Who is really profiting from High Gas Prices? The Arabs? The Oil Corporations?
With the continuity of gas prices rising, we can make a simple prediction that we will be paying $8 a gallon in several years. Is $8 per gallon gas coming soon? At the current $4 per gallon rate, many in the lower income communities are struggling even more to conserve their own resources. When prices rise, someone profits from it. People can point to supply and demand. Many are pointing to the emergence of China and India. However, pointing fingers at certain countries is the easy thing to do. The greater challenge is someone stepping up and becoming accountable.
Clarification added July 27, 2008:
http://www.trcb.com/News-and-Society/Energy/Who-is-really-profiting-from-High-Gas-Prices--The-Arabs-The-Oil-Corporations-396.htm
Good Answers (9)
Toby Marie W
Independent Consultant, Acclivus PDP
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The stock holders... ?
Jeffery A T
Social networks, Marketing, and Project Design
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My guess would be the speculators and the oil companies.
In May 2008, Uwe Beckmeyer, transport chief for Germany's Social Democrats, said a recent 25 percent rise in the price of oil to $135 a barrel had nothing to do with underlying supply and demand; "It's pure speculation,"
On the supply side things haven't really changed much. There has been a slowdown in growth on the supply side but no reductions in production.
The Iraq war can be blamed but the reality is that it really hasn't affected the price of oil one way or another except to provide cover for profiteering.
On the demand side we can look to increased worldwide demand for oil (China/India) but it is more likely that the bulk of the increase in oil prices that can be attributed to these emerging markets is due more to speculation than actual demand forces.
Also let us not forget the oil companies themselves who have reported record profits and are fueling the fire by pushing the bulk of those profits into dividends for investors rather than expanding exploration efforts (other than lobbying for drill rights to environmentally sensitive regions) or new technologies.
Links:
- http://en.wikipedia.org/wiki/Oil_price_increases_of_2004-2006
- http://www.usatoday.com/money/industries/energy/2008-07-26-oil-profits_N.ht...
- http://www.essencemontreal.com/index.asp?l=e
Clarification added July 28, 2008:
To the guy who said "I doubt there are profits" ... please tell me you are kidding.
James C B
JCBCapital.com, JCB Capital Performance - Personal Wealth Management, Asset Manager, Financial Planner, Wealth Adviser
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Hi Siddique,
Global demand is increaing the price of energy/food and money is flowing into commodities as a hedge against global inflation - consequently money has flowed out of financial assets.
As oil ran from $85 (2/08) to $147.27 - $12 trillion of global assets have been destroyed. Inflation is causing central banks around the world to raise interest rates to combat rising inflation. As of today, Fed funds futures are predicting that next July Fed funds will be 105 basis pts higher.
The CFTC is investigating if there has been any manipulation/fraud - report due in September.
Remember that we have seen heightened volatility in commodity markets since Mar 5 - commoditiy prices (though driven by increasing demand) may be rising at an unsustainable rate of growth, which may create overbought situations.
Oil $10 (12/98) - $147.27 (July 11) - and $122.50 (Jul 27)
CRB futures $185 (11/01) - $618 (July 2) - and $541 (Jul 24)
Gold $255 (4/01) - $1033.90 (Mar 17) - and $846 (May 4)
Silver $4.54 (1/03) - $21.44 (Mar 17) - and $16.05 (May 1)
Platinum $2308.80 (Mar 4)
Copper $4.26 lbs. (May 5)
Corn from $2.22 (Sep '06) to $7.79 (Jun 27) - and $5.43 (Jul 23)
Wheat from $4.12 (Apr '07) to $13.49 (Feb 17) - and $7.30 (May 29)
Rice from $6.18 (Jul '05) to $24.35 (Apr 18) - and $16.51 (Jul 24)
IMF is awaiting Congressional approval to sell 400 tonnes of gold at an expected average price of $850 in 2008-09. China and Russia as well as OPEC member states remain purchaser for their 'reserve allocation'.
If you believe that a commodity bubble has formed - hope for it to pop. Read about the Hunt brothers and how they speculated on silver during the last global oil crisis of late 1970s early 1980s.
The facts regarding the U.S. dollar are that the dollar has fallen dramatically over the last 8 years.
It has already fallen to - $1.60 to the Euro, falling from $0.82 (Oct '00) a 95% decline, $1.56 today.
The Federal Reserve has made it clear that they will be leaning toward higher interest rates in the future - which should strengthen the U.S. dollar. The Fed fund's futures are pricing in increases before the end of 2008.
However, the greatest pressures on the U.S. dollar have been our National debt, caused by U.S. budget deficits, almost entirely caused by our U.S. entitlement programs, see 2008 U.S. budget details:
Social Entitlement programs make up 69.2% of the 2008 U.S. budget:
$612 billion - Social Security
$391 billion - Medicare
$380 billion - Unemployment and welfare
$280 billion - Medicaid and other health related
$83 billion - Veteran's benefits
$261 billion - Interest on debt (cost of PAYGO systems)
U.S. National debt; $9.4 trillion (over 60% of current year U.S. gdp). To cover our debt we issue Treasuries - we will be forced to issue more (in future years) and the interest rate on their coupons must go up, putting downward pressure on the U.S. dollar.
Total global foreign-exchange reserves surpassed $6 trillion in 2007 (foreign 'surpluses') - the U.S. dollar accounts for 63% while the Euro accounts for 27%, and (misc 10%).
The EU / European bankers are concerned that the Euro may already be overpriced (to the dollar) by 10-30%.
JC Brandon
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James S
Futurism and strategic development at its sharpest. Understanding the future to create advantage today
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Siddique,
This is a question close to my heart. I've been predicting the rise in the price of oil for some time now - and the consequences - and I've had many who have attempted to show it will never happen.
So ... who profits from high oil prices?
Almost everyone apart from the consumer. By everyone I'm thinking about the oil producing countries, the oil companies, numerous governments through their taxation system, speculators (not so much as have been blamed for), etc. The consumer is paying for all of this.
And so where is all the money going?
Ah ha ... that part of the revenue going to oil producing countries is ending up largely in private bank accounts, or to boost military operations. That part of the revenue going to oil companies can be seen in their production profits. That part of the revenue going to goverenments through tax is, well, squandered as always.
All of this does come down to supply and demand, as you've hinted at. But the blame - if there is blame - should not be pointed in the direction of India and China. After all, the rest of the world is being persuaded to use as much oil as possible with extensive efforts going into misinformation regarding the level of reserves, and quietly suppressing R&D into viable alternatives.
Regardless of the present situation there will be a general and increasing cost of oil. This will slowly but surely undermine global sustainability and will continue until the economic pain is so great that viable alternatives will suddenly become attractive.
However, by that time there will have been significant environmental damage - and all that money will have been filtered away.
Regards
James.
Christopher M
Renewable Program Development Manager - Product Trainer - Sales Training at SunGate
America is seriously being taken advantage of ... in some countries, the price per gallon is only .85 cents per gallon.
The best part of gas prices going up, is to give Americans the ability to take control and to say "No to fossil fuels".
Did you know that The United States of America is directly responsible for over 32% of Global Warming? ... Sad but true.
Take control and go green!
Peak Power Solutions
http://www.peakpowerus.com
chrism@peakpowerus.com
Ali S
Corporate Marketing Specialist | Digital Strategist | Skype: Ali.Syme | E: ali.syme@irw.co.uk
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I doubt there are profits...since it's more expensive to find oil (which is the big mission - finding more) and petrochemical companies use a lot of energy to convert that oil in to the things we actually use. I doubt anyone's getting wealthy out of it - if anything, a lot of businesses are struggling.
1- Believe it or not the biggest gainer is the Green cause as people have lost the excuse of gas being "dirt cheap" in comparision to eco- friendly fuels.
2- Speculators
3- Oil company top brass (doubt that is good sign for them as they have to worry about upcoming depletion of resources)
4- Official Revenue collections on Petro taxes (they are getting sky high revenue from Oil taxes)
5- May be automobiles themselves:) as they are resting more in Garages then being on road.
Big Oil, Special fossil fuel interests. And also the environment, through the resulting decrease in demand for carbon producing fuels.
I have written extensively on this topic:
http://lamarguerite.wordpress.com/2008/07/20/rising-gas-prices-helping-with-climate-solution/
http://lamarguerite.wordpress.com/2008/06/09/feeling-josephines-pain/
http://lamarguerite.wordpress.com/2008/06/04/us-gas-prices-are-still-too-cheap/
http://lamarguerite.wordpress.com/2008/05/07/the-connection-between-suv-sales-and-gas-prices/
http://lamarguerite.wordpress.com/2008/05/02/special-fossil-fuel-interests-blocking-progress-on-climate/
http://lamarguerite.wordpress.com/2008/04/30/from-gas-tax-holiday-to-conservation/
http://lamarguerite.wordpress.com/2008/04/28/the-green-power-of-shrinking-wallets/
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Asra I
Sr. Financial Analyst at BP
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In the short term the arabs, latin americans, russians and africans alongwith big oil and their CEOs. In the long term, the entire world bringing an equilibrium to supply and demand by curtailing waste and luxury. The world will also benefit due to increased advancement in technology, new resources like oil sands, offshore drilling, etc and the increased competition in natural resource conversion like wind and solar sources.
