Sunday, December 27, 2015

Economy/Oil: Forget Opec - Meet The California Cartel

(Drivebycuriosity) - There is a global oil flood, oil prices are falling and people pay much less for gasoline, diesel and heating oil   - but not in California. In the Golden State gas prices have been climbing recently again - contrary to the national and global trends. Today Californians pay on average  $2.82 per  barrel, about 40% more than the national average ($2.00 fuelgaugereport ). Californian gas costs 12 cents more than a month ago - in spite of the worldwide falling energy prices (gasbuddy). It´s hard to believe, but the current Californian gas price is 15 cents higher than at Christmas 2014.


The oil refining industry claims that the high prices were caused by "state regulations, trouble with imports and an outage at a major refinery" ( latime). California requires a special mix of oil distillates and taxes gas higher than other states to protect the environment. The industry also claims that "unplanned refinery outages" are reducing the supply unexpectedly (mercurynews). But in the face the recent sharp rise of the Californian gas price these explanations sound fishy. Reuters & The Los Angeles Times report that at least one big oil tanker got detoured from California to Mexico to get there a higher price for the load (reuters  latimes).

This behavior reminds of Opec when the cartel had still control over oil. The organization was founded in the 1960s. Purpose: To keep oil scarce to hold the price up - like a monopolist would do. In the 1970s Opec cut oil production sharply to punish the West for Israel´s Yom Kippur war. Oil became rare and expensive what caused at least two recessions and a decade of economic stagnation and high inflation rates.

It seems that the California cartel is taking advantage of the global oil flood by restricting gas supply in California. So the cartel earns there high prices and stellar profits - in spite of the global oil deluge. Forget Opec - meet the California cartel.

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