“No Quick Fix”

It was a mere 26 lines of text in a two-inch-wide column, tucked inside the pages of a regional New Jersey newspaper on June 6, 2008. But it was full of meaning. In it, Henry Paulson, current U.S. Treasury Secretary, and former Chairman and CEO of Goldman Sachs, implied that oil prices will remain high, because they are a function of supply and demand. He relayed that news from Doha, Qatar, one of the oil-rich Middle East states, emphasizing that there is “no quick fix.”

It is supply and demand; but, that is not the entire question, and Mr. Paulson should know better than to put forth such a simplistic statement. The real, unstated, substantive question behind Paulson’s statement should be: Why is so much of the world’s oil supply continuing to be controlled by a cartel (the Organization of Petroleum Exporting Countries), of which Saudi Arabia is the linchpin?

OPEC continues to meet regularly at its headquarters in Vienna to set production quotas, effectively inflating prices and stimulating the current wave of speculation in the oil markets. This cartel sits on two-thirds of the world’s oil reserves, yet accounts for about only 36% of oil extraction, as of March 2008. Saudi Arabia, OPEC’s most influential and largest producer, continues to turn up its nose at recent U.S. requests for increased production, stating that supply and demand are in equilibrium.

In the United States, if executives of large companies were to conspire openly to control commodity output, as do the oil ministers of OPEC, they would be indicted, prosecuted, and put behind bars.

America’s role in winning the first Gulf War under George H.W. Bush and, thereby, preserving Saudi Arabia’s sovereignty and its monarchy means nothing . . . absolutely nothing . . . to these desert fat cats.

I acknowledge that there are many other factors contributing to the current level of oil prices, many of which are of our own making, but my focus here is to starkly underscore the lop-sided transfer of wealth to the oil cartel and its apparent I-don't-give-a-hoot attitude for the rest of the people on this planet.

Note: For an excellent account of the ascendancy of OPEC as an effective cartel, see Robert J. Samuelson’s story at http://www.washingtonpost.com/wp-dyn/content/article/2008/03/11/AR2008031102461.html

Gulf vs. Getty

Yesterday morning, after completing two exercise loops on each of the three levels at the Bridgewater Commons Mall, I drove the car into Somerville for a few errands and to gas up. It’s startling to see how much the price of fuel can vary within the distance of just a few blocks.

Not so long ago, the Gulf station on the corner of Mountain Avenue and West End Ave. (across the street from the Skylands Community Bank) regularly posted some of the very lowest prices in the area. Yesterday, the price was $3.599. Only a few blocks away, at the corner of Cornell Blvd. and West End Ave. (across from Thul Auto Supply) Getty was pumping the same stuff for $3.439, or $.16 less per gallon. That’s worth driving a couple of blocks to save significantly on a fill-up.

Sunday, along Route 22 West, beyond the Somerville circle, gas prices hovered around the $3.479 mark. None of us knows how long gas prices will continue to spike, but it looks like the good old boys from Riyadh and Houston have us all over a barrel.