Tuesday, April 17, 2012
Well, The Rubber Will Hit The Road Now
I've been saying that a prime mover in the volatility of oil prices recently has been speculation. My reasoning is simple.
First, we have seen that financial players can manipulate markets to a remarkable degree. We saw it in California with Enron, we saw it in the housing market. They are very good at creating bubbles.
Second, we saw in 2008 the price of gas spike to over $4 a gallon. It subsequently collapsed along with the economy. While decreased demand certainly played a part in that collapse, we are led to believe that it is Chindia that is driving the explosion in gas prices. But Chindia's economy didn't collapse. So what happened to all that demand?
Where has this increased demand from a year or two ago come from? It was a warm winter, so it couldn't have all gone to heating oil. The economies of Europe and the US are growing slowly (if at all in Europe's case) and the growth in China's economy has been pretty stable.
It seems self-evident that the price for gas should rest between where it was in the trough of a year or two ago and where it is now. And I would bet the difference is in speculation.
In any case, Obama has decided to spend some money and political capital going after speculators in the oil market.
Needless to say this will be attacked, because "F**k you, that's why!"
Gas prices are, I think, the single biggest threat to Obama's re-election. And there are limits to what he can do. But if I'm right, and this brings gas down to, say, $3.50 a gallon, then it will be hard to bet against him.
But it reminds me of the litany of stupid lies that are routinely thrown against Obama. Remember how he was mocked for talking about inflating your tires, back in 2008? And it turns out that's probably the best way to increase gas mileage? Or that he has retarded America's oil production, but it's at an all time high?
So, if Obama and I are right (Word out, homey!) and speculation is at the root of some of the gas woes, it will come down to a nebulous feeling on the American people rather than any hard data.
Because "F**k you, that's why! USA! USA!"