Many people have said that big oil is responsible for stripping them of their hard-earned money at the pumps. Where were these people when those same oil companies were almost bankrupt? We had Exxon and Mobil, now we have ExxonMobil. People forget that during the 90's oil was between $13-$20. Oil Companies were merging just to stay alive.
A prime example of people not caring about increased prices is Cisco (CSCO). This router company went up in price over 14000% (after multiple stock splits) was that stocks have no real bearing on your wallet. An investment of $10K in 1996 would have turned into a little over 180K at Cisco's peak. If a stock climbed from $20 to $70 in a couple of years, does that mean your cost of living went up? Oil did just that! People are only mad because they have to spend more money at the pump, which is understandable. This brings me to a question. If oil companies were in such dire circumstances, why didn't they jack up prices when the ecomomy was booming back in the 90's when more people were flush with cash and could shake of the prices easier? Because 'Big Oil' have little or no control over what the market deems an appropriate price. Hedgers and speculators control the cost of oil. Since oil is a commodity and not like other products, it is connected to the market due to its finite supply. There are many rational explainations as to why oil is so expensive:
- The instability in the Middle East (Afganistan, Iraq and Iran)
- The damaged oil rigs after Katrina in the Gulf of Mexico
- The violence in Nigeria
- Bolivia nationalized their oil and gas reserves
- The fact that an oil refinery hasn't been built in the U.S for over 20 years
These are just a few reasons that oil is at the price it is. George Bush can be blamed for the first example, since it was his administration that went to war with Iraq and destabilized the country. Sooner or later oil prices will come down. The more important question is when. I believe when you start seeing companies not directly connected with the oil business start drilling or exploring, that is when the oil market will take a nose dive. This means the market is over saturated with companies trying to profit from the high cost of oil. What would Yahoo! know about drilling oil? They don't have a clue. These companies would see the proverbial pot of gold. We should all know that this is the sign of a topping market.