No it isn’t…
In fact, we get our gas on the cheap. If one were to travel to Europe, they pay double the rate we pay here. In countries such as Italy, Norway and The Netherlands, they pay as much as $6.49*. Gas there is taxed heavily, often taking up about %75 percent of the costs. One of the reasons why some countries pay more than other’s depends a lot on government policy. Other countries such as in Latin America and the Middle East have much cheaper prices for gas, but it’s all government controlled.
Remember back 10 years ago before 9/11 when gas was about $1.59? Remember when $10 got you a little over half a tank a gas that lasted about a week? Those were the good ole’ days, but I highly doubt we’ll ever see those again. Back in 2008 gas got up to as much as over $5 dollars in some states as California and Hawaii and $4.89 here in parts of Maryland. So why are gas prices so high? There are a number of factors, one being high crude oil prices. On the news, you’ll often hear about the price of crude oil rising. That’s the stuf we get our gas from. Crude oil accounts for about %55 of our gas, the other %45 come from taxes and distribution. It has now risen to about $99 dollars a barrel. We were at over $100 a barrel during the Iraq War and during the Summer of 2008 and 2009 to about as much as $145** a barrel. To put it in basic economic terms, oil prices go up when demand is higher than supply. They also are expected to rise during the summer when people tend to drive more.
Another reason why they tend to rise is because of commodities traders speculating on oil futures contracts. What is a commodity trader you ask? All they do is buy or sell contracts and assets such as oil, agriculture, livestock, bonds, or gold and trade them in an open market and guess what the prices will be. They then lock in those prices and deliver those goods in the future. In this case, oil prices change daily and are affected by investors who trade on what the price of oil should be in the future and assume risk. When the price of oil will go up, investors bid higher and the price of oil rises higher. They even drive up the price of oil when supply is high and demand is low. Sounds to me like they’re playing a game of craps with gas prices. For those of you well versed in the financial meltdown of 2008, this is something similar.
Oil prices also rise due to unrest in oil-producing countries, concern for pressure from countries such as China and India to meet demand and the declining dollar. The middle East has erupted into turmoil lately, due to political unrest. But in countries such as Egypt, Libya, and Tunisia, where most of the uprisings have occurred, they only account for about %2 of oil exports. The US actually get’s most of its imported oil from Canada, Saudi Arabia, Nigeria, and Mexico. The dollar has been on the decline for the past 6 years and oil is traded in dollars.
The law of supply and demand tells us that prices rise when demand is high and supply is low and prices fall when demand is low and supply is high. Usually during the fall, gas prices tend to drop because demand is low. But during the summers of 2008 and 2009, the price of oil was at an all time high even during the recession. How the hell did that happen? Commodity traders driving up the price. In an interview with 60 Minutes, Dan Gilligan, President of Petroleum Marketers Association, notes that prices were driven, not because of the recession, but by speculators. “Approximately 60 to 70 percent of the oil contracts in the futures markets are now held by speculative entities. Not by companies that need oil, not by the airlines, not by the oil companies. But by investors that are looking to make money from their speculative positions,” Gilligan explained. But while being questioned in front of congress, Lawrence Eagles, banker at JP Morgan, said this, “We believe that high energy prices are fundamentally a result of supply and demand,” So wouldn’t this go completely against the law of supply and demand? And how is it that the only people who seem to benefit from this are investors and oil companies that tell us that the reason oil prices are high is because of supply and demand? Or political upheavals? Or hell, the BP oil spill? How convenient that now that we have the Middle East popping off, that gas prices, and with everything else such as food, goes up even though supply and demand may suggest that it has nothing to do with it. Remember this guy? He made off with a $400 million dollar retirement package when gas was at an all time high due to “supply and demand”.
IMHO, markets are not always driven by fear, but by greedy motherfuckers. I believe that the high price of oil is driven by speculators running a craps show on the market. And they are piss poor middlemen too. So what can we do? Not really a damn thing. We could drive less, but products made from plastics and other everyday materials come from oil, so a gasoline boycott wouldn’t really put much of a dent. But it can help us environmentally. Commodities markets such as this, should be regulated and I will update any information in the Energy Plan Post. This thing doesn’t pass the smell test and I could be wrong, but if anyone has a different opinion then me, Please feel free to leave a non-asshole-ish comment below explaining commodities trading and bubbles.Read Full Post | Make a Comment ( 1 so far )