On Gas Prices

Crude oil is an international commodity. Its value is a function of the worldwide supply-demand balance. There are two main accepted benchmarks which reflect crude’s value at any point in time. One is “Brent” crude, a high quality North sea crude, mainly used as a reference for international markets. The second is a quality “West Texas  Intermediate” crude, mainly used as a reference for North America. The two are usually fairly close with only a transportation adjustment. Other crudes are adjusted against these for their quality and location differences. The Dubai/Oman crude is also a benchmark, primarily used for some Asia markets.

The United States is blessed with hydrocarbon resources in excess of its national needs. We import a small quantity for regional quality needs or for some transportation advantage and we export some for the same reasons.

But we are hydrocarbon independent.

In our free market capitalization system, prices of products are based on what the market will bear. And our domestic crude prices have historically been pegged to the international posted prices of crude oil.

When at war, the people sacrifice much. Prices of many things go up, some products are scarce or unavailable, some services are curtailed, many of our young are called upon to fight, others leave home to work in defense industries, etc. We bear the burden willingly because we must.  It’s the right thing to do.

To me, gas is one of those things that is somewhat different. The cost of production, refining and transportation of petroleum products from our own domestic crude sources has really not increased much. Yet the cost at the pump that our citizens have to pay has increased substantially. So the people suffer, many businesses suffer, while the oil companies, who are not violating any laws, are making windfall profits, which we will probably see when the second quarter results are revealed. 

While all of this is legitimate, when a country is at war, it would seem rather unjust for taxpayers to incur substantial added costs while corporations are reaping substantial added profits. There is a transfer of money from the people to corporate entities, and not because of any economic necessity and not because it helps the war effort. In trying war times, it seems to me there should be a better balancing and sharing of the burden.

– – – –   Just the view of a common man