Why "It's All Good" for the Oil Companies

A friend of mine (who has very different political views than my own) and I had a rather profound and lengthy discussion recently about the price of oil, it's relation to the economy, and why neither good nor bad economic news seems to slow its ascent. For example, my friend was rather baffled why higher unemployment and a weaker dollar would cause the USO (Oil Exchange Traded Fund) to climb even higher. After all, he reasoned, wouldn't that mean that people would be buying less and that despite the declining purchasing power, companies would have a difficult lowering prices until the price of oil (needed to produce and transport goods) came down? Hmmm.... it would seem so, would it not? However, despite the facts that my friend stated, there are other facts still pushing oil higher. Although higher unemployment would seemingly push oil prices lower, 5.5% unemployment is not enough to frighten oil companies into believing that consumption will slow dramatically. In addition, China's economy continues to boom spurring an increasing demand for more oil causing even more hardship on the average American by pushing gasoline and heating oil prices ever higher while their wages are able to purchase less than they did last year or last month. These hardships do not matter to the oil companies. Consumption has not dropped enough to make a difference to their bottom line, and they have not found the breaking point at which the consumer will rebel. Therefore, their profits continue to grow. So, until things get "bad enough" to cause the U.S. consumer to stop purchasing, oil companies will continue to push prices higher, soaking the consumer for every penny possible.

And, if the U.S. economy were to turn around and begin booming... well, it's like I said in the title. It's all good for the oil companies.