Oil costs

The price of oil gushered just hours after Iraq invaded Kuwait, but when people across the country complained that big oil corporations were taking advantage of the crisis to turn an unjust profit, the industry’s economists condescendingly — at times, sneeringly — responded that the public didn’t know anything about business and that, to put it simply, it is the anticipated replacement costs of oil that control the price, so be quiet and pay up.

Earlier this week, however, the price of crude oil dropped on world markets, pushing down replacement costs and causing oil corporations to — Surprise! — raise the price of oil, anyway. So far, no new reasons have been created for this latest price hike. Even the Wall Street Journal, whose editorials snorted with indignation when consumers dared to suggest that oil and gas prices were unnecessarily high, has been quiet.

Actually, U.S. oil corporations have been muted since their first excuse — replacement cost — was nixed by, among others, Imperial Oil, one of the biggest gasoline retailers in Canada. Dennis Baxter, a spokesmen for Imperial Oil, pointed out that the Iraqi invasion didn’t cause gas prices in Canada to rise, and that, “the crude cost is only about a quarter of the total picture of costs that go into a liter of gasoline.” Although prices there already surpass those in the United States, oil prices in Canada are more stable because oil companies sell their lowest-priced oil before selling more recent, more expensive supplies. In the United States, Baxter said, “the most recent barrel purchased is the barrel that determines the value of your inventory.” Unless, as we have seen, that last barrel is less expensive than previous ones.

The U.S. Department of Energy didn’t buy the oil corporations’ excuses either. It examined the flow of oil into the United States and saw no reason for higher prices. That leaves it up the Justice Department, which has been asked by legislators to investigate whether the price increase for petroleum products violate federal statutes. Consumers deserve answers for the rapid, seemingly unnecessary, oil-price increase.