Gasoline prices slipped below the $3 a gallon mark in Kingsport last weekend and drivers marked the price break by rushing to the pumps to fill up.
From from the looks of the lines at the Wal-Mart pumps much of Saturday and Sunday drivers were also topping off just in case the price jumps with the next week.
It was a similar scene to the one a couple weeks ago when Hurricane Ike spiked prices and tanked area supplies.
According to a report by CNN Money.com on Sunday, Oil prices also have been moving sharply lower amid fears that the economic crisis, which has deepened globally, will have a severely adverse effect on demand.
Crude plunged to a 13-month low on Friday, ending down $8.89 to $77.49 a barrel. That's a far cry from the $147.27 a barrel seen in July.
And since oil prices make up about half of the price of gasoline, the slide in crude is good news for drivers."
Enjoy it while you can. Maybe the relief from the $80 fill up will last for a while, but don't bet on it.
It's a bad bet because the price of gas and oil is set on the futures market which has replaced OPEC as the principal determinant of the price of crude oil. "It is largely unregulated and prone to excessive speculation and manipulation," according to Antonia Juhasz.
Juhasz is the author of 'Tyranny of Oil' and a fellow at the petro-critic organization Oil Change International and at the Institute for Policy Studies.
The 'Tyrany of Oil' has its pluses and minuses - depending on the reader's political persuasions - but the research and presentation is a good back grounder for understanding some of the politics and economics behind what all of us pay at the pump.
During and interview with Terry Gross on Fresh Air, Juhasz argued that the business and politics of oil's production pose such grave implications on so many fronts - the environment, human rights, the economy, worker safety, public health - that the current state of petroleum-industry affairs is fundamentally antithetical to democracy." CLICK HERE
to hear that interview.
In her book, Juhasa writes that the merger of oil companies in the 90s has created not only huge politically powerful organizations but also allowed the oil companies to take control of the refining and selling of gasoline in the United States in the style of Standard Oil before it was busted up by the Supreme Court in 1911. "They have forged a mass consolidation of these sectors, yielding rapid increases in the price of gasoline and oil company profits," she writes
The book uses Connecticut's Attorney General Richard Blumental's testimony before a congressional committee in 2007 to reinforce its point. "Big Oil has created a market on the brink, manipulating inventories and refinery capacity to the point that the slightest supply disruption sends prices-and company profits-skyrocketing There is sufficient supply, but these newly created industry giants use their huge market power to keep a stranglehold on the spigot."
In a excerpt from her book that is available on the Fresh Air site, Juhasa also writes, "The oil industry argues in public that while its profits look large, its profit margin is not. In testimony before the U.S. Congress in April 2008, for example, ExxonMobil senior vice president J. S. Simon explained, "[I]n 2007, the oil and gas industry earned, on average, about 8.3 cents per dollar of sales-near the Dow Jones Industrial Average for major industries of 7.8 cents per dollar of sales."9 Simon measured the company's net income as a share of its total revenues. In ExxonMobil's shareholder report, however, the company uses a very different measure-the company's return on capital employed (ROCE). As ExxonMobil argues in its 2007 annual report, "The Corporation has consistently applied its ROCE definition for many years and views it as the best measure of historical capital productivity in our capital-intensive, long-term industry. . . ." Using this mea sure, Exxon-Mobil is far and away more profitable than any other comparable U.S. industry. ExxonMobil's global operations made a 31.8 percent rate of return on average capital employed, nearly 24 points higher than the average return for all nonfinancial U.S. corporaÂ¬tions in 2007 and 18 points higher than that of the manufacturing sector in 2006 (the most recent date available).10 As for the oil industry as a whole, U.S. News and World Report urges readers to look at shareholder equity available for investment. Using this measure, the oil industry, at 27 percent, was nearly 10 points higher than that of other manufacturers in 2007.
Although it's not in the book excerpt the Fresh Air interview touched on an issue related to some of the deregulation issues behind the subprime and credit crisis.
The issue is called the "Enron loophole" and basically it exempts most over-the-counter energy trades and trading on electronic energy commodity markets from government regulation.
It got its name because it was drafted by Enron Corporation lobbyists working with U.S. Senator Phil Gramm to create a deregulated market for their experimental "Enron On-line" initiative.
The loophole was enacted in the Commodity Exchange Act as a result of the Commodity Futures Modernization Act of 2000, signed by U.S. president Bill Clinton on December 21, 2000.
It allowed for the creation, for U.S. exchanges, of a new kind of derivative security, the single-stock future, which had been prohibited since 1982 under the Shad-Johnson Accord, a jurisdictional pact between John S.R. Shad, then chairman of the U.S. Securities and Exchange Commission, and Phil Johnson, then chairman of the Commodity Futures Trading Commission.
Several politicians have proposed repeal of the Enron loophole to curb oil future speculation that many blame for part of the skyrocketing oil prices.
The book can't be read as gospel, but it's compelling background for currents events as you watch the gas station price boards and wonder what's next.