- October 31, 2005: CPI posts biggest gain in 25 years "The department said energy costs were responsible for 90 percent of the rise. Record gasoline prices in September after Katrina sent energy prices soaring 12 percent in the month."
- November 14, 2005: Tax rate falling for many big oil firms "Report: Nearly one in four large-cap oil companies will pay lower taxes despite strong profits."
- December 15, 2005: CPI posts biggest drop since 1949 "Gasoline prices tumbled 16 percent and natural gas prices slipped a scant 0.5 percent after soaring for two straight months. But electricity prices rose 3.8 percent from October."
Now I understand that Hurricane Katrina had a big impact on East Coast oil production. I can understand this having an impact on East Coast oil prices. But what I can't understand is how on earth this could cause the price of Diesel in California to go from $3.262 on 10/3/05 to $2.465 on 12/12/05. That's a 25% drop in price. What connection is there between California Diesel and East Coast oil? None that I know of - we don't transport oil from the East to California or vice versa.
I don't mean to sound like a conspiracy theorist, but it sure seems like Oil companies took advantage of the Hurricane to boost short term profits. And this is nothing but bad for the economy. The price of virtually every consumer item, from food to the bricks in your house is effected by the price of diesel fuel. Big short term jumps in the COGS create an uncertain business environment, which leads directly to inflation.
If I own a brick factory, and I have to sign a 6 month contract to deliver bricks to a large builder, and I think there is a possibility that the fuel cost to move those bricks is going to double during the contract, do you think I am going to build my price based on the current costs? No way. I'm going to cover my ass, and make sure that my fuel costs are paid in full. If the price stays the same, "GREAT!More money for me." If they double, "oh well, I had it built into my price."