I filled up my car yesterday with Super Unleaded, paying $4.349 a gallon. What a rip off! Shades of 2008!
Do they even teach "supply and demand" in high school economics anymore? (Do they even teach high school economics anymore?) What we're paying for gasoline today has little to do with supply and demand. Talk about an antiquated concept! Nope, today it's all about "speculation".
It's one thing, entirely legitimate, for heavy fuel users....airlines, trucking companies, utilities, etc....to want to know what they'll be paying for fuel 6 months in the future. How can you sell your product or service if you don't know what it's going to cost you to produce it? Their "hedging" is understandable. I get it. But what I don't get is why the government that's supposed to protect us from the unscrupulous allows this virtually wide-open speculation to take place?
The Commodities Futures Trading Commission could put strong "position limits" in place which would bring things back more closely in line with true supply and demand, but they don't. Why? Who's holding the regulators back? I think it's fair to say the Republican position will always be "hands off". So what's the Democrat's excuse?
Former Senator Byron Dorgan (D-ND) accurately described what's happening now as paper trading "by people....who will never buy oil and never sell oil. They are actually buying and selling things they will never have from people who never had it." They never take possession of the fuel they're buying and selling, unlike the airlines, truckers, etc. It's all just a mouse click to them. They're getting rich(er), and we're getting screwed. A senior energy analyst at Oppenheimer says speculators are adding "at a minimum" $20 per barrel of oil. The St. Louis Federal Reserve says that over the past five years speculation drove the price of oil up by 15 percent. The CEO of ExxonMobil believes speculation could today be driving up oil prices by as much as 40 percent.
I'm sure it's a very complex issue, but to simply throw up our hands and say, "We give up. Let 'em do with us whatever they want" is just wrong. Why even have regulators if they don't regulate? Another example of government dysfunction.
S
My understanding is that the Democrats have offered a bill to prevent this sort of speculation but the Republicans have blocked it even for discussion. This is another thing Republicans will need to defend come November. Along with continuing oil subsidies and their attack on women's health. But to be sure, there is no oil shortage and we can't drill ourselves out of this problem.
ReplyDeleteMy husband rants about this all the time - the only real factor here is greed (as far as I can tell). I used to fantasize about living so close to where I work that I could walk or ride a bike. I'm pretty sure that's never going to happen now (wonder what time I'd have to get up to ride a bike 40 miles to work?). Sigh.
ReplyDeleteDana...the only way I coudl ride a bike to work if it was downhill BOTH ways. haha!
ReplyDeleteSteve....My understanding is the CFTC could impose new trading positions (limiting speculators) without getting Republican permission. It's within their regulatory jurisdiction.
It will decline again. It is a fantastic speculation from 80 to 100. A slam dunk. Only two factors move markets. Greed and Fear.
ReplyDeleteIt is a free market and so these issues will always be with us. You just have to be on the right side of the information curve.
Not always easy.
Cheers buddy,
Bobby
You're right Bobby. Speculative bubbles always do burst eventually. But until then how many people who don't have access to "the information curve" are going to be squashed?
ReplyDeleteS
it's not just over in your world but everywhere! Our government has it's kartell authority now checking if the big companies are selling their fuel to the "low price" gas stations higher then to their own. And, they are considering introducing the Australian system where the price has to be applied for 24 hrs before changing so people have time to perhaps fill up before it raises.
ReplyDeleteAt the moment I pay €1.70 ($1,3069) per liter....do the math :-(
You can add demand by China (who can afford it) and taxes at the pump, not at the boardroom.
ReplyDeleteImagine what the per gallon tax at the pump could be cut if oil companies paid more tax on profits (not receipts) of forty billion dollars per quarter (not year).
fin
Germany's price works out to about $8.41/gal,and here it's about $5.30/gal, a relative bargain :-)
ReplyDeleteI only use my car for shopping or travelling. I'm one of the lucky ones who can easily commute the 3.5 mile round trip by bike (about 2 miles if I walk). Since I bought my car a year and a half ago, I have maybe driven it to work four times.