Politics Roil Oil

If Congress were to open up new exploration lands and allow integrated companies to develop more refining capacity in key regions, the outlook for integrated might change. However, today's political posturing combined with challenges to growth make Big Oil a difficult place to pump profits in the energy space.

It's the Market, Stupid

Most impressively, it doesn't seem to matter to Congress that there is no evidence anywhere that the oil markets are rigged. In fact, members of Congress should spend a little time reviewing recent history to see that two of the strongest hurricanes in recent history knocked Gulf of Mexico production and transportation completely off line; oil production from Saudi Arabia and other OPEC countries is peaking; and there hasn't been a meaningful new refining project developed on our shores for three decades.

Better yet, maybe Congress should go to China and hold a hearing as to why this burgeoning nation is all of a sudden using so much of the world's hydrocarbon supply. There may be a conspiracy among the Chinese people to drive U.S. gasoline higher.

Nonsense, you say. But it's almost as plausible as the thought that four or five major oil companies -- which are under the regulatory and market microscope every day -- got together after the hurricanes and decided it was the perfect chance to screw the U.S. consumer.

Not that the liberal take would concur, but maybe, just maybe, this was the markets at work, with price acting as a demand-rationing mechanism to make sure the market clears. With supply incredibly challenged after Katrina, there was a period of a week or more that the vast majority of BP(BP Quote) retail gasoline stations in Atlanta had no gasoline for sale. In other words, for them, price didn't matter because they had no gas to sell and, as a result, made no money. That profit opportunity was lost forever.