If you recently heard that the Saudis are "behind the gas hike,"
your source was probably a friendly Saudi basher. Actually, Saudi Arabia
kept its allocation to U.S. buyers unchanged, even though the Organization
of Petroleum Exporting Countries (OPEC) recently cut wellhead production.
Since petroleum is a non-renewable energy resource, the ten member countries
of OPEC have been rationing their petroleum reserves to keep income
flowing for as long as possible. Presently, the OPEC countries--none
of them a major power--control about 38 percent of the world's crude
oil production and are holding two thirds of the world's estimated crude
oil reserves.
While America dominates the world with her military and economic strength,
OPEC exerts a strong, but hardly comparable, influence on the crude
oil market. Given our growing wealth and prosperity, we certainly have
no good reason to begrudge the OPEC countries their temporary advantage.
If they should dare to employ their crude oil assets to exert political
influence upon us, they would essentially be imitating our use of military
and economic power. We would probably feel as anxious as the OPEC countries
about our future if foreign armed forces were stationed in and around
our territory, as they are in and around theirs.
American calls for the petroleum producing countries simply to augment
their drilling and sell us all the oil we want at the lowest possible
price are ill advised, considering the fact that crude oil demand worldwide
has risen from 67 million barrels per day ten years ago to over 75 million
barrels now.
Demand for crude oil has grown most noticeably from Asian countries.
Mainland China is now trying to lower her dependency upon Mideastern
oil by building a pipeline from the oilfields of Central Asia to her
industrial centers. Singapore is trying to escape reliance on crude
oil altogether by switching to natural gas.
The critics of OPEC's alleged monopoly over the global crude oil market
tend to ignore that the world's petroleum reserves are steadily declining
and that discovering and extracting additional reserves is becoming
increasingly more difficult and expensive. According to The Wall Street
Journal, "Royal Dutch/Shell Group recently was forced to lower
a key measurement of its oil reserves by a whopping 20%." British
Petroleum also cut its reserve estimates.
Before we summarily blame America's rising retail prices for gasoline
upon OPEC, we need to consider that the cost of crude oil accounts only
for some 40 percent of the charges at the pump. Roughly 15 percent are
refining costs and profits, 15 percent distribution costs and profits,
and over 30 percent federal and state taxes, according to the U.S. Energy
Information Agency. Even if crude oil prices remain unchanged, retail
gasoline prices tend to rise up to 6 percent with warmer weather when
people travel more.
More importantly, since the Reagan administration deregulated the oil
industry, government can no longer tell importers, refiners, wholesalers,
and retailers how much to charge for gasoline. If you do not like the
prices your service station posts, you are free to fill up elsewhere.
As petroleum reserves decrease and demand for gasoline increases, the
only potential winners are producers and investors. Over the past twelve
months, a Dow Jones index of large oil company stocks climbed 23 percent
while Exxon Mobil stock rose 22 percent. Shares of drilling equipment
and services also jumped 33 percent; and Schlumberger, the leader in
oil services technology, is up nearly 70 percent.
So while your gasoline costs are at a 13-year high, you might as well
take advantage of the profit potential for investments in the oil industry.
"There's Gold in Rising Gasoline Prices," says The Wall Street
Journal.