Who Understands the Economics of Gas?

Heard on the news this morning that we will probably see $1.00/litre gas in Canada this summer (Approx. $3.80/gallon I think).

Since almost half of the price/litre is tax, and since our oil companies have reported record-shattering profits for the last couple of quarters, can someone explain why this isn't a happy situation for both our government and our oil companies?

We Canadians have an unfortunate tendency to bend over and grab our ankles no matter what is done to us by our politicians and big business - am I right to be extremely pissed off or is there a legit reason for this nonsense?

 

Not to defend Big Oil, but it has been years since anybody invested any significant money into refining capacity. Just to give one example, several years ago, California demanded that gas companies start using MTBE's to reduce pollution, a desirable goal. Given that California is such a huge market, the gas companies made major investments to switch over to MTBEs.

Unforunately, while MTBE did reduce air pollution, it also had a less than desirable effect on ground water. S-o-o-o, California changed it's mind and no longer allows MTBEs. Many of majors decided to mothball their MTBE refineries, instead of converting them back.

Now that we are talking about $100 a barrel oil, the majors are catching heat for closing those refineriers.

Bottom line is that we have NEVER had any kind of rational energy policy. It is all emotion. I was in Sacarmento when Exxon had that little boo boo in Alaska, and I remember people coming unglued over this. But they didn't like it when I pointed out that the Valdez spill represented something like ONE DAY's worth of gas for the state of California. You can't have it both ways. People in California will not allow drilling, fine. But do they stop driving their cars? Nope.

Dr "It's called awl" Tax

 

Good point Dale - I see the Catch-22 of that situation.

Now - what is OPEC's role in what is going to be a gruesome summer at the pump? Is it fair to say that this crisis is artificially created by their desire to cut production?

As a tangential point, is it true or an urban legend that Saudi Arabia promised to increase production, thereby lowering prices, thereby boosting the economy, in time for the election?

Like everyone here, I'm all for free markets and unbridled capitalism - however, price-fixing, collusion and profiteering are not part of true capitalism.

 

Yo, Dale -
Last time I looked at barrel prices (late this morning) it was shy of $40. How did you get to $100/barrel? Or do i really want to know?


Just curious......
James

(It's a good thing my GTC gets >100 mpg just sitting in the barn!)

 

That's actually just the buzz that's driving the nut cases who trade on the futures markets. You see, if this happens and that occurs and the sun rises in the West, why we will have $100 a barrel oil.

Don't worry, after the last bust the most popular bumper sticker here in Texas was one that said, "Lord, just give me one more chance, and I will not blow it like last time."

Take care, Dale

 

$1.11/litre CDA for premium plus today in Vancouver