The price of crude oil briefly touched $100 (US) a barrel yesterday before dipping back down and settling just below that mark. Today's news reports are filled with the usual stories on how this might impact you at the pump, but there is also some worthwhile reading in the Wall Street Journal, the Toronto Star and here which helps explain how oil prices rose ten-fold in the last 10 years. To help round out the perspective, I will turn to the great Jimmy Buffet.
In the lead-up to one of his more colourful hits on the live album "Feeding Frenzy", Jimmy Buffet takes on the persona of "Reverend Jim". In full gospel swagger, he explains to the enthusiastic Atlanta audience how the world has changed by pointing out that "today a pair of tennis shoes costs more than a lot of your first automobiles did," capping it off with "can I get an A-men for a hundred dollar pickup truck!" Big applause.
While that album was recorded in 1990, Jimmy's message still holds true. The price of virtually everything has gone up over the years. And ironically, the price of a barrel of oil is almost equal to the cost of JImmy's first pickup truck. Growing up in a northern town, I've been in my share of $100 pickup trucks...not pretty, but they get the job done.
Yet despite the evidence all around us, when it comes to oil, there are still some who believe there are other factors at play. CityNews in Toronto asked a "motorist" who gave this opinion: "I'm not suprised. It's not going down with all the profits they're raking in. They say it's because of the oil. I don't believe it is. I think it's just profits."
While crude oil is the raw product used to produce the gasoline we purchase, the actual price of oil is set in the global marketplace - which is bigger than any one company or country. There are also other gas price-influencers, including provincial and federal taxes.
As a "motorist" myself, I understand the frustration. But I also understand that oil companies must manage rising costs and other external pressures while trying to bring the oil to market that you and I will consume - hopefully responsibly. For that, an oil company needs to be profitable. And when you operate in a climate where you have little control over the price your product will sell for, you must be wise in your investments to ensure you can weather the good and the bad. Talk to anyone who has lived in Calgary and they'll tell you what it's like to ride through a commodity market cycle.
I think Jimmy Buffet's "Reverend Jim" got me preachin' a bit, so I'll stop there. If you own the album, you know what song Jimmy was leading into. There's good perspective in that one too.
Photo Credit: arthaey