Sunday, November 16, 2008

How Have Oil Prices Affected People?

1. People
• Middle East middle class: In February, because of high oil prices in Jordan, the price of basic food items (eggs, potatoes, cucumbers) more than doubled.
• Americans: Partially due to higher oil prices within the past few years, 24% of the income of young adults has gone to pay off credit card debt. Overall, credit card debt in the United States was at $790 billion as of February of this year. Gasoline and home heating prices have risen 29.4%, transportation costs 8.3%, food and beverage prices 4.8%, and medical care 5.2%. American people haven’t been given comparable increases in income to match these historically high increases. The cost of products that use oil as a raw material, like lotions, toothpaste, plastics, etc. have also risen.
• American politicians
o Donald Rumsfeld: Normally, politicians have to divest themselves of any holdings that stand to gain or lose from political decisions. However, Rumsfeld was belligerent and never sold his stocks in Gilead Sciences. If he had sold when initially requested, he would have received $7.45 for each share. However, due to his consistent refusal to sell, he ended up making $67.60 when he left the Bush administration, a profit increase of 807 percent.
o Dick Cheney: Like Rumsfeld, Cheney was very hesitant to detach himself from his business interests as he held public office. He was pressured into selling most, but not all of his Halliburton stock for $18.5 million. However, he still kept 189,000 shares in Halliburton and 500,000 unvested options. Halliburton’s stock rose from under $10 before the War in Iraq to $41 three years later.
• Oil Companies: Removing Saddam Hussein from power in Iraq opened up many opportunities for oil companies including Exxon Mobil, Chevron, Shell, and BP. Halliburton is also included. The War in Iraq has been the single most profitable event in Halliburton’s history. Exxon Mobil recorded a record $11.68 billion profit for the second quarter of the fiscal year.
• Automotive Industry: GM, Ford, and Chrysler are all requesting a bailout. Last month, the automotive industry sold less than a million cars, the slowest the sales rate has been in 15 years. This is due to the fact that Americans, on average, spend 4.5% of their income on gasoline as opposed to 2% when oil was cheap in the early part of this decade.

Source: Bill Baer of
Some of that is just plain scary.

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