Getting rid of the junkie.

Today OPEC announced they were increasing production of oil by as much as 500,000 barrels a day.

So, that’s a good thing, no?

I mean if there is more of anything on the market, well it weakens the market and the price should go down, right?

Crude oil for October delivery climbed as high as $79.80 a barrel in regular trading on the New York Mercantile Exchange. That’s the highest level a front-month contract has ever reached on the exchange. The previous record was $78.70 from the regular trading session on Aug. 1.

See, there’s this great shell game going on and until enough people get pissed off about it, things are only going to get worse.

Tight global energy supplies are expected to keep energy prices high through 2008, the U.S. Energy Information Administration, the Energy Department’s reporting arm, said Tuesday in a monthly report.

On Nymex, October reformulated gasoline closed up 0.25 cent at $1.9811 a gallon. October heating oil closed at $2.1827 a gallon, adding 1.11 cents.

People who don’t own cars think they’ll avoid getting hit by this but they couldn’t be more wrong because goods are shipped around the country and if it costs more to ship them you can be assured that the increase will be passed along to the consumer as well.

Plus, people always seem to forget about plastic.

...For this and many other uses, the oil needs to be separated into parts and refined before use in fuels and lubricants, and before some of the byproducts could be used in petrochemical processes to form materials such as plastics, and foams.

Petrochemicals are used to make plastic. Look around you, use any plastic?

Plastic is ubiquitous, it’s everywhere! Whether it’s garbage bags or toys or juice containers, plastic is all around us. If the price of oil goes up don’t you think the price of making plastic goes up too? Think companies will just eat those added costs?

Think again.

Back in the 70’s during those gas shortages, the obvious villain was those diabolical schemers at OPEC. Today though, the member nations of OPEC realize that a slowdown on the world economy will hurt them as well, so they are less inclined to take draconian measures and limit supply.

What’s the problem then?

Well, oil companies have gotten smart now. They realize as long as the price of oil stays high, they make money and lots of it! The convenient excuse oil companies use is that there is limited refining capacity to process the crude oil into other grades of fuel.

In the United States, there is strong pressure to prevent the development of new refineries, and no major refinery has been built in the country since Marathon’s Garyville, Louisiana facility in 1976. However, many existing refineries have been expanded during that time. Environmental restrictions and pressure to prevent construction of new refineries may have also contributed to rising fuel prices in the United States[8]. Additionally, many refineries (over 100 since the 1980s) have closed due to obsolescence and/or merger activity within the industry itself. This activity has been reported to Congress and in specialized studies not widely publicized.

Wow! That’s just tough for those poor oil companies, isn’t it?

“Consumer demand just continues to grow, and we can’t grow as fast at the refining level,” said Charlie Drevna, executive vice president at the national Petrochemical and Refiners Association, which includes companies like Valero, ExxonMobil, Chevron, and ConocoPhillip. “But there are plenty of economic reasons why that hasn't happened.”

They just are at the mercy of their refining capacity and as long as they can only refine a certain amount of oil prices will just stay high and keep getting higher.

Now, I think it would be a good thing to wean this nation off of its oil jones - we had taken major steps in that direction until the early nineties when the SUV made the scene. Truth of it was, we had taken the kind of steps that dropped the value of oil and had the oil companies hurting and worried. It gave oil companies a great excuse to not increase refining capacity because the commodity oil had such a diminished value. Nowadays though, oil companies are reporting record profits but strangely enough you don’t hear about them taking any of that money and putting it into building new refineries.

I shouldn’t complain I imagine because I bought oil stock and it’s been good the last few years but, hell! I don’t want to see the economy go down the tubes anymore than anyone else. Never mind we have the cold weather coming. Even if you don’t own a home and the cost of heating oil goes up you don’t think your landlord isn’t going to raise your rent?

Wake up people.