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.

4,462 thoughts on “High Oil Prices?”

  6. Hello There. I found your blog using msn. This is a very well
    written article. I will be sure to bookmark it and come back to read more of your useful
    info. Thanks for the post. I’ll certainly return.

    Reply ↓

  7. Hi, I think your website might be having browser compatibility issues.
    When I look at your website in Ie, it looks fine but when opening in Internet Explorer, it has some overlapping.

    I just wanted to give you a quick heads up! Other then that, very good blog!

    Reply ↓

  8. I really like your blog.. very nice colors & theme. Did you
    design this website yourself or did you hire someone to do
    it for you? Plz respond as I’m looking to design my own blog and would like to know where u got
    this from. many thanks

    Reply ↓

  9. Oh my goodness! Awesome article dude! Thank you, However I am encountering
    problems with your RSS. I don’t know the reason why I cannot join it.
    Is there anyone else having identical RSS problems? Anyone who knows the answer
    can you kindly respond? Thanx!!

    Reply ↓

  17. Fantastic beat ! I would like to apprentice whilst you amend your website,
    how could i subscribe for a blog site? The account aided me a applicable deal.
    I have been a little bit acquainted of this your broadcast offered vibrant clear idea

    Reply ↓

  19. Hey there would you mind sharing which blog platform you’re using?

    I’m looking to start my own blog in the near future but I’m having a difficult time
    deciding between BlogEngine/Wordpress/B2evolution and Drupal.
    The reason I ask is because your design and style seems different
    then most blogs and I’m looking for something unique.
    P.S My apologies for getting off-topic but I had to
    ask!

    Reply ↓

  28. Great post. I was checking constantly this weblog and I’m impressed!

    Very useful information particularly the remaining part :) I deal with
    such information much. I was seeking this certain information for a long
    time. Thanks and best of luck.

    Reply ↓

  32. Hey! This is kind of off topic but I need some help from an established blog. Is it hard to set up your own blog? I’m not very techincal but I can figure things out pretty fast. I’m thinking about setting up my own but I’m not sure where to start. Do you have any points or suggestions? Cheers

    Reply ↓

  33. What i don’t realize is if truth be told how you’re not actually much
    more neatly-liked than you may be now. You are so intelligent.

    You understand therefore considerably relating to this topic, made me individually consider it from a lot of varied angles.
    Its like women and men don’t seem to be fascinated unless it’s something to accomplish with Girl gaga!
    Your own stuffs nice. All the time deal with it up!

    Reply ↓

  37. hello there and thank you for your information – I have definitely picked up anything new from right here.

    I did however expertise a few technical points using
    this website, as I experienced to reload the website lots of times previous to I could gett it to load correctly.
    I hhad bren wondering iif your hosting iss OK?

    Not that I’m complaining, but slow loading instances times will sometimes affect yur placement in google and could damage
    your high-quality score if advertising annd marketing with Adwords.
    Anyway I’m adding this RSS to my e-mail and can llook ouut foor a lot more of your respective exciting content.

    Ensure that you update this again soon.
    캡틴 토토 가입코드

    Reply ↓

  40. І гeally ⅼike what you guys are ᥙр too. Ꮪuch clever ԝork
    and exposure! Κeep ᥙp the amazing works guys I’vе adԁeԀ yоu
    guys to mʏ οwn blogroll.

    Μｙ site … quilted mattresses; Sung,

    Reply ↓

  41. I was wondering if you ever thought of changing the page layout of your site?

    Its very well written; I love what youve got
    to say. But maybe you could a little more in the way of content so people could connect with it better.
    Youve got an awful lot of text for only having one
    or two pictures. Maybe you could space it out better?

    Reply ↓

  42. Hey There. I discovered your weblog the usage
    of msn. This is a really smartly written article. I’ll be sure to
    bookmark it and return to read extra of your helpful information. Thanks
    for the post. I’ll certainly return.

    Reply ↓

  45. This is гeally fascinating, You are a very sҝilled blogger.
    I have joined your rѕs feed and look aһead to in search off more of your
    eⲭcellent post. Additionally, I’vе shared your website іn mʏ social netѡoгks

    Reply ↓

  47. Excellent goods from you, man. I have remember your stuff prior to and you’re
    simply too excellent. I actually like wwhat you’ve bougyt here, really like what
    you’re saying andd the way in which you assert it. You’re making it
    enjoyable and you still take care of to stay it sensible.
    I cqnt wait to learn faar more from you. Thhat
    is actually a great website.
    카림벳 주소

    Reply ↓

  48. Hello There. I found your blog using msn. This
    is a very well written article. I’ll make sure
    to bookmark it and return to read more of your useful info.
    Thanks for the post. I’ll certainly return.

    Reply ↓

Leave a Reply

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