Is There An Oil Industry Conspiracy Against Barack Obama?

Without such much as a jot or tittle of evidence, other than a downtick in the unemployment numbers, an entire conspiracy was launched by Jack Welch and others over Friday’s unemployment numbers released by the Bureau of Labor Statistics.

Mr. Welch was finally forced to admit that his allegation involving those “Chicago guys’ trying to “change numbers” was baseless, just like all of the right-wing conspiracies in the Age of the Scary Negro.

All of which prompted a thoughtful commenter to write the following regarding my piece on this ridiculous conspiracy:

The conspiracy that I want answers to involve gas prices. In June of 08 when we had record gas prices of nearly $4.00/gal the price of a barrel of oil was over $130.00 dollars. Now, we have nearly the same gas prices, but the cost of a barrel of oil is slightly over $90.00. What gives here? Am I the only one that thinks the oil industry is trying to influence the election?

Kabe

Because gasoline represents about 50%  of the U.S. consumption of petroleum products and the Department of Transportation and the U.S. Energy Information Administration claim that the average household purchases about 1,100 gallons of gas every year, I checked on Kabe’s numbers to see if he got them right. Because essentially each penny increase in gasoline represents a tax on consumers.

I found that, as of today, West Texas Intermediate (the grade used in benchmark oil pricing) is priced at $89.92 a barrel.

I then checked on the price of a barrel of oil in June of 2008 and I found the following:

June 6, 2008 $138.54
June 13, 2008 $134.86
June 20, 2008 $135.36
June 27, 2008 $140.21

So, it appears that not only was Kabe right, his inquiry actually underestimates the disparity between the current gas/crude ratio and the ratio of 2008, when George Bush was president (crude peaked that year in July at $145 a barrel). We can clearly see that gasoline is higher now than it appears it should be, if oil prices, as we have always been told, determine most of the cost of gasoline.

I then checked on how the cost of a gallon of gas breaks down to see if crude oil pricing does indeed represent a substantial part of the cost:

As you can see, the price of crude oil both in the summer of 2008 and into January of 2012 represented around 80% of the cost of a gallon of gas. In fact here is a graph that shows the steady rise, since 2000, of crude oil as a share of the cost of gasoline and particularly the spikes in the summer of 2008 and 2012:

Now, from these data we would expect that since crude oil has represented and continues to represent such a large part of the price of a gallon of gasoline, that lower oil prices today ($90 a barrel) than in the summer of 2008 (about $140 per barrel), then gas prices should be much lower than they are.

But as we all know, despite the drop in crude oil prices, gasoline remains stubbornly high. Here is a chart that demonstrates the problem:

As you can see quite clearly, the gap between the price of crude and the cost of gasoline was quite dramatic in the summer of 2008—when a Republican administration was under siege and a Republican candidate for president was trying to gain traction against Barack Obama.

Thus, those of us who know that Republicans are in the pockets of the oil industry suspect that something nefarious is at work here. But we should hesitate to advance, without corroborating evidence, some kind of overarching conspiracy designed to elect Mittens. There are plenty of reasonable-sounding explanations available that have nothing to do with an industry conspiracy. Just type into Google, “Why are gas prices so high now?” and you will get 96,700,000 results. Here is one you should check out and here is another and here is another and here is another, just as examples.

Notwithstanding those explanations, there remains no doubt in my mind that bidnessmen in the oil industry want milky Mitt Romney in power. But we need more evidence than the numbers and graphs I presented above, lest we become like Jack Welch and other paranoiacs that people the right-wing conspiracy industry.

What we need is some tenacious investigative journalist or journalists to investigate, to demand an explanation from representatives of and players in the industry, to have them explain why things are operating so asymmetrically today, to have them explain why things seem designed to produce public frustration—which Romney and Ryan and Republicans everywhere are exploiting—with the current occupant of the White’s House.

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9 Comments

  1. Treeske

     /  October 7, 2012

    With an Oligarchy already in power, will be difficult to find an independent investigative reporter with guts enough to present the facts. That’s all folks!

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    • Duane

       /  October 7, 2012

      See below, Treeske. There are some independent journalists out there, albeit fewer and fewer all the time.

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  2. The investigative reporters are all dead save a few at The Nation and Mother Jones. MSNBC is a front, as is NPR, for a subtle-but-persistent right wing slant. We are all citizen soldiers in this war which will either thwart the fascists or hasten the return to global feudalism. It is probable that the vote has already been rigged by the voting machine companies. The only hope is for every single progressive vote to VOTE. Even that may not be enough.

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    • Sorry for the length of this response, but you made me think:

      I disagree about MSNBC and NPR, as far as the charge that they present a “subtle-but-persistent right wing slant.” They certainly do at times (NPR especially at times), in terms of the stories they choose to emphasize, but overall I think they present analysis of the news that isn’t readily available on radio and television here where I live.

      If it weren’t for MSNBC and NPR, folks around here would be left with Fox and Rush Limbaugh. And I mean that (local broadcast journalists are, uh, not exactly little Edward R. Murrows). MSNBC’s Rachel Maddow, Lawrence O’Donnell, Melissa Harris Perry, and Chris Hayes offer an analysis, in depth at times, that aren’t available anywhere else (except PBS) that is readily accessible to general audiences who get their journalism via television in areas like where I live.

      As far as investigative reporting–the heart and soul of effective journalism–there has been a dramatic decline. Much of it has to do with the advent of the Internet, which, as J.W. August pointed out, has fragmented advertisement, such that the once powerful broadcast networks and print institutions have lost revenues, revenues which they need to pursue long-term stories that may, or may not, produce fruit. August states the obvious: these kinds of stories need time and resources and the “need to be able to fail,” if the story doesn’t pan out.

      He also mentions the litigious nature of life these days, and the resources needed to defend stories. I will mention that I was asked by the editor of the Joplin Globe to take down a piece I wrote, a piece I spent a lot of time researching, that mentioned a big donor family from Joplin, the Humphreys (who has considerable national influence to boot) who gives lots of money to right-wing causes. Why? The threat of a lawsuit. It was acknowledged that nothing in the story was inaccurate, but the piece was submitted to at least two corporate lawyers who suggested it be withdrawn in order to avoid potential (read: co$tly) litigation. That stuff changes how the news business operates and changes its journalistic product.

      Related to this point, SLAPP suits are being used to silence a lot of bloggers and other folks who dare to criticize big-time players. SLAPP is an acronym for “strategic lawsuit against public participation,” which essentially is a strategy designed to force writers to defend themselves against frivolous but costly litigation in hopes they will say to hell with it and give up.

      August also points out that cable TV has cut into the broadcast revenue of the networks, which used to have extensive journalistic footprints. Cable TV doesn’t specialize in investigative reporting, as you know, but offers lightning-quick, if often inaccurate, analysis of developing stories. Thus the result is more talk and less real news.

      And August mentions the staff cuts and the “do more with less” attitude that prevails across the broadcast and print business, which, he says, affects the quality of the product. Again, I will mention here that I was cut off from the financial support of the Joplin Globe newspaper due to alleged anticipated declines in revenue (which I doubt ever happened in this market), which just goes to show that the industry is super-sensitive to the metamorphosis in how folks receive their “news.”

      I will say too that people (in numbers large enough to matter to the bottom line) these days generally don’t want a long piece of journalism that requires sustained attention to get the entire picture. They want, as, say, USA Today provides, short pieces that get to the point with very little detail and requiring no more than a minute or two to browse through. Don’t get me wrong, there is still a place for 60 Minutes-like outlets, but such outlets are shrinking fast.

      Let’s face it: Investigative journalism, of the kind that can make a real difference, constitutes a very small universe these days. A lot of the high-profile stuff is done via big-whig journalists like Bob Woodward, who write books for popular consumption, not necessarily to expose corruption. His latest work appears to be designed to appeal to those who don’t like President Obama all that much and are willing to spend a few bucks to satisfy that anti-Obama jones.

      But there are some non-profit groups, such as ProPublica, that are doing good work, work in the public interest. As ProPublica states, these “new models” of journalism are,

      necessary to carry forward some of the great work of journalism in the public interest that is such an integral part of self-government, and thus an important bulwark of our democracy.

      It may be that such non-profits constitute the future of aggressive and effective investigative journalism in an increasingly news-Balkanized America. It will then be the job of bloggers and others to get the news they produce out to the folks, just like bloggers tend to do now with the big-time for-profits that are still doing that kind of reporting. And that is where your “We are all citizen soldiers in this war which will either thwart the fascists or hasten the return to global feudalism” comes in.

      Duane

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  3. Clearly it is refinery problems that have led to excessive prices and shortages in California. However, the circumstantial evidence for excessive prices in general would seem to point to a conspiracy of some kind. It would have to be of massive size, but I do not discount it.

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    • Nor do I, Jim. I just wish there was someone (perhaps there is) who was looking into it in an in-depth way that could provide some explanation for the obvious difference between now and four years ago.

      Duane

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  4. ansonburlingame

     /  October 8, 2012

    I stick strictly to the economics of the question related to the rise of gasoline prices. As I have been doing of late, be sure you use apples and apples to compare “then year and this year” prices of gasoline, for starters.

    In 2000, per the posted graph, gasoline cost $1.38 per gallon. IF ONLY inflation was involved that same gallon would cost $1.93 today a rise of about 35%, again only due to inflation.

    But gasoline today costs $3.38 an increase in $2.00 per gallon comparing “then” year prices to this year. But in comparing apples to apples it was only a $1.45 increase. So the REAL question is why such an increase, $1.45, using “this years” prices.

    According to the above graphs the cost of crude oil drives the bulk of the price. Yet crude oil went down from a peak of $145 to now $90, a $50 per barrel drop in price or a 34% DROP in cost. Well if inflation drove prices UP by about 35% and cost of crude drove it DOWN by the same percentage, all else being equal the cost of gasoline should have remained unchanged over the last 11 years, right?

    But gasoline went UP by 75% (apples to apples percentage). Big oil profits alone is the accusation herein I suppose. To me that is lacking in substance at least in part, a large part.

    The cost of a barrel of crude sold at the “well head” so to speak dropped for sure. But first of all that barrel must be transported to the refinery. Have those costs skyrocketed, shipping and trucking and rail costs and by how much?

    Then we must look at what happens IN the refinery today as opposed to “then” year refinery operations. Think any regulatory changes have taken place over those 11 years in terms of safety requirements, emmision requirements (from the refinery), the wages paid to refinery employees, the HEALTH CARE costs for those employees, the retirement benefits for those employees, and that list can go on and on.

    And what about the requirements, new requirements placed on the gasoline delivered from the refinery. What exactlya are the costs involved to now produce various and changing “blends” of gasoline. Californoria alone has gone nuts in such new requirements has it not?

    I trust all of you are familiar with new technologies that have been developed in the last 11 years to produce more oil and GAS, natural gas, whose price has gone down, the natural gas prices. That money to create those new technologies came from much greater investment by “big oil” and others and that money comes right out of PROFITS for those companies, “extra money” invested to GROW the company and its products.

    Finally, one must look at the simple supply and demand effects on gasoline. Undoubtedly our DEMAND for gasoline continues unabatted. Look at the gallons of gasoline consummed in America in 2000 versus today. If “big oil” simply sustained their profit margins of 2000 then their gross profits should have gone up simply by that increased demand in total gasoline consummed. Say they made $1 profit on X gallons produced “then”, nothing else changed, well they would now get $1 on Y gallons produced with Y being much larger than X for sure. No wonder gross profits went up just from increasing demand, forget price changes as well.

    Bottom line is this is a complex issue and not susceptible to off the cuff analysis, for sure.

    Anson

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  5. Sedate Me

     /  October 10, 2012

    When you have an oligopoly on a product the entire nation is addicted to, you can basically charge whatever the hell you want whenever the hell you feel like it. Price fixing in the gas racket is so commonplace its hardly worth mentioning. In my neck of the woods, area gas peddlers got busted twice in the last year…despite the fact that the government never does anything to catch them.

    Conspiracy? Damn near every day! The only call here is whether they are out to get Obama with high gas prices or are just using Obama to get high gas prices. At the end of the day, all they care about is maximum profits by any means necessary. If folks are blaming Obama for high gas prices, then you can bet the farm they’ll use it as cover for higher prices.

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