Oil Drops to $88 a Barrel … Why does the Price at the Pump not Follow? Trump Says OPEC & Oil Companies Ripping Us Off

 

The price of oil has dropped to approximately $88 a barrel amid economic concerns Oiland the concern that demand for oil consumption will follow. In mid-July 2008 oil was selling for a yearly high of $147 a barrel. So with oil falling 40% since July, why does the national gas average not reflect the same? So why has the price at the pump that reflected these price changes?

At $88 a barrel and falling one would think that the price presently should be under $3.00 nationally. So why isn’t it? Once again, where is the Federal Government and namely the Department of Energy providing oversight? The irony is that the DOE has a web page promoted to reporting price gouging & fixing. So how does one report that the entire practice of oil companies is price fixing and the DOE just turns their head and allows it to happen?

U.S. crude settled down $6.07 at $87.81 a barrel after hitting an eight-month low of $87.56. London Brent crude fell $6.57 to settle at $83.68 a barrel.

Crude prices have plummeted from a peak over $147 a barrel set on July 11 as high fuel prices and the growing financial crisis slow oil demand in top consumer the United States and other industrialized nations.

However, at $88 a barrel one would think that the cost of gas would be below $3.00 a gallon. Imagine what our economy would be doing today if people had more disposable income of their own and were not gouged on a daily basis to fill up their gas tanks. If OPEC is not manipulating the price it would seem that the oil compares are. Donald Trump spoke recently on CNBC as said the following,

“I consider myself to be a great capitalist, but I think the oil companies have been ripping off this country and the world for a long time,” Trump said. “I can see doing something against the oil companies. They’re making numbers–nobody’s ever seen numbers like this. They and OPEC and lots of people together are having a lot of fun.”

Trump has stated that the silver lining to the present economic crisis is the falling price of oil. However, will the consumer ever see the savings or will the oil companies continue to take that what OPEC does not?

Gas prices expected to fall further

There are predictions that gas prices will fall; however, don’t tell that to people in Atlanta, GA where the price of gas is far above the national average.

“We ought to see prices drop pretty quickly,” said American Automobile Association spokesman Geoff Sundstrom. “We’re well on our way to $3 gas within the next week or two.”

The national average price for a gallon of regular, unleaded gasoline fell 2.4 cents to $3.480 from $3.504, according to a daily survey released Tuesday by AAA. That’s down 18% from an all-time high of $4.114 a gallon hit on July 17.



If you liked this post, you may also like these:

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  • Have You Seen the Price of Gas Lately? Oil Consumption Down for First Half of 2006
  • The Environmentalist War on the Price of Gasoline,
  • Gas Climbing Toward $5.00 a Gallon & Trump Says It’s Obama’s Fault




  • Comments

    16 Responses to “Oil Drops to $88 a Barrel … Why does the Price at the Pump not Follow? Trump Says OPEC & Oil Companies Ripping Us Off”

    1. Rob on October 7th, 2008 7:37 am

      For once I completely agreed with “The Donald” or he agreed with me. I was actually shocked yesterday when I saw the segment and he told the truth.

      This was economic terrorism at it’s worst. It was a plan to crash the US economy using a commodity no one can live without. This was the intention by the OPEC nations and it was allowed to happen to due our own lack of desire to reign it all in. The plan actually worked. When a plan is conceived in this fashion, it takes time for it to all happen, but it was only a matter of time. Just let it bleed long enough and it will die.

      American’s mainly have a fixed budget, just like the rest of the world. The one difference was the rest of the world does not do the heavy lifting. That happens in America. When a necessity rises by 300% to 400% something has to give. And it did. People choose not to pay their mortgage and fuel their cars and actually continue to eat. Adding the interest increase in the ARMs and an extra 100 to 200 dollars per month left most folks with a situation that could not be fixed in an instant.

      Here’s how it all shook out -

      With quite a few Americans living in homes they could not afford (about 6 to 10%) due to the sub-prime lending created under the Clinton administration and continued through Barney Frank and Chris Dodd all the while using Freddy Mac and Fannie Mae as the vehicle, the fluctuation in oil bankrupted those 6 to 10 percent and crushed the housing market.

      It only takes about a 7 % drop in any one stable and longterm market to collapse the entire thing. Although oil is longterm it does not have a fixed price, like housing or treasury bills. Those are fixed longterm investments. Oil can not be a longterm investment unless you use dividend re-investment continually over the life of the stock holding. Oil is subject to market turbulence and could fall to 10 dollars a barrel and there will be no return or a negative return. Oil is profitable now, but could be worthless next year.

      It’s complex how it all occurred but the oil inflation was the primer for the pump. (no pun intended).

      With the monies that would have gone to paying the mortgage now going to fuel the car(s) to get to work, there was bound to be a fall out eventually. And it did happen. As I said, Americans are usually on a fixed income even if they are working. There is only so much money per month coming in. With more of that money going to fuel there was less and less going to interest and principle on mortgages. The sub-prime mortgage was 100% interest and zero principle. It’s not practical to think people are going to bicycle 20 to 30 miles to work. Gas must be purchased.

      Now, add in the continued checking and re-checking of the prime rate charged by banks lending over night or to consumers with terrific credit to fight inflation by Alan Greespan and the Federal Reserve, and the volatility of the free market was in dire straits.

      It sure isn’t pretty what’s happening, that’s for sure, and I sure don’t like this giant handout one bit, but hopefully the markets will correct themselves and this will not happen again. (I’m not sure this handout will work at all, in fact I doubt it. Free markets do not work like that.)

      Allowing a huge handout only prevents the natural process of re-organization in a free market. So, in turn the pain will last longer then normal.

      If there was ever a reason for a war for oil, this was it. Economic terrorism launched by the OPEC states is as good a reason as you will ever find.

    2. Wily Trax on October 7th, 2008 7:38 am

      Oil companies are ripping us off?

      STOP THE PRESSES!!!

      Wow, next thing you know the banks are going to start ripping us off.

      http://www.wilytrax.com

    3. john staton on October 7th, 2008 7:39 am

      The “price of oil” you see is a spot future price for a particular crude, West Texas Light as an example for delivery at future date. It is not a contract price retroactive to existing contracts. Crude mix into the refinery, refinery slate of production and ultimately consumer demand determines price at pump.

    4. ayfit on October 7th, 2008 7:44 am

      Plain and simple–BUSH ADMENISTRATION–YOU KNOW THAT CLOWN YOU GUYS PUT IN THWE WHITE HOUSE EIGHT YEARS AGO.

    5. Buster on October 7th, 2008 7:47 am

      I often wonder about this, You would think the oil companys get 5 gallons of gas from 1 barrel of oil.
      Just wait till the oil companys print there profits next quarter I predict another record profit for the oil companys

    6. Richard on October 7th, 2008 9:23 am

      In my area, anyway, prices at the pump have been falling.

      There is always a time lag between changes of prices on futures markets and their reflection at the pump. Also, all of the markets have been so volatile lately that if Wall Street stabilizes, oil might just shoot back up again … apparently oil prices are being knocked down on the outlook for a recession, maybe a severe one, and consequently less demand.

      I guess that’s what they call a Hobson’s choice situation … a battered economy will at least help drivers.

    7. Bob in Florida on October 7th, 2008 10:00 am

      I think Richard has a point, but not the whole story.
      The real oil company rip off is found in the way they raise or lower prices….when oil was going up daily (hourly), oil companies (including their distribution networks – wholesalers and retailers) were almost instantly raising the at pump price to reflect the cost increase to ‘replace’ a gallon of gas in the holding tank. Now that prices are falling, the reverse pricing policy isn’t in effect, they are selling the gas at a price to recover their ‘purchase price’ of the gas in the holding tank, not at the lower price it will cost to replace that gas. This gives the oil companies, wholesalers and retailer a better profit margin and why we see price increases happen so fast, and decrease so slowly…

    8. Rob on October 7th, 2008 10:01 am

      Oil companies make too much! That’s funny.. really it is.

      Say there are only 1000 barrels of oil available. The demand for those 1000 barrels would be astronomical. The price would be 1 billion dollars per barrel or more.

      Not too many would be able to buy those barrels. It’s all about supply and demand.

      Now if there are 1 billion barrels per year available the price drops. The price is completely reflective of the amount of supply in the pipeline, not in the ground.

      As the supply chain widens and more crude becomes available there needs to be consumers for those barrels, otherwise the oil is worthless if no one has a need. It works like this in any free market. (not to argue whether or not the oil industry is free-market. Some areas are / some are not. And that’s a different argument for a different day.)

      When the oil companies get the “product” i.e. oil. They must refine the oil. Refining is a combination of many regional fuels, jet-a and byproducts used in other goods.

      As the demand rises, there is the need for more refining… and as they refine more barrels they are paid per “unit” of refinement and distribution.

      When you take into account the amount of money paid to the oil companies it is 4% in total. DUE TO THE LARGE AMOUNT OF PRODUCT THEY MOVE, THEY ARE PAID WHAT ADDS UP TO A LARGE DOLLAR AMOUNT.

      Now, if they moved only the 1000 barrels I referenced earlier, they would make no where near the amount of money they do today even though the price at the end of the day would equal the same to OPEC.

      The amount of money made by the oil companies is entirely related to mass volume.

      Why should they NOT make a profit of 4%? That’s not capitalism to say otherwise.

      If you moved 1000 “units” of widgets at 4% you would be paid accordingly. If you moved 1 billion “units” of widgets, should you still be paid on the baseline of 1000 widgets? I doubt you or anyone would feel adequately compensated for your hard work.

      The movement of the “units” is the payday the oil companies see, not the baseline dollars per unit of drilled oil by OPEC.

      In my opinion, OPEC has gotten off to lightly in the States because everyone focuses on the “evil” oil companies.

      If every company relied on a baseline of 4% profit, most would never get past the business blueprint due to the fact that few companies sell as many “units” as the oil companies or McDonalds.

      You either need mass distribution or high profit ratio to continue in any business. That’s business 101.

      Personally, I like doing business with a company that attempts to keep prices low due to mass volume and buying power opposed to a company with few customers and little buying power.

      A company with mass distribution and buying power keeps prices low, or customers go to their competitor who will lower the price a few points to attract those customers.

    9. da_wench on October 7th, 2008 10:15 am

      #4 AMEN! I’m not one of those “guys” who put Bush in office except that maybe I didn’t get involved more in the campaign for Gore. Not this time. People need to read the facts and stop listening to Gramps and Caribou Barbie. THEY ARE NOT THE SOLUTION…THEY ARE JUST MORE OF THE SAME. Barack is not Muslim, he does not “pal around with terrorists” and Sarah, honey, Iraq is not our “neighbor”. Maybe you need to go to Geography camp as well.

    10. scott on October 7th, 2008 11:18 am

      Bush is NOT the reason for the economic fallout. He is an easy target for the Dems because the Dems think Americans are dumb as a whole, which is why there trying to play to the dumbness of America by saying McCain is more of Bush. As you can see on this board by the likes of da wench, it has worked!

      She never said Iraq was OUR neighbor you dumb twit! And yes Obama does “pal around with terrorists.” Even CNN (almost as left as you can get) is saying the Anti-Christ lied about his relationship with Ayers.

    11. Maggie on October 7th, 2008 4:53 pm

      You thought Acorn was gone from the package..NOTTTTT… good ole Barney Frank..

      October 7, 2008 —

      IF you thought the trillion- dollar-plus “financial-rescue plan” signed into law Friday had been stripped of the radical group ACORN, think again: The Chicago-based Association of Community Organizations for Reform Now’s fingerprints are still all over the law.

      ACORN’s participation in “fixing” a crisis it helped create is flabbergasting.

      For decades, the left-wing activist group pressured lenders to give loans to lower-income borrowers who couldn’t otherwise afford homes. The grateful homeowners then become political recruits, serving as foot soldiers for ACORN’s radical agenda.

      Problem is, such mortgages are now going bad all across America. ACORN’s answer: Pressuring the banks not to foreclose on bad risks. And now, with the “rescue” bill, they’re getting ready to simply rewrite mortgages to make them affordable.

      House Republicans removed one pro-ACORN measure from the rescue bill – torpedoeing a provision devoting 20 percent of all profits from the bailout to a housing slush fund – which would’ve funneled money to ACORN and similar groups.

      In its place, however, ACORN’s favorite lawmakers – led by Maxine Waters (D-Calif.) and Barney Frank (D-Mass.) – got ACORN-championed “foreclosure-mitigation” provisions into the rescue.

      This will radically expand the federal role in meddling with mortgage loans. The key sections mandate that the Treasury “consent” to rewriting loans to prevent foreclosures – not only by reducing interest, but also by cutting loan principal.

      Stuck with a $300,000 mortgage you can’t pay? Get the government to wave its magic wand and cut your debt to $150,000.

      The deal is only for those who have fallen behind on their mortgages, of course – not for all you chumps who’ve been paying on time.

      And it’s a good bet that ACORN mortgage counselors will “help” decide which distressed borrowers benefit, and how.

      The group’s housing arm, the Acorn Housing Corp., is already funded with millions of taxpayer dollars to renegotiate loans for low-income people who should have never received them in the first place. Loan modification is ACORN’s bread and butter.

      And when the group doesn’t get what it wants, it will sue, protest and shake down until business and government bend again.

      Rep. John Culberson (R-Texas) foresees havoc: “Liberals who manage these programs will give away millions of free or reduced homes in neighborhoods all over America to families who could not otherwise afford them.

      “The federal government now has the power to create federal housing projects, house by house, in neighborhoods all over America. Just imagine what that means for property values and the safety and security of your neighborhood.”

      All this comes on top of the $5 billion ACORN-backed housing bill passed in July, which hands $600 million-plus to ACORN and similar groups to bail out homeowners under water and help countless more risky loan prospects.

      During the floor debate on Friday, Reps. Frank and Waters assured Democratic colleagues that they had personally lobbied Treasury Secretary Hank Paulson on these measures and would press him to consent to “do the kind of loan modifications we’ve been urging.”

      Waters exulted: “We’re in charge! . . . We own them now.”

      If the banks and others that collect payments on these distressed mortgages don’t write down enough loan principal to keep Rep. Frank happy, he threatens hearings and new legislation next year.

      He’ll have the backing of ACORN. ACORN President Maude Hurd warns that her “members plan to hold Secretary Paulson accountable and ensure he uses this authority to make streamlined loan modifications a priority for struggling American families.”

      What’s next? Principal write-downs on credit cards and car loans? What incentive do responsible borrowers have left to pay their bills on time?

      As independent housing-bubble analyst and blogger Patrick Killelea (patricknet) notes: “Nobody was ever forced to borrow money. People who borrowed too much money made a mistake. If they can do that with impunity, they will keep on doing it . . . Every prevented foreclosure also prevents a deserving family from buying at a reasonable price.”

      Thanks to ACORN, the bailout enshrines the homeownership-at-all-costs mentality that got us into this mess in the first place.

      http://www.nypost.com/php/pfriendly/print.php?

      url=http://www.nypost.com/seven/10072008/postopini

      on/opedcolumnists/rescue_rewards_housing_hustlers_132399.htm

    12. Maggie on October 7th, 2008 5:15 pm

      Seems to me the previous administration thought Saddam had Weapons of Mass destruction also. I suppose they were after oil, is why they all said this too..? 3

      One way or the other, we are determined to deny Iraq the capacity to develop weapons of mass destruction and the missiles to deliver them. That is our bottom line.”
      -President Bill Clinton, Feb. 4, 1998

      “If Saddam rejects peace and we have to use force, our purpose is clear. We want to seriously diminish the threat posed by Iraq’s weapons of mass destruction program.”
      -President Bill Clinton, Feb. 17, 1998

      “Iraq is a long way from [here], but what happens there matters a great deal here. For the risks that the leaders of a rogue state will use nuclear, chemical or biological weapons against us or our allies is the greatest security threat we face.”
      -Madeline Albright, Feb 18, 1998

      “He will use those weapons of mass destruction again, as he has ten times since 1983.”
      -Sandy Berger, Clinton National Security Adviser, Feb, 18, 1998

      “[W]e urge you, after consulting with Congress, and consistent with the U.S. Constitution and laws, to take necessary actions (including, if appropriate, air and missile strikes on suspect Iraqi sites) to respond effectively to the threat posed by Iraq’s refusal to end its weapons of mass destruction programs.”
      Letter to President Clinton, signed by:
      - Democratic Senators Carl Levin, Tom Daschle, John Kerry, and others, Oct. 9, 1998

      “Saddam Hussein has been engaged in the development of weapons of mass destruction technology which is a threat to countries in the region and he has made a mockery of the weapons inspection process.”
      -Rep. Nancy Pelosi (D, CA), Dec. 16, 1998

      “Hussein has . chosen to spend his money on building weapons of mass destruction and palaces for his cronies.”
      - Madeline Albright, Clinton Secretary of State, Nov. 10, 1999

      The oil reason is cleary far fetched.. We could’ve kept our billions spent on that war and bought much oil by now.

      I voted for Bill Clinton the first time.. There were all kinds of stories going around about him, but I chose to ignore them and vote.. By the time his second term came up..forget it.. so many gates..so little time.. I will never forget seeing Juanita Broaddrick on Dateline.. And this is the man people were saying was good with women’s issues? Many around him were shady people.. now we are seeing what some of his policies have done..to the economy, house of cards.. Now the democrat party tries for the most part to keep their distance from him. I’m sure even more after he came out and said they are responsible for blocking tighter regulations in Congress.

      Obama came to the Senate in 2005,, 2 years of that he has spent campaigning ..since early Feb. 2007.. Sure he’s came a long way from where he started.. but that doesn’t mean I think he’s qualified to be president. Like I said Franklin Raines was a janitor’s son.. Harvard Graduate and Rhodes Scholar.. he worked for Clinton..went on to be CEO of Fannie Mae.walked off with 400 plus million.. Jamie Gorelick worked for Clinton and went to work as a CEO at Fannie with no background at all in Financing..she walked off with about 27 million.. Some of them cooked the books.

    13. Maggie on October 7th, 2008 5:40 pm
    14. Murph on October 7th, 2008 6:14 pm

      Democrat controlled Congress will do nothing because they are bought and paid for by the oil companies.Why are they not helping the people of the USA? They will pass something if they can put 112 billion of PORK to it! How can we recall Congress!!

    15. A New Girl on October 7th, 2008 11:08 pm

      Hmnn….OPEC and Oil Companies ripping us off?

      Now, there is the understatement of the Century.

      Question is,,,,,since most are aware that this has been their MO for many years—-is it ever going to change???

      The answer is glaringly obvious…..we’ve really got to DRILL DRILL DRILL here in the States and keep putting alternate energy sources first and foremost on the list of things to accomplish under the new Administration….REP or DEM!

    16. Tatiana on October 10th, 2008 12:31 pm

      Very useful post. where can i find more articles about gas prices?

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