Why Is Gas Prices Going Back Up ?

[Mrs. Sharon B. Hodge]

Why Is Gas Prices Going Back Up ?
by Clifford Krauss


The five-month slide in gasoline prices has come to an abrupt halt, with gasoline rising by several cents in recent days amid indicators that the national average could jump to $2 a gallon or higher this spring.

A broad shift in the psychology of the oil market seems to be under way. Oil prices are up more than 40 percent since they bottomed out just below $33 a barrel on Dec. 19. The reversal, after months of declines, suggests that production cuts by the OPEC cartel may be having an effect, along with growing tensions in the Middle East and the sentiment by traders that the precipitous drop in prices went too far.

OPEC, after making windfall profits, more than they have ever made, last year by overcharging the consumers, decided that they could not stand to have a slow period when gas prices had fallen. In order to get the prices back up, they had to create an artificial shortage by cutting back on production. When there is less gas made available, then they can charge more. If they have to, they will cut back so much on production that the consumers will have to line up at the pumps again and wait for hours.

OPEC met with the leaders of oil countries all over the world to get them all to do the same. Russia who has never been known for their cooperativeness, turned them down and left the meetings. Now Russia and the Ukraine will be the only ones in the world without over inflated gas prices.

For six days in a row, drivers have been paying a few more cents a gallon than they did before Christmas. The change has been almost imperceptible for drivers who remember prices soaring above $4 a gallon last summer.

But if the price of gasoline continues rising, it may become another headache for consumers worried about their jobs and the dropping value of their homes and investments. Of course, it will create a huge problem for the consumers, but the big greedy gas industry could care less about what the average person has to go through
because the industry is only concerned with themselves and raking in the money, taken from the average and the poor.

Oil prices are up about 25 percent in the last week alone, in part because of the escalating conflict between Israel and Hamas in Gaza. Rising oil prices have helped push the wholesale price of gasoline up by 40 percent since Dec. 24, leading to predictions by energy experts that retail gasoline prices will spike by as much as 25 percent in coming weeks. Actually it is an excuse made up by OPEC to push up prices faster.

"A lot of people are talking about dollar-a-gallon gasoline, when the wholesale market seems to be pointing to $2 a gallon," said Tom Kloza, chief oil analyst at the Oil Price Information Service. As of Monday, regular gasoline was selling for $1.67 a gallon, on average, up from a recent low of $1.62 on Dec. 30.

The decline in gasoline prices has offered badly needed relief to consumers. A driver buying 50 gallons of gasoline a month has been saving $2 a day compared to a year ago, and $4 a day compared to the price peak in July. For the national economy as a whole, the savings came to around $1 billion a day, according to the Oil Price Information Service.

Among the big winners have been businesses like shipping companies with large transportation costs, commuters who drive long distances to work and consumers with moderate incomes who spend a relatively high percentage of their paychecks on fuel. It's strange though how the cut in shipping cost did not bring retail prices down again, especially food. When gas went up, all of the prices went up everywhere. but when the shipping cost was reduced, all of the prices stayed high and even went up.

The summer's high prices prompted Americans to cut their driving, and the drastic downturn of the economy this fall led to the huge decline in oil prices. But with the Organization of the Petroleum Exporting Countries cutting production, and with refineries trimming their output of gasoline, supply and demand may be coming back into balance according to OPEC. The truth is that it will all be slanted to their own side.

Refineries have cut the number of barrels of crude oil they processed weekly to 14.5 million during December, from 15.4 million, according to the Energy Department. The tighter supplies are putting pressure on retail prices and soon we will all be paying far more than we can afford again. The ones who are out of work will be hit especially hard
since they need a way to go out and find a job, but they will have no money for gas. They will have no money for their mortgages either, and the rate of the homeless in this country will be astronomical. Are you listening Obama? the country will look to you to provide some kind of government housing.

Analysts say the decline in gasoline use may have bottomed out, barring a further big downturn in the economy. MasterCard's SpendingPulse data service, which measures both cash and credit card sales of gasoline, had shown volume declines as sharp as 9 percent during some weeks in the fall. But that number has narrowed considerably as prices have fallen, and one recent week even showed a slight increase in gasoline sales compared to the same week the year before. Consumers are so strapped that they are cutting back in every way, even gas when it is low.

"There will be a real spike in gasoline prices coming in the next four to six weeks," predicted Chris Ruppel, an energy analyst at Execution, a brokerage and research firm. "We are witnessing a sea change in energy market sentiment as Americans appear to be returning to some of their old driving habits just as geopolitical risk is once again a factor in crude prices." Only the very young or very foolish would return to the old ways in this economy.

Oil prices jumped more than 5 percent on Monday alone to close at $48.81 in New York trading, as fighting continued in the Gaza Strip and Iran's OPEC representative said the cartel would hold a special meeting in February. The cartel decided last month to cut output by 2.2 million barrels, on top of earlier cutbacks. Notice, that was on top of earlier cutbacks. They are determined to bring back the long gas lines again, to be able to get anything they want from you.

The AAA auto club reported that the average price for a gallon of unleaded gasoline on Monday was $1.67, up nearly a penny and a half from the day before. That still compares favorably to the national average of $3.10 a gallon a year ago and the record high national average price of $4.11 last July 17.

In contrast to gasoline, diesel prices have not yet bottomed out. A gallon cost $2.40 on Monday, down a fraction of a penny from the day before.

Mr. Kloza said he thought gasoline prices probably hit a bottom last month. He said gasoline prices in California, which frequently leads the rest of the nation in gasoline price swings, bottomed the first week of December and had been rising since.

While gasoline prices felt like a great weight to many consumers on the way up, they have not been an economic cure-all on the way down. The people are trying to conserve, which is what they should do.

"In comparison with between roughly a 40 percent drop in the stock market and a 20 percent drop in home values, the drop in gasoline prices is just a drop in the bucket," said Adam J. Robinson, director of commodities at Armored Wolf L.L.C., a hedge fund.

Mr. Robinson said he was unconvinced that oil and gasoline prices would go back up before long. "I think it is too soon to call a bottom in oil or gasoline because demand is falling faster than OPEC is cutting," he said, but these guys are never honest with their statements.

For so very many years now, OPEC has done this very thing over and over again. Why are we letting them get away with it? Why are all of the governments setting by watching it happen, and not do one thing about it? Something is really wrong with this picture. If someone is good at organizing, get a band of people together, and call the law officials day and night, bombard them with emails, send snail mail, go lobby every
senator or congressman that crosses the floor. Don't let those greedy oil barons and sheiks rob us anymore.

This is a call to action. We have been cheated and robbed for too often, far too long. It is time that we band together and get something done about these rich robbers.