OIL Price Gouging

We – American Citizens that is – have been told that oil prices are high because there aren’t enough refineries available, and/or other such mumbo-jumbo. Now it seems to me that, if it cost more to pump oil (hence the higher prices), then there would not be such a huge profit available during the selling process. Yet, many are getting humungous profit margins from oil sales. I don’t know about you, but I smell something very fishy around here.

Rising oil prices are nothing short of a curse for most Americans. But they’ve been a blessing for Al Fraches, a Calgary, Alberta, florist.

While most U.S. consumers are scaling back, residents of Alberta, Alaska, Venezuela, Norway and other oil-fertile regions are enjoying an economic boom so rich that, in some cases, the government is sending checks to its citizens.

World crude oil prices, which averaged $22.74 a barrel in September 1999, are now at $58.20, according to the U.S. Department of Energy, as demand has swelled from the U.S. and China.

Government royalties from Alberta’s oil sands have already helped the province pay off its debt, lower corporate taxes, freeze tuition at universities and launch a three-year, $7 billion capital spending program to put in new roads, and expand medical centers and schools.

Venezuela, which produces 2.9 million barrels of oil a day, enough to make it the world’s sixth-largest producer. Under President Hugo Chavez’s leadership, the government has significantly boosted production and filled its coffers, extracting more money in taxes and royalties from foreign oil companies such as Exxon Mobil and Chevron operating in Venezuela.Surging revenues from Venezuela’s national oil company, PDVSA, also have helped Chavez subsidize fuel prices in his country and reduce the price of oil and gas for several of his Caribbean and Latin American neighbors.In August, the average gas price in Caracas was 12 cents a gallon, according to data firm AirInc.

Venezuela and Alberta aren’t the first lands to reward residents as the price of oil has gone up. For 23 years, Alaska has paid a dividend to each of its residents from a Permanent Fund. The fund was started with oil money, then diversified into other investments such as stocks and bonds.The fund has paid every eligible resident, including children, an average of more than $1,000 each September since 1982.

In the past two years, gushing oil prices have helped Alaska go from a billion-dollar deficit to a billion-dollar surplus, Knapp said.And now the state is looking for ways to spend its newfound wealth. Alaska Gov. Frank Murkowski recently used money from the state’s Revenue Department to purchase a $2.6 million Westwind II corporate jet, complete with a cream leather interior and in-cabin stereo system.

With refining capacity down, especially after hurricanes Rita and Katrina, some analysts expect high gas prices to eventually usher in a new economic U.S. downturn.“We are going to have a massive recession, the worst since 1907," said Peter Beutel, president of New Canaan, Conn.-based energy consulting firm Cameron Hanover. ”Consumers are just hemorrhaging money for energy,” even with some of the largest oil reserves in the globe.