With gasoline prices approaching $4 per gallon in Madison, there are many factors that have been blamed by politicians and so-called analysts in the corporate media. Among those are tensions in the Middle East, supply and demand, OPEC policies, the Obama administration’s policies, etc.
While many factors can be considered in placing the blame for rising gasoline prices, the primary cause of the price increase is rarely mentioned – speculation on Wall Street. Wall Street is betting on higher oil prices in the future and that betting is causing prices to rise.
A recent article by Robert Lenzner, writing for Forbes, concludes that speculation adds $23.39 to the price of a barrel of crude oil, which translates to a $.56 increase in the price of gasoline at the pumps for Americans. In other words, relatively few players in the Wall Street casino with very deep pockets are placing huge bets on oil – and you are paying.
Another factor that is causing rising oil and gasoline prices can also be attributed to Wall Street and the private central bank, the Federal Reserve. In order to compensate for the billions of dollars in losses by the big banks on Wall Street since 2008, the Federal Reserve has been flooding the market with newly printed money and borrowing it to Wall Street banks at low interest – a policy known as “easy money.” That reduces the purchasing power of the dollar by creating inflation. Since most oil is traded in petro-dollars, that means it takes more dollars to purchase a barrel of oil, which accounts for part of the price increase.
Free market fundamentalists who insist that gasoline prices are on the rise due to supply and demand are overlooking some simple facts. Demand for crude oil is decreasing and supply is adequate. According to Robert Reich, who has served in three national administrations, over 80 percent of America’s energy needs are now being satisfied by domestic supplies. In fact, the U.S. is starting to become an energy exporter.
The International Energy Agency (IEA) reports that the world oil supply rose by 1.3 million barrels a day in the last three months of 2011 while world demand increased by just over half that during that same time period. Gasoline usage is down in the US by 8%, Europe by 22% and has even fallen in China. Recession across much of the European Union, a deepening recession in the United States and slowdown in Japan have reduced global oil demand while new discoveries are coming almost daily. Countries like Iraq are increasing supply after years of war. A brief spike in China’s oil purchases in January and February had to do with a decision last December to build their Strategic Petroleum Reserve and is expected to return to more normal import levels by the end of this month.
While the Obama administration’s energy policy is not to blame for rising gas prices, part of the blame for failure to effectively regulate the oil commodity market can be placed on both the current administration and Congress. In recent years, a Wall Street-friendly (and Wall Street financed) U.S. Congress has passed several laws to help the banks that were interested in trading oil futures.
The bottom line is that consumers are paying more at the gas pump because of futures trading on Wall Street, inadequate regulation of the oil market and the ability of speculators to drive gasoline prices up every time the drums of war beat in the Middle East. With access to “easy oil” supplies dwindling and new supply sources becoming increasingly more difficult and costly to extract, all possible measures must be taken immediately to keep prices down.
The moment it becomes clear that the Obama administration is serious about market reforms and acts to prevent wars in the Middle East by pursuing diplomatic channels, the price of oil will plunge. Until then, the top 1% will be laughing all the way to the bank at the expense of the other 99%.
Read more, get quotes, links and video here: Madison Independent Examiner – The real reasons for high gasoline prices.