High Oil Prices?

Posted on by

Why are oil prices shooting through the roof lately?  Well, it seems like TV pundits blame everything except the single institution that has the largest influence on what oil is traded at, and that is the Federal Reserve.  Some things might cause brief spikes in the price of oil, like shortages in supply, but the main cause for gas at the pump getting more expensive over time is the Federal Reserve. The real frustrating thing is that TV pundits seem not to have a clue and have not mentioned monetary policy at all.  Left or Right, the mainstream media seems totally clueless.  Bill Orielly had a discussion with Lou Dobbs about oil prices and not only did the two not mention the FED once but, they don’t seem to understand basic economics either.  The conversation went something like Dobbs telling O’Rielly that the oil refined in the United States is being sent overseas.  Well, this should not be surprising considering that oil refining is a highly complex process that third world countries often do not have the industry to refine themselves.  Therefore many countries ship their crude here and when it is refined it is shipped back overseas.  This is not some kind of complex plot where oil companies are taking advantage of American customers.They are simply selling refined oil on the world market at it’s commodity price.  O’Rielly seems to think that there is some kind of price fixing going on because gas is at such a similar price between different gas stations.  This is pretty easy to understand when you realize that oil and gas are not consumer goods like tennis shoes. They are instead commodities like beef, gold, copper, and many other industrial products.  The margins are very small when looking at any commodity because commodities by definition are homogenous, unlike two pairs of shoes that are likely very different.  If you went around town trying to buy gold or silver bullion at different coin shops, you would notice that the prices are pretty similar if not almost exactly the same.  Same is true for industrial metals like copper, the going rate is the going rate.  Additionally, oil, gas, gold, and copper are in a world market, the price of each is nearly uniform around the world, gold costs the same in Shanghai as it does in New York.  Oil, before taxes, has a very similar cost as well.  The real variable here is the dollar. When the dollar loses value, the price of oil goes up.  If you want someone to blame for high gas prices look no further than the Federal Reserve.

 

Some people might say that the government owning so much land and preventing drilling is pushing the price of oil up.  This might be true to some extent, and I would agree that opening up more land for oil exploration would be a good idea but, this does not explain how a gallon of gas used to cost a dime and will now likely be five dollars by summer.  The reason that gas is so high this year should be put into consideration of what the Federal Reserve’s actions have been over the last four years.  The FED has pumped trillions of dollars into the economy but, this has been mostly absorbed by the big banks where they have kept the money preventing it from being pushed into the economy.  We are begging to see the affects of this money as it enters the economy, for food and many other commodities have been inflated up 10% in 2011.  The drive up in the stock market to 13,000 has also been a result of inflation because Wall Street is always one of the first in line for newly printed money.  We are finally starting to feel the beginning of the price inflation that comes about when the Fed doubles the monetary base.  If the economy shoots up to full employment we might even see ten dollar gas but, to be honest we truly do not know because monetary inflation affects different sectors of the economy in different degrees.  Oil, though, is one commodity that is almost always affected by monetary inflation (so is food for that matter, interesting how neither is included in the official CPI).  When oil starts going up in price for long periods of time, it is likely that we will see inflation in other areas as well.

 

In conclusion:

 

The Federal Rerserve is the most to blame for oil prices going through the roof.  Someday the media might catch on to this too but, don’t hold your breath, they have been blaming everything else for 50 years.

3,372 thoughts on “High Oil Prices?”

  3. You could certainly see your skills in the work you write. The world hopes for even more passionate writers such as you who aren’t afraid to say how they believe. Always go after your heart. “History is the version of past events that people have decided to agree upon.” by Napoleon.

    Reply ↓

  5. We are a group of volunteers and opening a new scheme in our community. Your web site offered us with valuable info to work on. You have done an impressive job and our whole community will be thankful to you.

    Reply ↓

  10. I have been surfing online more than 3 hours today, yet
    I never found any interesting article like yours.
    It is pretty worth enough for me. In my opinion, if all webmasters and bloggers made good
    content as you did, the internet will be much more useful
    than ever before.

    Reply ↓

  12. Wow that was unusual. I just wrote an incredibly long
    comment but after I clicked submit my comment didn’t show up.

    Grrrr… well I’m not writing all that over again. Regardless, just wanted to say excellent blog!

    Reply ↓

  16. Having read this I believed it was very informative. I appreciate you taking the time
    and energy to put this short article together. I once again find myself spending
    way too much time both reading and posting comments.

    But so what, it was still worthwhile!

    Reply ↓

  17. This design is incredible!You most certainly
    know how to keep a reader entertained. Between your wit and youjr
    videos, I wass almost moved to start my own blo (well,almost…HaHa!) Excellent job.
    I really loved what yoou had to say, and more tha that, how you presented
    it. Tooo cool!
    월클평생주소

    Reply ↓

  18. An outstanding share! I have just forwarded this onto a colleague who
    had been conducting a little homework on this.
    And he in fact ordered me breakfast simply because I found it foor him…

    lol. So allow me to reword this…. Thank YOU for the meal!!
    But yeah, thanks for spending some time to talk about this issuie here on your web
    site.

    Feell ffree to visiot my page –카지노사이트

    Reply ↓

  20. This is really fascinating, You are an overly professional blogger.

    I’ve joined your rss feed and sit up for in quest of extra of your magnificent post.

    Additionally, I’ve shared your website in my
    social networks

    Reply ↓

  21. Oh my goodness! Awesome aгticle dude! Many thanks, Ꮋowever І am going thrοugh pгoblems with your RSS.
    I don’t know whyy I can’t join it. Is there anybody else getting
    similaг RSS issues? Anyone who knows the answer ccan you kindly respond?
    Ꭲhanx!!

    Reply ↓

  23. Ꮋi to all, how is the whole thing, Ι thіnk very one
    is ɡetting more from this site, аnd yoᥙr viws are pleasant designed for new people.

    Reply ↓

  25. Fantastic goods from you, man. I have understand your stuff previous to and you’re just too great. I really like what you have acquired here, really like what you are saying and the way in which you say it. You make it entertaining and you still care for to keep it sensible. I cant wait to read far more from you. This is really a terrific web site.

    Reply ↓

  36. Hi! This is my first visit to your blog!

    We are a collection of volunteers and starting a new project in a community
    in the same niche. Your blog provided us valuable information to work on.
    You have done a outstanding job!

    Reply ↓

  42. Just want to say your article is as astonishing. The clearness for your post is just great and i can suppose you’re
    a professional in this subject. Well with your permission let me to clutch your feed to keep updated with forthcoming post.
    Thank you 1,000,000 and please keep up the rewarding work.

    Reply ↓

  47. Greetings! I know this is kinda off topic nevertheless I’d figured I’d ask. Would you be interested in exchanging links or maybe guest authoring a blog post or vice-versa? My website covers a lot of the same topics as yours and I feel we could greatly benefit from each other. If you’re interested feel free to shoot me an e-mail. I look forward to hearing from you! Excellent blog by the way!

    Reply ↓

  49. Hello would yoou mind letting me know which hosting comppany you’reutilizing?
    I’ve loaaded your blog in 3 different browsers and I must
    say this blog loads a lot quicker then most. Can yoou suggest a good
    hosting provider at a reasonable price? Thanks, I appreciate it!

    양주교정치과

    Reply ↓

Leave a Reply

Your email address will not be published. Required fields are marked *