Chapter 11 - Inventory Blog - http://www.economicnews.ca/cepnews/wire/article/117731

Oil prices slip even after inventory drops

The Energy Department of energy information administration said that crude oil inventories dropped by 5.9 million barrels, gasoline dropped by 6.5 million, and distillates, which included heating oil and diesel fuel, dropped by a 1.2 million. The did predict that the oil company who have lower inventories of each, but these results were lower than expected. In fact the oil refineries were only running at a record breaking low 78.3 percent capacity last week. OPEC, The Organization of petroleum exporting countries said they were going to reduce outputs by 520000 barrels a day, but they chosen not to take the more drastic step forward in cutting their production rates. This was viewed as a compromise to avoid a backlash from the biggest countries that consume petroleum. With it they also planned to reduce the rapid decline in oil prices. Early Wednesday hurricane Ike was about 95 Miles west of Havana, Cuba. Ike was moving at 10 miles per hour with winds near 75 miles per hour. It was expected to move across the gulf of Mexico and into the Texas coast, with winds up to 130 miles per hour and moving into a category 3 hurricane. As of Tuesday the US department of the interior minerals management service said that about 77.5 percent of oil and 64.8 percent of natural gas productions in the Gulf remained shuttered as hurricane Ike approached Texas. Since two weeks ago when hurricane Gustav hit oil and gas operators have been working around the clock to restore productions. With all these natural disasters people must be wondering why the majority of gas prices are lower than they expect them to be.

This article connects to the chapter we are learning today in many ways. The obvious connection is that the article gives you lots of examples of gas, oil and other natural gasses having their price dropped. The natural gasses represents the inventory of these companies. The article subtlety says if you have a low inventory due to some natural disaster, the prices of the affected products would have its dollar value sky rocket, but its not the case here according to the article. The opposite is happening, a hurricane hit many oil refineries and lost much of their products. What you would think would happen is gas prices would go through the roof and lots of people would be angry, but the entire opposite happened the prices of gas in most countries fell in the aftermath of the hurricane.

I personally think that raising the prices after a natural disaster hit would be a great business plan. I don't really get why these oil companies don't heighten the prices on gas, but i do know why they lowered the price. The reason was all the companies were so scared before the hurricane they shot up the price of oil. When the hurricane hit, it wasn't there wasn't as much damage as the companies thought there would be. So they lowered the price back down. If you think about it our gas prices didn't really change much before the hurricane hit. I don't really care for the gas prices because I don't own a car yet and really I don't have that big of an appreciation for money, but that because I'm still a teenager. I'm sure when I grow up ill be as angry as the rest of the world about the overpriced oil we so disparately need.