The Darkest of Mysteries
Gasoline pricing remains the darkest of mysteries.
Within a week of the Russian invasion of Ukraine, the price for a gallon of Unleaded leaped from $2.90 to $4.60 in the Lehigh Valley. Our local gasoline comes from refineries in Philly as opposed to refineries in Moscow. There had to be millions of gallons of cheap, original price, non-Russian oil in the pipeline. How could the cost to fill our tanks increase by more than 50% practically overnight? Someone is “making a bundle” with Unleaded nearly $5 per gallon. Who can that be?
Intrepid reporters went to local gas stations. “Don’t blame us. We only add 2 to 5 cents per gallon to what we pay our wholesalers.”
The reporters then went to the wholesalers. “Don’t blame us. We only add a few cents to what we pay the refineries.”
The reporters went to the refineries. “Don’t blame us. Crude oil went from $75 per barrel to $130 overnight. When our feedstock nearly doubles in price, we have to get twice as much for our product.”
Finally, the reporters went to the Public Affairs Dept of various “Big Oil” companies. “The international oil market is incredibly complex and volatile. Consumers are not capable of understanding it.”
Those reporters might have asked the question that would probably get them a Pulitzer Prize. “How then did Exxon Mobil report profits of $5.5 billion this quarter while writing off $3.4 billion in Russian assets? That’s double Exxon’s profits from the same quarter last year.”
What did Exxon do with all that cash it is swimming in? Did it drill for more oil to increase supply and possibly reduce prices? Of course not! Exxon announced a plan to buy back $30 billion of its stock through 2023. Stock buy backs increase stock price and make all those executive stock options even more lucrative.
Is Exxon alone in reaping the benefits of Putin’s War? Chevron’s most recent quarterly profit was a whopping $6.3 billion. That’s more than four times what it made in the same quarter last year.
Actually, the international oil market is not all that complex. Big Oil is taking advantage of Putin’s War and screwing the consumer. Why? Because they can.
By Ed Dufton