It's in the Hole, or Life at Wyndfall CC
There's been lots of talk recently about BIG OIL and price gouging. Sooner or later you know the Senate had to stick it's two cents in and round up a whole bunch of CEO's out of golf carts in Palm Springs to come and sort of testify as to whether they might have twisted the knife a bit.Well, the whole experience was apparently unsatisfactory to our Governor Doyle, who has decided to subpoena the same guys to visit Milwaukee in a couple of weeks. Good luck with that. Today's 7 AM guest on WPR was Erin Roth, executive director, Wisconsin Petroleum Council, who had a few things to say on the subject.
And a fine defense of windfall profits it was, that given by Mr. Roth. Those big shot CEO's had nothing on our guy. No, he had every club in the bag, his game hot to go. Even at this early hour he stepped right up to the first tee with the big dog and tthhwackkk!!!, "supply and demand", right on down the middle.
Is it then?
But then you might have to point out to him that his ball has found the rough, as inspection of last year's supply runs for this same period―it is the end of summer, after all―reveals a drop in supply during the first two weeks of September of 5%.
In fact, nearly every year reveals a supply drop somewhere near this time frame as companies tighten inventories in anticipation of the autumn lull.
So the supply situation doesn't seem all that unusual, certainly not to the tune of 36% retail price increases. Demand? Inventories of gasoline increased during the last three months of September while prices continued to hover around $2.75. This is not about supply and demand, my friend, at least on a retail front.
No problem; our boy takes out his new hybrid escape club and, crack!!!, "free markets", high and long for the green. but he doesn't seem to mean the market where you actually buy your gas. So what gives?
Well, you know the whole idea of free markets is that eventually everything comes out in the wash. If I may mix metaphors―and who's going to stop me?―all this kind of works at the speed of a lava lamp in real life, which is simply not fast enough for financial types to achieve financial nirvana. The solution is markets within markets within markets. These futures markets tend to drive spot gasoline markets, and spot gasoline markets drive gasoline pricing. The DOE says this isn't a big part of the pricing picture, but short-term it can have a big effect, especially when driven by an emotional event. That's when we can get hung out to dry. (Okay, metaphorically speaking I've gone full circle: new paragraph)
Ostensibly, the big guys are just along for the ride on this one, to the tune of about 23 billion profit last quarter. The refiners reap the windfalls from prices driven by a bubble on a futures market; that's nothing they control, or so they say. With all this newspeak about fragile supply one naturally questions our golfer if some of these profits will go back into increasing production capability. He pulls out his Cleveland Wedge and fffluff!!, "EPA and NIMBY's messin' every thing up," while nestling the ball right up under the hole for a gimme.
Okay, fine, you got your windfall this time. But while senators and governors are grandstanding we're going to start looking into this futures market. We want to know who these traders are and just how intertwined they might be with BIG OIL. We want to know if BIG OIL has been conspiring to rig the futures market. We want to know just how "free" this little market setup is. We want to know if BIG OIL, the futures market, and the administration are going to turn out to be one and the same.
Mr. Roth gets all huffing and dismissive and says its not like BIG OIL can get up one morning and turn on a switch for higher prices, and that may or may not be fundamentally true.What we want to know is just how easy it is for them, given the opportunity of a Sept. 11 or Katrina, to pour gasoline on the fires of misfortune and hardship.
posted by sequoit @ 7:37 AM
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