By Claude Salhani of Oilprice.com
Oh, how I miss the days of Bill Clinton’s presidency when the price of gas at the pump was around 99 cents per gallon. Yes, you heard me right: ninety-nine cents (US), less than one dollar per gallon.
Over the years the price rose steadily until it hovered around the $3.60 mark where it was until last week. But then in just a few days car owners in the United States discovered, much to their horror that they need to dish out almost $4 per gallon. In other words they would have to hand over roughly between $60 and $75 to fill up an average SUV, the preferred vehicle in the US.
Why the sudden shift upwards? Why this inexplicable rise in one of the most important commodities in the country after clean water and bread? Possibly even more important than bread.
Are Americans following in Europe’s footsteps when it comes oil prices?
Experts in the oil market blame this sudden price rise on the weather, which has not been too clement, particularly to the east coast of the United States and where a number of oil refineries are located. Hurricanes and storms that hit the east coast have affected some of these refineries, slowing down production. Naturally, justified or not, the oil companies could not pass over the opportunity to make a few more dollars.
Additionally the cold weather front that has hit the US for the past two weeks (on and off) has increased the demand for heating oil, thus, once more putting the oldest rule of a free market economy into play: more demand equals higher costs.
So the prices keep rising and rising and rising… Still, by European standards Americans continue to pay far less than what Europeans are paying for the same amount. In France for example, in some instance drivers are paying more that $8 per gallon. That’s twice what Americans are paying.
But by golly, this is the United States of America, the land where the car is king, where gas in meant to be cheap. After all, several wars were fought to guarantee a continuous supply of cheap oil for Americans, who need their cars to buy a loaf of bread.
The US went to war with Iraq to liberate Kuwait in 1990 because Washington did not want Saddam Hussein to get his hands on that much oil… yes, and because he stole incubators from Kuwait. Oh, wait that story was later proved false. But never mind that. The oil fields were reclaimed.
The US occupied… er, I mean liberated Iraq a decade later for the sake of democracy …and cheap oil. So listen up America, unless you want to become like those French people who are paying $8 and more for a gallon of gasoline, let’s not make any sudden moves that would contribute to even higher prices. Moves like a new war in the Middle East.
John Kerry, the new US secretary of State is scheduled to undertake a trip to a number of countries in the days and weeks to come. Those include four European nations, but also Turkey, Egypt and several countries in the Persian/Arabian Gulf. (note to all you folks who will jump on their keyboards to insult me for calling the Gulf, the Arabian Gulf, I know, I know…).
Mr. Kerry will visit London, Paris, Rome, Berlin, as well as Ankara, Cairo, Riyadh, Abu Dhabi and Doha.
Somewhere along that yellow brick road the new secretary of State will listen to the great concerns of America’s allies in the ARABIAN Gulf, (The Saudis, the Emiratis and the Qataris) who will reiterate their great trepidation regarding Iran and its nuclear ambitions, just across the waters.
The Saudis, among others, will probably try to convince the American top diplomat that something needs to be done to make sure the Islamic Republic does not achieve its nuclear goals. Being the new kid on the block, Kerry will listen and then will report back to the president in Washington DC.
Chances are nothing more will come of it and America will continue to plug along with the price of gas slowly rising. On the other hand a renewed conflict in the Middle East will send oil prices soaring possibly to the $8 per gallon mark much like the French are paying today. Of course by then, the French will be paying as much for the cost of a full tank of gas as it does to purchase a Smart Car.