Opportunity Cost of Using Inventory

Increased demand, security fears, depleted oil reserves, and production cut-backs all contributed to an increase in the world price of crude oil. In 2012, for example, the market price was close to $130 per barrel for UK-traded Brent crude. The market price in 2008 had been around $70 per barrel. At one point after a quick surge in the price of crude, the major oil companies raised the retail price of refined oil products, even though these products were manufactured from oil purchased at the earlier, lower prices. The media charged the oil companies with profiteering and price gouging. Quick to respond, outraged politicians promised immediate investigations. Critically evaluate the charge that the major oil companies profited from the rapid increase in the market price. What advice would you offer their management?