Want to be rewarded for doing bad business? Join an oil company!

10Aug - by Frank Koehntopp - 3 - In Blogging

You may have noticed that prices at the gas pump went up last week. This has become standard, so we don’t even realize it anymore. The reason given was the shutdown of a pipeline in Alaska.

“Oil prices jumped by $2 a barrel Monday following a shutdown at an Alaskan oil field that accounts for about 8 percent of daily U.S. production.

Gasoline futures also rose, and experts are expecting prices at the pump to increase by about 10 cents a gallon.

BP Exploration Alaska Inc. began shutting down 400,000 barrels of daily oil production Sunday at Prudhoe Bay, in Alaska’s North Slope region, due to severe corrosion on a pipeline.”

Sounds normal, doesn’t it? But wait – there was no explosion or anything serious, it’s just rust. When the pipeline has been repaired, the oil will be flowing normally again. So, there is no current shortage of supply, no loss of oil, it just starts flowing through the pipes a bit later.

Why does that have to affect the price? There is no loss for BP, on the contrary: due to the rising prices, they get rewarded by more money for the oil they deliver now! Anyone ready to take a bet that the price won’t go down by the same amount after the pipeline is repaired?

Also, rust doesn’t exactly build up in a day – I heard that these pipelines hadn’t been serviced for fourteen (!) years – so it was just sloppyness that led to the problem.

I’m in the wrong business….

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3 thoughts on “Want to be rewarded for doing bad business? Join an oil company!”

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