As with the last time during the Bush Administration, all the Obamabots at work are running around complaining about the oil companies raising the price of gas and how it's a conspiracy.

However, I just don't see the increase in gas prices being due to the actions of some group of rich white men rubbing their hands together in a room behind closed doors? If oil companies had that power, why wouldn't gas always be $5.00?

Isn't it an issue of high demand and low supply?

Do speculators affect the current price of gas?

Help me out here. I've read some articles, but no defintive conclusions have jumped out at me.

Does speculation affect fuel prices? Yes it does. What fuels this speculation? There are two main drivers: one thing is banks nowadays are more willing to lend to "financial operators" (a garbled word for old fashioned speculators) than to industrial or commercial activities. The second is everybody's desperately looking for some way to get something back from financial investments. Due to monetary politics old fashioned "safe" investments (bank deposits and obligations, Treasury bonds etc) pay a pittance, well below even the much doctored CPI. It means if you leave money in your bank account or buy bonds you'll actually end up losing it through sheer attrition. Of course junk bonds and stocks are not for everybody so commodities are usually a safe bet. Everybody needs fuel, rice, wheat etc. The more money is diverted from traditional forms of savings and investment into the commodities market, the higher the prices become, even in face of reduced consumption. The noticeable dip we saw in worldwide crude and especially refined fuel (gasoline, diesel, kerosene etc) consumption this past January should have sent speculators running like rats abandoning ship but prices haven't moved an inch: in fact they have increased in face of decreasing demand. That says quite a lot about the present climate.

Which leads us to point 2. Before I get clubbed to death like a baby seal for omitting it, we live in an era of accelerating monetary inflation. While money velocity these days is much slower than in decades past, the mass of liquidity which was literally dumped into the system starting in 2008 (before QEI inflationary mechanism were subtler and more sophisticated) is simply staggering and is starting to trickle down into the system. Everybody has thrown insane amounts of money into the system, even the usually cautious Swiss. Things have really started to heat up last year as even doctored CPI data have shown a substantial increase mainstream economists are refusing to comment (because they know the causes perfectly well: after all even ECB officials have said time and time again "Price inflation is ultimately a monetary issue"). As you may know more paper money equates in higher prices with less importance attached to the supply and demand mechanisms. This affects everything: from gasoline, to tomatoes, to cellphones to motorcycles. A LvMI scholar used a great metaphor to describe the process: imagine you are at an auction. Suddenly you notice men going around and handing a few people plastic bags full of banknotes. People who recieved the plastic bags immediately start a bidding war among themselves, raising prices well above your projected budget. When you walk out of the auction you notice your money bought you far less than you expected. It's crude, but it's simple and effective to show how monetary inflation affects the pricing system.

From the yesterday's Zero Hedge post:

There’s a lot of talk right now, for example, about rising oil prices which have created uncomfortably high gasoline prices. In gold terms, however, gasoline prices are in a deflationary spiral. The chart below shows unleaded gasoline prices in grams of gold since January 1976:

 

Well, Krugman appears to disagree:

http://krugman.blogs.nytimes.com/2008/06/23/speculative-nonsense-once-again/

Though he later goes back on his word:

http://krugman.blogs.nytimes.com/2009/07/08/oil-speculation/

@Anton:

 

The image cuts off. Here is the link:

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/02/20120301-36year-gas-v-gold.jpg

Oh, indeed. But I provided the link to the article, so there must be no problem.

I think all of these theories are incomplete in ignoring the fact that the looming possibility (and now reality) of an oil embargo against Iran would lead to global shortages and thus rising prices.  And to the extent that Obama and Clinton are active participants in lobbying for these "wartime" sanctions, they are to blame for the rising prices.  See how your liberal friends swallow that pill.

 

 

The truth about rising gas prices, the stock market, & Warren Buffett's taxes

 

NB: his commentary on the supply of gas being relatively high and the demand for gas being relatively low.

I just love these figures, oil companies make something like 2-cents profit on every gallon sold. The government makes 48-cents on each gallon.

We should be putting a windfall-profits tax on the government's massive oil profits.

http://www.api.org/oil-and-natural-gas-overview/fuels-and-refining/gasoline/whats-up-with-gasoline-prices.aspx

 

According to the american petroleum institute,

political instability

nationalization risks

piracy

weather

exchange rates

speculation

inflation

economic growth

and more play a factor

 

Good point. Yeah, Schiff's the man- I hope he considers running for office again.

Wheylous:

@Anton:

 

The image cuts off. Here is the link:

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/02/20120301-36year-gas-v-gold.jpg

 

I have a better idea.  Why not plot Oil prices in terms of Oil prices?  You'll get even a flatter graph that doesn't prove too much...except maybe that buying oil has proven to be a good hedge against rising oil prices.

 

 

 

 

I guarantee almost everyone in your office could fill up for less than $5 in pre-1965 US dimes, quarters, half dollars and dollars. That should get you started talking about the currency. Go by the local coin shop and get some peace dollars and bring them in. Be prepared to spend almost $30 for a one dollar coin.

Well, we more or less have energy-supply-communism with private companies right at the end of the chain. That's why everybody thinks that oil prices are about market forces, but they really aren't. Since the 50's most of the oil supply was gradually nationalized, and now it's practically completely in the hands of governments.

Governments(OPEC) hold back production/limit oil discovery via licenses.