Market more powerful than big oil

It seems like yesterday mobs clamored for government to spank Big
Oil for gouging. “Windfall profit taxes!” they demanded as gasoline
prices in June rose to $4.33 nationally.

What a difference a season makes. Gasoline prices now are around a
buck and half in some parts of the nation and $2.40 on average for New
Mexico, according to AAA auto club. Unsurprisingly, price relief came
without Washington’s intercession.

It was almost otherwise. When gasoline prices topped $4 a gallon,
Senate Democrats last summer wanted the federal government to reduce
major oil companies’ profits as much as $12 billion. The White House
threatening a veto, the Senate measure died.

But oil now costs less than half last summer’s price, posing harder
economic times for politically correct, government-subsidized fuels
like ethanol. Even for subsidized so-called renewable alternative
fuels, appeal wanes as plentiful, conventional fuel declines in price.

“If prices keep dropping and stay down, future fuels like cellulosic
ethanol and biodiesel will have a harder time competing,” the San
Francisco Chronicle recently reported.

Economic reality is stubborn. Supply and demand still hold sway.
Economies ebb and grow in response to the complexities and
interconnectivity of countless factors. Despite conspiracy theorists,
most factors are beyond control of producers and retailers.

Light, sweet crude oil has fallen to $59 a barrel on the New York
Mercantile Exchange, the lowest price in 20 months and a fraction of
July 11’s $147.

“There is just no demand for gasoline these days,” one market
analyst told the Los Angeles Times. “In the past, when prices dropped
after a high spike, demand always came roaring back, but not now with
the economy struggling this much.”

Such unpredictable economic fluctuations in the global market for a
ubiquitous, virtually necessary commodity are all the more reason
government interference is unwise, irrespective of clamoring mobs and
Nanny State inclinations.

“It all comes back to the economy and how deep folks think the
recession will be,” another analyst told Bloomberg.com. “Demand is poor
and should get worse as the recession deepens.”

While the Organization of Petroleum Exporting Countries decided
recently to reduce production because of falling demand, a cold spell
could suddenly boost heating oil demand and drive prices back up.
“Perhaps consumer sentiment will get strengthened after the national
election and people will say, ‘Hey, gasoline prices are cheaper. Let’s
go take a trip,’” an AAA spokesman told the Sacramento Bee.

Buying decisions affecting supply and demand ultimately will tell
the tale, we hope without government meddling corrupting the equation.