Wednesday, April 27, 2011

$4 dollar gas locally

In today's Fishwrap (to use Quimbob's term for the Enquirer), the headline was about $4 dollar for a gallon of gasoline has reached here. No surprise to anyone who drives, prices have been rising for weeks.

Yesterday the news was all about suspending tax breaks for oil companies (as though they need them!) and investigation into the how oil speculation was driving up the price of gas. Now the Fishwrap comes along and explains that it isn't greedy speculators but merely an imbalance between supply and demand. Wait, it gets better. The imbalance is caused by more people driving as a result of the recovering economy.

Oil speculators make money by betting that gas will cost some much in the future. If prices go up, they make money. If prices go down, they lose money. Imbalance of supply and demand is the equivalent of economic psycho-babble. The supply has remained steady, in fact recent reports are showing a surplus of oil. Last time gas prices rose this high, oil was trading at $150 per barrel. Today oil prices are trading at $112.

Demand going up makes no sense. Local communities are cutting public safety and school budgets due to a lack of tax revenues. Those tax revenues come from taxes paid by businesses and residents. If businesses are gone, residents unemployed or leave then those tax revenues drop. Therefore, the contention that demand is increasing as a result of the economy recovering is false.

Another way to disprove the claim of increase demand is look at your own driving habits. People are looking for more fuel efficient vehicles, car pooling, using public transit or simply not driving as much. How is that increasing demand?

The war in Libya spurred the surge in oil prices but only 2 percent of the worlds oil comes from there. Saudi Arabia initially assured the US and NATO that they could increase production to offset the loss of Libyan oil. The $112 price per barrel for crude would seem to support the Saudi's promise. More oil is produced in Nigeria than in Libya yet thus far no one is running claiming the civil war in that country will effect oil prices.

It is easy to see why conspiracy theorists will connect the higher price of gas to the hostilities in North Africa. If this nonsense was tried in France, citizens would be striking throughout the country. Here, we will just mumble to ourselves and shell out more money for gas and consumer goods.

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