Oil Companies Don't Set Oil Prices

A recent Gallup poll found that 42% of the general public believes the Bush Administration has deliberately manipulated gasoline prices in advance of the fall elections.

From an article I just wrote for national distribution through McLatchy (formerly Knight-Ridder) newspapers:

The basic economic reality of world oil trading is that even the biggest oil companies don’t set gasoline or oil prices, any more than farmers set the price of corn, soybeans, coffee or sugar. Oil and gas prices, like all world commodities, are set by the twin forces of global supply and global demand in a competitive international marketplace, not in the conference rooms of oil companies.

And many people also mistakenly think that the major oil companies are still sitting on top of most the world’s oil. But oil companies today control only a small fraction of the world’s oil reserves – about 2.5 percent. Most of the world’s oil is owned by the national oil companies of foreign governments such as Saudi Arabia, Iran, Russia, Venezuela, China, and India. The fact that U.S. oil companies control such a small fraction of the world’s global supply of oil is another reason that makes it almost laughable to think that they could deliberately manipulate gasoline prices for political reasons.

Oil and gasoline prices in the U.S. change daily, in response to the relentless and dynamic changes in global economics, forces that are totally beyond the control of U.S. oil companies.