What President Biden should really do about gas prices
Over the years I’ve seen estimates that oil speculators drive up prices by anything from 15 to 25 percent during spikes. (Even the ultra-conservative, market fundamentalist Fed acknowledges that they’re a real factor.) Here’s why they do that.
Traders with connections to the oil companies can also make big bets on the opaque crude oil futures market to drive up the price and also drive up the value of their Exxon shares.
The crude oil that big integrated oil companies use in their own refineries is mostly bought on long-term contracts or through their own production, so the oil companies don’t pay the world price for crude oil when it’s high. Their raw material costs are much lower than they would like us to believe. So when the companies raise the price of gasoline in tandem with the run-up in crude oil prices, they are making big profits because Exxon’s crude oil unit is charging its own refining unit a higher price for crude than is necessary. The accounting shenanigans result in an overall windfall profit but show the companies’ gasoline refineries making little profit, and “upstream” crude-oil production divisions making the lion’s share.
Anyone who doesn’t get that there is clearly a lot of collusion and market manipulation going on is being awfully naive, deliberately or otherwise. And despicable greedheads doing that shit is supposed to be illegal. Serious felonies, in fact. It’s been noted that the Biden administration has been putting in place an unusually strong group of industry regulators. How about starting to bring exploitative prick speculators, whose depraved antics hurt the poor the most, up on charges?
The purpose of commodity markets is supposed to be to allow industries to lock in guaranteed supplies at known prices, so they can plan accordingly. They’re not supposed to be about giving pathologically selfish and irresponsible assholes yet another way to royally screw the rest of us.
It won’t take much, to get them all to pull way back and run for cover. Even if the criminal charges don’t stick in the long run, it’s clearly the right thing to do, both practically and ethically. We’re all sick of getting gouged.
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