Oil Crisis...Bringing Families Together One Gallon at a Time

There are, of course, many negative news stories because of the high price of oil. Lost jobs, higher prices, shorter vacations, an increase in prices in other industries, etc. But today, I actually found an upside to the problem of high oil prices.

My family was getting ready for church and getting into my Suburban when I noticed my 21 year old son climbed into my vehicle. All of us were very surprised. This wasn't because the oldest son doesn't go to church (in fact, he some times has a better track record than mom and dad), but because he was coming with the rest of the family. Usually he takes his own car.

So, my wife asked, "why are you gracing us with your presence?" Without thinking twice, he responded, "$4.00 a gallon gas. It would take around 8 bucks to get to and from church today." He was off more than a little, but he would certainly be paying more than just a few months ago. As a result, we got to spend much more time with a family member who has become very independent.

It is true that the higher prices might undermine vacation times together. People will choose shorter distances for family time together. But I think they will spend as much time together as ever. Last year it was Orlando and Universal for my family, this year it will be a Hill Country cabin. However, we will still spend about the same time together.

Who knows, we might find an occasional upside to this energy crisis.

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Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Will Criminal Cases Follow Oil Speculation?

Around a decade ago oil cost around $11 a barrel, now it is hovering around $150. Was there almost a fifteen fold decline in its availability or a similar increase in its demand? Why is there this huge disparity in just ten years? How does it seem like just yesterday that the major headlines for a week was oil breaking $70 a barrel for the first time in history?

The massive increase in the cost per barrel has led to charges of "speculation" and "price manipulation." Some are even beginning to use terms such as "criminal" because of the enormous economic impact due to lost jobs and high prices.

Whether or not they take the extreme move of making this activity "criminal" (like Sarbanes Oxley did with accounting), it is still too early to say; but I think it is safe to assume that some are going to try to figure out ways of pursuing civil action. How, I don't know, but the situation is very hostile for those in this business.

Can the actions of those who set these commodity prices be defended? Let us, just for a minute, give them the benefit of the doubt. These prices aren't made simply on the basis of current supply and demand, but also the future. There is little doubt that supply won't likely increase any time soon, especially with the Democrats in Congress making it perfectly clear they have no plans to let bill that incourage such pass. And demand? Ten years ago, China was a non-player in oil consumption, today it is the number two consumer in the world and growing. Over 1,000 cars are added to its roads daily and demand increases by almost 10 percent annually. It is safe to assume this demand is only going to continue or increase. There has been a comparable increase in demand by India and other developing countries in recent years. These too have driven prices.

I personally think the rise in the cost of oil is not nearly as "wild" or "speculative" as the media would like one to believe. Those who are crying such are typically the same people who are undermining our efforts to increase supplies. Unfortunately, I don't expect reason to prevail, but vengeance. I'm sure that will do a great deal to lower gas prices.

Tired of the plain old business news? Ready for practical information to change your business and even your life? Visit HoustonBusinessReview.com and sign up for this important weekly ezine.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Energy Losers in Oil Boom

High oil prices have resulted in a boom for some of the largest oil companies in the world. The huge demand created by China, India, and other countries in the pursuit of modernization has created a situation that has led to gas prices that are multiples of what they were a few years ago. As a result, corn prices are exploding due to the pursuit of ethanol and biodiesel is raising the value of untold other agriculture products. Yet, not every energy business has directly benefited. Why? Because high prices has actually reduced demand for the first time in almost two decades.

Two of the biggest losers in energy from high oil process are retail locations and refineries. Both of these type of companies are far more effected by demand than gas prices.

ABC News reports that Exxon Mobile, "the world's biggest publicly traded oil company, said it now plans to sell to distributors its remaining 820 company-owned stations and another 1,400 outlets operated by dealers." Citing ABC, the company also reported that the reasoning behind the decision was because 'As the highly competitive fuels marketing business in the U.S. continues to evolve, we believe this transition is the best way for Exxon Mobil to compete and grow in the future,' said Ben Soraci, the director of Exxon Mobil's U.S. retail sales."

Meanwhile, the Houston Chronicle is reporting that "after three years of record profits, the U.S. refining industry has been confronted recently with a hard truth — that the party may be ending."

"Refiners' profits have plunged this year as record crude oil prices have sharply boosted fuel-making costs. At the same time, higher prices at the pump are softening demand for gasoline and diesel, limiting refiners' ability to pass along the bill."

Ironically, these stories come out rather close to the announcement that the United States is opening its first refinery in decades. There is now a great deal of talk about increasing domestic oil production. That rhetoric may have to become reality in order to create good news for these suffering businesses.

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Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.