hvactec
VIP Member
The rise in oil prices is not due to the laws of supply and demand regarding oil. It is the result of the continued fall of the dollar. As the Federal Reserve creates more money, the value of the dollar falls. As the value of the dollar falls and oil producers demand more and more for each barrel, the price of crude goes up. Despite what the politicians say about the oil companies, the greatest component of the price of gas is the cost of crude. Crude oil is about 67% of the price per gallon, 7% for refining, 11% for distribution and marketing, and 15% for taxes. Blaming the oil companies may be good for politics, but it is not good economics.
Pouring more crude into the pipeline is not going to appreciably change the price at the pump. Nor will reducing total car travel cause much difference. The emphasis on the supply and demand for crude does not explain the dramatic increase in the price of gas, which is far above the changes in the demand for crude oil. The chart below illustrates the matter.
In 2002, with an ounce of gold worth $278, an American consumer could buy 251 gallons of gasoline. That ration of gold to gas held steady, going up and down between 215 and 279 gallons for the years from 2002 to July 2008. Then gas dramatically surged in price, and it has not come down.
From January 2009 (when Obama was inaugurated) until today, the number of gallons per ounce of gold has fluctuated between 349 and 525.
Opening up Saudi pipelines, or any other such matters, will not be more important in determining the price of oil measured in dollars than the value of the dollar.
Surprisingly, gas prices have not risen as much as they should. In fact, oil is underpriced compared to the rise in the price of gold. If we had the same ratio of an ounce of gold at $1,780 per ounce, gasoline would cost $7.09 at the pump. Gas prices have not rise as much as gold prices. Gas is about three times more expensive than in 2002, while gold is over five times more expensive ($1.11 vs. $3.64 for gas compared to $278 vs. $1,780 for gold).
Prices at the pump, of course, do not reflect the other inflationary effects such as the cost of transporting goods, planting and harvesting crops, and running factories and homes.
It is surprising that Republican politicians do not make the case for the relation between inflation as measured in the increase in the declining value of the dollar versus gold. Rather, they let Democrats harangue about the oil companies, although the Democrats do that less now that they are in political control. The American consumers see prices rising in food and other goods, but nothing is as visible as the price increases they see at the pump.
Republicans would be better off putting the blame where it belongs: excessive spending means monetizing our debt, which means printing money, which means foreign oil producers want more of it for the same barrel of oil. This would be another force or reason to control spending beyond the abstract idea of inflation. The vast majority of Americans are probably more sensitive to the visible impact of the price of fuel than they are to the invisible decline in the value of their savings.
Read more: Articles: Rise in Oil Prices a Result of the Decline of the Dollar
Pouring more crude into the pipeline is not going to appreciably change the price at the pump. Nor will reducing total car travel cause much difference. The emphasis on the supply and demand for crude does not explain the dramatic increase in the price of gas, which is far above the changes in the demand for crude oil. The chart below illustrates the matter.
In 2002, with an ounce of gold worth $278, an American consumer could buy 251 gallons of gasoline. That ration of gold to gas held steady, going up and down between 215 and 279 gallons for the years from 2002 to July 2008. Then gas dramatically surged in price, and it has not come down.
From January 2009 (when Obama was inaugurated) until today, the number of gallons per ounce of gold has fluctuated between 349 and 525.
Opening up Saudi pipelines, or any other such matters, will not be more important in determining the price of oil measured in dollars than the value of the dollar.
Surprisingly, gas prices have not risen as much as they should. In fact, oil is underpriced compared to the rise in the price of gold. If we had the same ratio of an ounce of gold at $1,780 per ounce, gasoline would cost $7.09 at the pump. Gas prices have not rise as much as gold prices. Gas is about three times more expensive than in 2002, while gold is over five times more expensive ($1.11 vs. $3.64 for gas compared to $278 vs. $1,780 for gold).
Prices at the pump, of course, do not reflect the other inflationary effects such as the cost of transporting goods, planting and harvesting crops, and running factories and homes.
It is surprising that Republican politicians do not make the case for the relation between inflation as measured in the increase in the declining value of the dollar versus gold. Rather, they let Democrats harangue about the oil companies, although the Democrats do that less now that they are in political control. The American consumers see prices rising in food and other goods, but nothing is as visible as the price increases they see at the pump.
Republicans would be better off putting the blame where it belongs: excessive spending means monetizing our debt, which means printing money, which means foreign oil producers want more of it for the same barrel of oil. This would be another force or reason to control spending beyond the abstract idea of inflation. The vast majority of Americans are probably more sensitive to the visible impact of the price of fuel than they are to the invisible decline in the value of their savings.
Read more: Articles: Rise in Oil Prices a Result of the Decline of the Dollar
