As most boys do, we enjoyed a little rough-housing with my dad when we were little. The rough housing endgame was usually one of three torture mechanisms:
- The Whose-Gow, where your head gets clamped in between Dad’s legs.
- The Nevada Torture, where Dad pins your arms down with his knees while poking his finger into your chest.
- Whisker Pie, where Dad rubbed the stubble from his face all over you like sand paper.
We knew that if Dad could get us into one of these positions, the fight was over and we would have to yield, so our main goal was to stay out of the Whose-Gow, Nevada Torture, or Whisker Pie.
Well, I feel like the universe currently has me in all three of these at the same time… And what am I referring to?
Gas Prices!
Memory Lane
I remember when gas was a dollar…
I remember when gas was a nickel…
I remember when they gave gas away for free, and people used to drink it instead of water…
Well, maybe not that last one. But one thing history has shown me is that gas prices only go one direction, UP! That I can remember, I have never seen gas prices go down. Gas is a commodity that seems to only get more and more expensive, and which seemed to always reflect the value of the dollar in your pocket, which always seems to be less and less.
If this continues this way, I’m going to have to start dreaming of a seven figure salary to live the rest of my life.
The Conundrum
We have to have gas. We all use it, each and every day. Even those who don’t drive cars consume products that require gas to be delivered. Gas touches everything. Gas is the universal commodity none of us could live without. If gas stopped flowing tomorrow, the world would literally stop cold in its tracks.
The funny thing is, the current problem defies Economics 101. Usually, prices only go up when when demand is up and supply stays flat or diminishes. Scarcity drives up prices, right? The truth is that demand for oil worldwide has increased, but supply has kept pace. There is no supply crisis that would spur this drastic price climb.
After thinking about it a bit and listening to people who are smarter than me, what appears to be driving up the price of oil is really this guy…
Thats right, your resident suit. Your financial guy. Your useless, “I sit behind a desk and manipulate numbers to my benefit guy.”
Well, these guys screwed up the housing market for the last 3-8 years, so now they have their eyed square on the commodities exchanges for their next quick buck. They have to make pretend money somehow. They have to inflate their spreadsheets so that when they go to their board meetings with other suits, they can show pretty line charts with lines trending upward.
Fake. They provide nothing to this world and should all be shot.
The worst part
There’s nothing you or I can do about any of this. All those emails I get to not buy gas on a certain day or from a certain company are all bunk… it’s not going to change a darn thing, cause people are going to buy gas. It’s like an eternal truth that will never change. God will always love you, and people will always buy gas. End of story.
I rate this 4 out of 5 * 😛
I agree with the blame. I haven’t researched it, and I don’t know whose fault it is academically, but I DO believe that it is part of the wierd financial picture that has to have certain commodities go certain directions.
The thing that drives me NUTS is that for most of my life american military has spent almost all it’s time and money sitting only miles from all these oil derriks that are supposedly the root of 90% of world oil supply(i.e. deseret storm etc in the 90’s and now the current situation) And yet we are somehow not able to take from these people (that mismanage and cannot govern themselves) an ability to govern our own import of oil.
Then you get that pass along email (that I haven’t verified with snopes) about these arab oil tycoons and their millions of dollars of crystal palaces that they build themselves and live high on the hog. To put it mildly. YET we all know that almost all gas stations (owned many times by local mom and pop american familes trying to make ends meet) make very very little profit from the actualy gas pumped in the car, but mostly from people buying diet cokes.
How is this American? That we let American citizens struggle to make one or two cents per gallon of gas pumped out of the station, and let these scary oil tycoons in the middle east make billions of dollars when they do nothing to help their own people that are supposedly starving, disease infested, uneducated, sad people? Where is the good in all this? I don’t see it.
We are almost too generous I think. We are allowing the american people to get …. um… hosed. While we spend american dollars to help a the countries that are hosing us “get in their feet and govern themselves.” I think if they are going to mess us over… well to be nice, we need to rethink our approach in the middle east.
The problem is the exchange rate of the dollar. The exchange rate is based on expected US economic growth compared to other countries. As the international value of the dollar decreases, commodity prices increase. People who deal in international exchange want to protect their value, so they buy a hedge. Oil prices and the value of the dollar are approximately inversely related. (i.e. If I own oil and dollars, no matter which direction the price goes, I keep my value.)
The guys with suits are not smart enough to manipulate market prices. The dirty little secret is that we pay less for gas than almost anyone in the world. Almost everyone else pays 2 or 3 times as much. In fact, lots of them pay that much because government taxes are that high. There is a whole advocacy industry that wants Americans to pay more for gas and change our lifestyles.
The people who have spent the last 30 years preventing us from building a new oil refinery and won’t let us tap our massive domestic oil reserves are to blame. If we had started drilling 10 years ago, we would have cheap gas today. I say Drill here, Drill now, Pay less. (see http://www.americansolutions.com/)
Whether the suits are doing it by accident or on purpose, they’re doing it.
I’m not against drilling more at home either, but that oil won’t hit the market for 5-10 years… not much of a short term solution. Though I will concede, economics is 75% human nature’s attitude. If we announced a new aggressive drilling program at home, it might be enough to scare the price down a bit.
Three things:
1. I love the word “conundrum.” Why? There is no explanation–it’s a puzzle really.
2. I’m glad I own an Accord.
3. I’m distrubed that the “suit” has no hands. Who are these handless money grubbers anyway? Gee.
Well, at least God loves me…
yup. here is a good article.
http://www.businessweek.com/lifestyle/content/apr2008/bw2008041_945564.htm
Whoever’s fault it is, it has become ludicrous! Over here, diesel runs at £1.28 a LITER, which is £5.12 a GALLON, which, with the exchange rate, is about $10.24 a gallon. The last time I filled up my car it cost $130 – for a 4-door hatchback!
(And I don’t like the fake hankie in his pocket either.)
I disagree with Tony, I believe the weak dollar is more an effect of oil pricing than a cause. if you feel like watching 6 hours of interesting tv check out c-span.org ,House Energy & Commerce Subcmte. Hearing on Energy Prices: Panels One & Two (June 23, 2008) VERY interesting.
quoting the aforementioned article:
in 2000 approximately $9 billion was invested in oil futures, while today that number has gone up to $250 billion. Now, if any publicly traded company had an additional $241 billion put into its stock in the same period, its stock would rise out of sight too—even if the company was not worth anywhere near that amount of market capitalization.
Moving on to the weak U.S. dollar as a primary cause for skyrocketing oil prices—there is “some” truth in that statement. But consider this: The dollar has depreciated 30% against the world’s currencies since 2002, while the price of oil has gone up 500%. So is it the weak dollar that has caused a 500% increase in the price of oil, or is it the extra $241 billion worth of speculation? You can make the call on that one.