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It doesn’t take a rocket scientist to realize that global demand is what’s driving up prices.

China has to build lots of factories to keep up with the demand for big screen TV’s so Americans can run home from work and crash in front of their home theaters to watch American Idol, and Entertainment Tonight to see see what Paris Hilton and Brittney Spears are up to.

Gotta keep them “consumers” happy.

The bottom line is “PRIVATE OIL COMPANIES DO NOT CONTROL THE PRICE” if you combine the production of Shell, ExxonMobil, BP, Chevron and all the ‘Private Oil Companies, you would have just 15-20% of the worlds oil production. About 80% is controlled by NATIONAL oil comanies, ARAMCO (Saudis), PDVSa (Venezuela), PetroBras (Brasil) and Russia. It is this group of National Oil Companies (NOCs) dominated by OPEC that sets the production levels and price worldwide. NOT Shell Exxon, BP or other private Oil Cos. To compete with the NOCs the Private Comanies have had to merge, thus the “Profits” of Exxon is really the combined profit of Mobil, Exxon, Superior and all the other companies that are now known as Exxon.
PROFITS ARE AT A RECORD for two reasons (1) because the OIL COMPANIES are not at a record size! and (2) oil is traded in dollars and on the world market dollars are at all time lows!

The fiscal policy of our government has erroded the value of the dollar to the Euro has gone from 0.95 $/E to 1.55 $/E a loss of ~60%, thus on the world markets (relative to the Euro) 60% of the price increase is due to the drop in value of the dollar. Back when the dollar was $0.95 to the Euro, Oil sold for ~$35/bbl. With the $ to the Euro at $1.55 oil is $119/bbl remove 60% of that increase ($119-$35 = $84 per bbl 60% of $84 = $50) and you get oil selling at $119 – $50 = $69/BBl and Gas at $2.25 per gallon. Had the dollar not lost it’s value we would be paying over a $/gallon less for our gas.

What is scary is most of our government has no clue how world commodity markets work and the damage they have done by weakening the dollar.

Instead of increasing access for additional safe offshore development we get our Offshreo oil and gas development held to just 5 states, Louisiana, Texas, Alabama and Mississippi and Alaska. Really just 4 since the 9th circuit court in SF has shut down drilling offshore in the Alaskan Beaufort.

I am amazed at how ignorant our leaders are of the facts and reality of such a critical industry to our nation.

JML – thanks for your insightful analysis. You are right on about the price in comparison to the lose of value of the dollar.

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