Oil and Gas Prices

Coach Z wrote

  A cartel controls prices to protect their interests sometimes those interests are to prevent competition with lower prices.

Harvey wrote

Politics and environment aside, after so many years of being owned by OPEC it's fun to watch them squirm.

However, while the Trump administration refuses to aid hard-pressed institutions that employ around 25 million Americans, it has gone all-out to help the oil industry.

Trump’s possible success in brokering a deal to cut global oil production — I say “possible” because oil prices haven’t moved much, which suggests that markets aren’t impressed — made headlines Monday. But I haven’t seen much commentary about just how strange it is for a U.S. president to be playing that role.

First, since when is it the president’s job to organize international cartels?

Second, why are higher oil prices in the U.S. national interest? We’re not a major oil exporter — in fact, we import more oil than we export. And if Trump’s cartel were actually successful in raising oil prices back to what they were before the current price war, U.S. consumers would pay a heavy price, on the order of $200 billion a year.

So why is propping up oil prices a priority? Trump says that it’s about jobs. But U.S. oil and gas extraction employs only around 150,000 workers. That’s less than 1 percent of the number of jobs America has lost in the past three weeks. It’s only around 0.1 percent of total U.S. employment. It’s a rounding error compared with the jobs at risk in hospitals and local government, which Trump is refusing to help.

So what makes oil worthy of aid when hospitals aren’t?

One answer is that investors have sunk a lot of money into oil, even though few jobs were created. Net fixed assets in oil and gas extraction are around $1.8 trillion, almost twice the total for hospitals, despite far smaller employment. So maybe this isn’t about protecting jobs, it’s about protecting capital.

And this capital happens to be very G.O.P.-friendly: The oil and gas sector makes big political contributions, almost 90 percent of them to Republicans. This is, by the way, in strong contrast to education, which accounts for a majority of state and local government jobs and gives most of its contributions to Democrats.

Finally, while America isn’t a net oil exporter, Russia and Saudi Arabia are basically petrostates that export oil and almost nothing else. So propping up oil prices is a way for Trump to help his two favorite autocrats.

In sum, Trump’s response to the economic fallout from Covid-19 is looking a lot like his fumbled response to the virus itself. He’s in denial about the problem; he’s blocking essential action because of personal political vendettas; and his party is opposing desperately needed aid because of its anti-government ideology.

The economics of dealing with a pandemic were never going to be easy. But Trump and company are almost surely going to make things even worse than they had to be.

Harvey wrote

It's well under a dollar in parts of the south. Storage really is the issue at this moment.

https://www.foxnews.com/auto/gas-1-89-nationwide-average-79-cents