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The math is very simple.  The average price of gas is $3.59 based on crude at an average of $106/barrel.  Now I will concede that is overly simplified but good enough for a rough calculation?

$16/barrel - McCain/Graham/Gingrich

$15/barrel - Wall Street speculators

Voila....follow me below on how to get to $2.50/gallon TODAY!!!!

According to McClatchy(Kevin Hall),

Once again, speculators behind sharply rising oil and gasoline prices
.  You can read the entire piece here but here is the summary:

*  US Demand is down sharply - we are a net exporter!
*  Should be price is about $75/barrel

The ostensible reason for the climb of crude prices on the New York Mercantile Exchange, where contracts for future delivery of oil are traded, is growing fear of a military confrontation with Iran in the Persian Gulf's Strait of Hormuz, through which 20 percent of the world's oil passes.
 This is what I call the McCain/Graham/Gingrich fear factor.  The first two were speaking out against General Jack Dempsey and US Policy in Israel and beating the drums of war to bomb Iran right away(remember bomb, bomb, bomb from the last election).  And Gingrich(others too) keeps stoking this fire during the debates.
Still, oil's price shot up because it trades in financial markets, where Wall Street firms and other big financial players dominate the trading of oil, even though they have no intention of ever taking possession of the oil whose contracts they are trading.
.  Then the speculators take over.  

So if you take out the impact of the last two, you are down to about $75/barrel and that converts to about $2.50/gallon.   You can do the math yourself but here is what I cam up with (75/106*3.57 = $2.53)   Newt Gingrich has it exactly right.  He is not a dummy.  

And by the way, during an election year, this is obviously a major issue and these guys can make the market move any way they want.  They are market makers.

Not surprisingly, big Wall Street traders on Tuesday projected oil will rise above $112 a barrel; some such as Swiss giant Vitol even suggested $150-a-barrel oil is coming soon. When they dominate the market, as they do, speculators' bids can make their prophecies self-fulfilling.
 You can call me a conspiracy theory nut if you want but this is clearly not helping Obama or the economy.
What's indisputable is that oil and gasoline are not in short supply, and that demand remains weak.
Inventories of stored oil are also unusually high, the EIA said
Hence, no shortage to explain soaring prices.
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Comment Preferences

  •  Majordomo - we are an exporter of gasoline (5+ / 0-)
    Recommended by:
    Majordomo, litho, taonow, nextstep, erush1345

    We are a net importer of oil. Speculation clearly plays a role in the pricing of all commodities, not just oil. Some in the market believe that a variety of factors are pushing oil prices higher, including tension in the middle east. There is no doubt that there is a lot of crude oil in storage and those people would be rewarded if there was open conflict in Iran. Speculation is very difficult to regulate because oil contracts are sold all over the world on several markets. The US government really can't control speculation. Remember that if prices crack the same forces will be applied to the downside, as they always have in past oil price cycles.

    "let's talk about that"

    by VClib on Fri Feb 24, 2012 at 07:08:40 AM PST

    •  I concede... (4+ / 0-) math and analysis is oversimplified but the logc still holds?

    •  Even that's not quite right. (3+ / 0-)
      Recommended by:
      Meteor Blades, nextstep, mightymouse

      We are a net exporter of DIESEL. Gasoline, not really.

      •  again, (4+ / 0-)

        the greater point I'm trying to make is that it's not the traditional supply/demand gap that is driving prices.

        •  I understand what you're trying to say (3+ / 0-)
          Recommended by:
          Meteor Blades, Majordomo, Egalitare

          The people trading on these oil futures are hearing the repeated drumbeat for the US to support an Israeli military attack on Iran, if not outright participate in one.

          While the GOP field makes it seem like this would be a one time hit, Iran would cry uncle, give up their nuclear program and we'd have cheap gas, most people understand the reality that it would be a long and messy conflict that would engulf most if not all of the middle-east. They are speculating on this potential disruption. I think you posit that if our right wing war mongers would stop frothing at the mouth about attacking Iran, the markets would calm down. You have a valid point.

          If the heated rhetoric isn't driving the speculation, I really don't see what else is. There are however, very real tensions between Israel and Iran. Iranian leaders talk smack pretty much on a daily basis and have been for decades. Israel is now doing the same. It seems more like two sides before a wrestling smackdown match but with enormous real world consequences. I really wish they'd all just shut up, most especially our right wingers who have an absolute fetish for wanting to bomb countries into submission.

          48forEastAfrica - Donate to Oxfam "Compassion is the radicalism of our time." ~ Tenzin Gyatso, 14th Dalai Lama -7.88, -6.21

          by Siri on Fri Feb 24, 2012 at 07:39:42 AM PST

          [ Parent ]

        •  It's not entirely the traditional supply/demand (2+ / 0-)
          Recommended by:
          mightymouse, erush1345

          gap that is driving prices.  It is, in part, the anticipation of what the supply and demand situation will be in the future.  If I'm a seller of widgets and I have some doubt that I'm going to be able to obtain an adequate supply in the future, I'm going to be raising my price now, if only to give me enough money to put in my community bank to cover my anticipated inability to sell as many widgets as customers have shown that they customarily desire.

    •  Do ethanol and biofuels effectively... (0+ / 0-) an imprecise ceiling of sorts on the price of gasoline? I know that current capacity really isn't very significant, and that any such ceiling would probably be very high ($7/gal? $8?) but I speculate we don't have to "hit the ceiling" in order for the ceiling to have some effect.

      When you are right you cannot be too radical; when you are wrong, you cannot be too conservative. --Martin Luther King Jr.

      by Egalitare on Fri Feb 24, 2012 at 07:28:53 AM PST

      [ Parent ]

  •  I'm Sorry (7+ / 0-)

    But this is the kind of half baked analysis that seems to substitute for a real energy policy. Everyone wants low prices .... but the road to energy independence (and a smaller military) goes through higher prices!

    The US has some of the lowest gas prices in the developed world. It even has lower prices than Canada which is an oil exporter (and exports oil to the US). So Canadians who produce the oil pay more for gas than Americans that import it. Why? Taxes. A smart US government would tax gasoline more . Tax it enough and the speculators can't make as much.

    And the road to solving global warming also runs through higher prices. So let's ask for higher prices and higher taxes and let the government take the money instead of speculators and oil producing dictatorships.

    Those who make peaceful revolution impossible will make violent revolution inevitable. - JFK

    by taonow on Fri Feb 24, 2012 at 07:27:22 AM PST

  •  Spot is not futures (2+ / 0-)
    Recommended by:
    Majordomo, erush1345

    and US supply/demand imbalances only marginally effect exchange prices.  So you are right about the mismatch seen as a temporary local phenomenon.  But consider the kinds of bets that the production and distribution operators have to make on capital investment with lag times in decades.  All sorts of risk assessments feed into the futures markets and while there is purely speculative activity prices there are a reflection of investment climate.

    •  ummmm really??? (0+ / 0-)

      the speculators are betting on short term gains...those fluctuations have nothing to do with the operators making their investment decisions.  Those risks would be factored in by the investors in those operators.  These fluctuations are not being driven by any long term prospects for oil.  I just watched the price go up by over $  .50 in 3 days?

      •  I am not really disagreeing with you (1+ / 0-)
        Recommended by:

        concerning a least a portion of the short-term variation.  But I would argue that investors in the operating companies would price their securities differently if the hedging mechanisms were not there.

        •  By the way, (0+ / 0-)

          The desirability of restricting hedging activity to producers and consumers in order to dampen speculative price swings has been debated endlessly.  I tend to think that general principles applied to all commodities miss the specific costs and benefits involved in particular markets.

          I am not an expert in oil market economics, fwiw.

  •  $5.00/Gallon What a Bargain! (1+ / 0-)
    Recommended by:

    We Americans are a funny bunch. We like to believe that whatever we believe cannot be a lie. We like to believe that we are entitled to cheap gas - as compare to other major world economies - therefore our chosen elected officials will pander endlessly about the tragedy of higher gas prices, while never daring to mentioned the true cost of a gallon of gas at the pump. According to the Progress report, gasoline prices at the pump should include: (1) Tax Subsidization of the Oil Industry; (2) Government Program Subsidies; (3) Protection Costs Involved in Oil Shipment and Motor Vehicle Services; (4) Environmental, Health, and Social Costs of Gasoline Usage; and (5) Other Important Externalities of Motor Vehicle Use. Together, these external costs total $558.7 billion to $1.69 trillion per year, which, when added to the retail price of gasoline, result in a per gallon price of $5.60 to $15.14.

    Enjoy the bargain price while it last!

  •  but this is WRONG (1+ / 0-)
    Recommended by:
    What's indisputable is that oil and gasoline are not in short supply, and that demand remains weak.
    That statement right there is BULLSHIT.

    Global demand is NOT WEAK! EIA says it will rise in the current year.

    All these articles that blabber on about "declining US demand," as if that should determine the price of oil are DECEPTIVE. Oil is a global market - it is global demand that is relevant.

    Please let's stop this reproducing this deceptive meme. We do ourselves no favors by repeating nonsense.

    The oil story is tricky enough as it is. Let's stick to reality.

    Sorry for yelling - this is pissing me off.

    An ambulance can only go so fast - Neil Young

    by mightymouse on Fri Feb 24, 2012 at 08:47:20 AM PST

    •  get a Depend then.... (0+ / 0-)

      so your argument is that this spike is caused by some legitimate, fundamental imbalance in supply/demand?  Seriously?  To the tune of $31/barrel?  You may want to take a look at some historical charts of gas prices.

      •  Not really a responsive comment (0+ / 0-)

        To posit "declining US demand" as relevant to  global oil pricing is deceptive. That is what I object to. Yours is one of several diaries to quote such articles.

        Any analysis that uses US demand as a basis for predicting oil prices is faulty.

        Start with global demand and go from there.

        Maintain skepticism and don't jump to conclusions.

        Americans are not (surprise, surprise) well-informed about the prospects for oil prices. We need to be to successfully face the future.

        First thing we can do is "do no harm" by not spreading deceptive analyses that only make Americans stupider.

        thank you.

        An ambulance can only go so fast - Neil Young

        by mightymouse on Fri Feb 24, 2012 at 09:20:24 AM PST

        [ Parent ]

        •  deceptive analysis??? (0+ / 0-)

          Seriously??  What is  deceptive about  that fact that speculators are also market makers or have you forgotten the whole financial mess we are in.  And this particular market is very elastic to fear mongering leverage that is going on.  Therefore, manipulation of this  market goes well beyond any structural imbalances(global and long term) that might exist.

          Get a Depend if that pisses you of but how is that deceptive or making you stupider?

          •  I object to referencing US demand (0+ / 0-)

            and not global demand.

            That is deceptive.

            To consider the effect of supply and demand on prices, global demand is the key parameter.

            you close your diary with the statement "demand remains weak."

            But demand doesn't remain weak. that is the point.

            thank you.

            An ambulance can only go so fast - Neil Young

            by mightymouse on Fri Feb 24, 2012 at 09:32:38 AM PST

            [ Parent ]

  •  Wrong price (2+ / 0-)
    Recommended by:
    erush1345, mightymouse

    Incidentally, you're really using the wrong price.  $106/bb (actually $108 today) is the price for WTI.  But most of the US doesn't use oil from WTI; rather, gasoline prices much more closely track Brent crude, which is at $125.  There's been a divergence in the two since around the time the recession started, which is why gasoline never went down as much as the massive drop in oil prices.

    •  Sigh.... (1+ / 0-)
      Recommended by:

      ....I'm not defending my numbers as much as the broader argument.  It's very easy to manipulate these prices...all you need is a few news cycles with McCain/Graham in Israel and Gingrich here rattling the sabres and the price goes up.  That has not done anything to fundamentally alter the supply/demand equation in the long run and neither in the short run.

  •  What is a speculator? (0+ / 0-)

    A speculator is just someone who thinks that people are willing to pay more for something than the price he can acquire it for.

    If you want someone to blame for gas costing more than $2.50, blame everyone willing to pay more than $2.50.

    Those who support banning cocaine are no better than those who support banning cheeseburgers

    by EthrDemon on Fri Feb 24, 2012 at 10:34:32 AM PST

  •  I Hope This Diary Gets Rescued (0+ / 0-)

    because oil speculation and the political motivation behind it is the problem here, and the light needs to be shone upon this fact.

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