#27 | Posted by LampLighter at 2023-11-16 05:59 PM |
@#26 ... Why didn't they just raise prices before Covid? ...
----- I have suggested in the past that Big Oil was raising prices and obtaining record profits in order to make Pres Biden look bad and to get a Republican back in the White House, a Republican that is sympathetic towards Big Oil.
Oh no, not the Big Oil conspiracy again!
First of all, there is no such thing. Outside of maybe OPEC+ (which has not been doing great lately), oil and gas are global commodities which are responsible for less than 5% of global GDP and about 8% of total composite (direct and indirect US GDP) - out of 12 major Integrated Oil and Gas companies on US stock exchanges (and not counting Saudi Aramco, Russian Gazprom and Lukoil, several giant Chinese oil companies like CNOOC and CNP etc.) only two, Exxon and Chevron are US-registered, the rest are 3 Canadian, 2 British, 1 each from France, Norway, Brazil, Italy and Colombia.
All of them conspired against Biden?
Like most essential global commodities, the prices of oil and gas are driven by supply and demand and therefore fluctuate widely.
If "Big Oil" had such a (political) control over prices of oil and gas then why in the last two months alone the price of Brent and TWI crude fell from USD$98 / $93 to USD$77 / $73 respectively?
Natgas prices, which crashed in 2019 from USD$4 to USD$2 went up in 2022 to USD$10 after Russia invaded Ukraine and threatened Europe with supply disruption, but dropped almost 80% in early 2023 back to $2 level and is now up almost 50% at about $3.
Why, when 3 times in the last year Saudis announced (and Russia echoed) that they will reduce supply of oil, the markets jumped initially and then almost immediately, within weeks slumped to previous, or even lower levels? Why are they at the price level of 2018 - Trump administration?
If "Big Oil" companies really have "record profits" their stocks wouldn't be at the level of 2013-2014 (Obama administration) and were flat to 25% down during 2017-2020 period? Refineries like Valero or Marathon did even worse during Trump administration, with stocks down 60%-80% over 3-4 years. Why didn't any of them just raise prices to get magical mythical "record profits" if they could do so at will?
Increased supply (as Republicans want) leads to lower prices, restricted supply (as Democrats supposedly want, to promote "clean" / "renewable" energy) lead to higher prices - it's basic market economics. Which ones would lead to "record profits"?
Very few companies now, outside of "Magnificent Seven" have annual "record profits," especially if they're adjusted for inflation.
The weakness in energy prices (and in recent CPI/PCE "headline inflation" baskets) is much more likely due to overall, possibly recessionary, weakness in economy - consumers are tapped out and are using more of BNPL, credit cards and other forms of debt, as well as dipping into their 401(k) accounts for "hardship" withdrawals.
www.marketwatch.com - 401(k) hardship withdrawals jumped 36% in the second quarter - Aug. 12, 2023
www.marketwatch.com - Hardship distributions are on the rise. The economy may be to blame - Nov. 7, 2023
"If this is happening during a boom, what will the picture look like when the U.S. next enters a recession?"