The bump at the pump - just who is responsible

An interesting question and it's not who you would think. From The Business and Media Institute comes this report by Nathan Burchfiel:

Crude Coverage
Media ignore OPEC�s control of oil market when covering America�s pain at the pump.

The media are awash with historical flashbacks. Is this the worst economy since the Great Depression? Or is it a repeat of �70s-era financial woes? For the most part, the comparisons have been less than accurate. But there�s one the media have missed: an old villain from the �70s causing Americans grief over oil and gas.

Oil prices have soared to more than $100 a barrel and journalists are looking for someone to blame for Americans� �pain at the pump.� They call �Big Oil� �thieves� and accuse them of reaping �excessive profits� driven by �greed.� But the networks ignore one of the big causes of high gas prices � the hostile leaders of the world oil cartel � the Organization of Petroleum Exporting Countries (OPEC).

A bit about OPEC:

OPEC was created in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. It now includes nine other oil-producing nations � Algeria, Angola, Ecuador, Indonesia, Libya, Nigeria, Qatar, Saudi Arabia and the United Arab Emirates. Its stated goal is �to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers.�

But in reality, its effect is less than �fair� and �stable,� said Cato Institute Senior Fellow Jerry Taylor. He wrote in March 2004 that OPEC contributes to the instability of oil prices.

�In the period between World War II and the formation of OPEC, the inflation-adjusted price of oil fluctuated little,� he wrote. �From 1970-1980, however, the real price of oil rose by about 1,300 percent. Between 1980 and 1986, it dropped by about two-thirds. It was fairly steady between 1986-1997, fell farther in 1997-1998, and then nearly quadrupled after February 1999. This is stability?�

Taylor predicted in 2004 � when oil was around $31.50 a barrel � that �if OPEC disappeared tomorrow, oil prices would drop to somewhere around $8 a barrel and gasoline prices would almost certainly be south of $1 a gallon. A price collapse of that magnitude would do more for consumer welfare and the overall health of the American economy than almost anything that�s been put on the table by President Bush or his Democratic Party rivals.�

And those huge profits that the greedy Capitalist Oil Companies are making?

ExxonMobil�s profit was about 10 percent of revenues. Chevron and ConocoPhillips had profits below 10 percent of revenue. Those percentages aren�t high when compared to other industries. Bank of America operates with an 18-percent profit margin, according to Forbes.com. Berkshire Hathaway has profit margin of 11 percent. AT&t: 11.8 percent. Proctor & Gamble: 13.1 percent.

And it is not as though we do not have the tools to wean ourselves from Oil. Nuclear power for electrical generation, increased drilling for oil and using Nuclear power to drive the conversion of Coal into Gasoline and Diesel. For more on the last item, read here. Algae fuel is also promising. Fusion is perhaps (finally), on the horizon. Read here, here, here and here.