm until the desire for it declines.
It's Econ 101.
“Whenever there is a disruption, whether political unrest in Nigeria or worries about what will happen in Iran or the hurricanes in the Gulf of Mexico last year, if you lose supply in one of these places it’s harder to find,” said Ron Planting, an economist with the American Petroleum Institute.
But it's the money invested in the speculative or Futures markets that gets people the most nervous. So, what's the prediction?
Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, said he remembers when energy officials said the price of gas wouldn’t top $2 a gallon. Now, the reality is we’ll probably never see those prices again as crude oil rises about $10 a barrel each year.
“I have a hard time believing we’re going to see a dramatic drop in price over the next few years unless the world economy takes a turn for the worse,” Flynn said. “I think we’re going to be in a boom time for oil for the next 20 years.”
That's what someone in the Futures market has to say, FYI.
But, for those who complain about oil company profits, this may sum it up best:
“People seem to think this is shocking and outrageous,” he (Severin Borenstein, director of the University of California Energy Institute) said. “Gas costs a lot and anyone who has it is going to make more money. It’s like asking someone in San Francisco to sell a home below market price because they’re already making a lot of money.”
Would you?
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