High Oil Prices?

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.

3,441 thoughts on “High Oil Prices?

  1. Wonderful items from you, man. I have bear in mind your stuff previous to and you’re just too
    magnificent. I actually like what you have bought right here,
    certainly like what you’re saying and the way in which wherein you assert it.

    You make it entertaining and you still care for to keep it smart.

    I can’t wait to read much more from you. That
    is really a wonderful web site.
    부산 치과 상담

  2. I like the valuable info you provide in your articles.
    I’ll bookmark your weblog and check again here regularly.
    I’m quite certain I’ll learn a lot of new stuff right here!
    Best of luck for the next!

  3. Geetings from Ohio! I’m bored to tears at work sso I decided to check out
    your site on my iphone during lunch break. I enjoy the information you prvide here and can’t
    wait to take a look when I get home. I’m surprised at how quick your blkog loaded on my phone
    .. I’m not even using WIFI, just 3G .. Anyhow, very good site!

    ig廣 – Gretta,

  4. After study a few of the blog posts on your website now, and I truly like your way of blogging. I bookmarked it to my bookmark website list and will be checking back soon. Pls check out my web site as well and let me know what you think.

  5. Hey I am so happy I found your blog page, I really found you
    bby accident, while I was looking on Askjeeve for something else, Anyways I
    am here now and would just like to say thank you
    for a fantastic post and a all round entertaining
    blog (I also love thhe theme/design), I don’t have time to read through it
    all at the moment but I have saved iit and aldo added your RSS feeds, so when I have time
    I will be back to read a reat deal more, Please doo keep up the awesome work.

    웅진코웨이얼음정수기렌탈

  6. Howdy! This article couldn’t be written much better!
    Looking at this article reminds me of my previous roommate!
    He constantly kept talking about this. I am going to forward
    this article to him. Pretty sure he will have a very good read.
    Thank you for sharing!

  7. First off I would like to say superb blog! I had a quick question which I’d
    like to ask if you do not mind. I was curious to know
    how you center yourself and clear your head prior to writing.
    I’ve had a difficult time clearing my mind in getting my ideas out.

    I truly do enjoy writing but it just seems like the first 10 to 15 minutes tend
    to be lost simply just trying to figure out how to
    begin. Any suggestions or tips? Many thanks!

  8. Greetings! Very helpful advice in this particular article!
    It is the little changes that will make the greatest changes.
    Thanks a lot for sharing!

  9. Hello, Neat post. There is a problem along with your website in internet explorer,
    may test this? IE still is the marketplace leader and a big section of other people will leave
    out your magnificent writing due to this problem.

  10. Hi, I do believe this is an excellent site.
    I stumbledupon it 😉 I may return yet again since I bookmarked
    it. Money and freedom is the best way to change, may you be rich and continue to guide other people.

  11. I just could not leave your web site before suggesting that I extremely loved the
    usual info a person supply in your visitors? Is gonna be again ceaselessly in order to inspect new
    posts

  12. Hi there, this weekend is fastidious in support of me, as this point in time i am reading this great educational post
    here at my residence.

  13. Hey there! Do you use Twitter? I’d like to follow you if that would be okay.
    I’m absolutely enjoying your blog and look forward to new updates.

  14. If you are going for most excellent contents like I do,
    only pay a quick visit this site every day because it gives
    feature contents, thanks

  15. This is very interesting, You’re a very skilled blogger. I’ve joined your rss feed
    and look forward to seeking more of your great post.
    Also, I’ve shared your site in my social networks!

  16. I know this if off topic but I’m looking into starting my own blog
    and was wondering what all is needed to get set up?
    I’m assuming having a blog like yours would cost a pretty penny?
    I’m not very internet smart so I’m not 100% certain. Any recommendations or advice would be greatly appreciated.
    Kudos

  17. I think what you posted made a bunch of sense. But,
    think on this, suppose you added a little content? I ain’t suggesting your
    information is not solid, but suppose you added a title to maybe grab a person’s attention?
    I mean High Oil Prices? | FreedomOmaha.com is
    a little plain. You could glance at Yahoo’s front page and see how they create news titles to get people
    to click. You might add a video or a related pic or two to
    get readers excited about everything’ve written. Just
    my opinion, it would bring your website a little livelier.

Leave a Reply

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