Robert Reich: Why Republicans Aren’t Mentioning the Real Cause of Rising Prices at the Gas Pump

[salvorhardin]

I have yet to hear a respectable mainstream news source unequivocally state that current rising gas prices are primarily due to speculation. On the other hand, respectable mainstream news sources don't seem to consider people like Robert Reich, or Paul Krugman, to be respectable mainstream economists. Even the NY Times which pays Krugman for an oped every week has reported numerous conflicting reasons for rising gas prices.

Gas prices continue to rise, which is finally giving Republicans an issue. Mitt Romney is demanding the President open up more domestic drilling; the super PAC behind Rick Santorum just released a new ad in Louisiana blasting the President on gas prices; and the GOP is attacking the White House on the Keystone XL Pipeline.

But the rise in gas prices has almost nothing to do with energy policy. It has everything to do with America’s continuing failure to adequately regulate Wall Street. But don’t hold your breath waiting for Republicans to tell the truth.

As I’ve noted before, oil supplies aren’t being squeezed. Over 80 percent of America’s energy needs are now being satisfied by domestic supplies. In fact, we’re starting to become an energy exporter. Demand for oil isn’t rising in any event. Demand is down in the U.S. compared to last year at this time, and global demand is still moderate given the economic slowdowns in Europe and China.

But Wall Street is betting on higher oil prices in the future — and that betting is causing prices to rise. The Street is laying odds that unrest in Syria will spill over into other countries or that tensions with Iran will affect the Persian Gulf, and that global demand will pick up as American consumers bounce back to life.

Full post: http://robertreich.org/post/19353120672

[russspeakeasy]

1. "Greedy Bastards"....is all that needs to be said.

If you haven't read it, you should.

[Cirque du So-What]

2. I'm of the opinion that speculators in the commodities markets need tighter regulations

In the beginning, trading in commodities could benefit the small farmer in lean times and in surplus years. It evolved, however, into just another mechanism for wringing money out of the populace - whether directly by bilking the small investor or through price manipulations that, without exception, put the screws to everyone; the 1% hardly ever gets the short end of the stick in the commodities markets (substitute 'stock market,' 'bond market,' etc., and it's no less true).

Allowing these shithogs to profit from price manipulation in the oil market should be treated as a matter of national security, which it is, really, seeing that the entire economy is tied so closely to the price of petroleum products. The so-called 'free market' serves only those who can pay the price of admission to obtain the information necessary for manipulating the price of oil; for everyone else, it's a sucker's game that draws in the rubes, takes their money, and then gives them a good fleecing.

[salvorhardin]

3. I agree

[klook]

5. Damn right

Oil is a market whose valuation has nothing to do with supply and demand. And this state of affairs is indeed harmful to the American economy and our national security interests.

[hifiguy]

14. One simple rule would decimate oil speculation:

A simple requirement that anyone trading in oil be physically capable of taking delivery of the oil. Poof, there go the bankster speculators.

[Dokkie]

27. You have any idea what happens

to speculators when they bet wrong on the future price movement of gas? they lose their shirts. Now we all know that not even Robert Reich believe the speculator story and I know you also do not believe it. The true cause is inflation, the FEd ran their QE 1 and QE 2 programs in the hope of jump starting the economy and now the effect of all those money diluting is hitting home and the best these quack economist can say is speculating.

Lets say you believe its as a result of speculating, then all Obama has to do is to make sure nobody attacks Iran and make sure nothing disrupts the flow of oil by not starting anymore wars, not even in Libya or Syria and watch all those speculating of future oil shortage drown in their oil hoarding.

Speculators do what everyone of us would do if they thing something they buy all the time is about to increase in price. There's nothing wrong with it, let em go m8

[lonestarnot]

4. k & r!

[Xyzse]

6. That Is of course also over-simplifying

As much as I respect Robert Reich's point of view, he has neglected to mention that the US is now more of an Oil Exporter rather than importer. In doing so, we sell oil to other countries which drive up value. Due to that, we feel it in the pump.

However, I do agree that I can't blame Obama for the price in gas. I do blame him however for the environmental impact the increased production has caused. Though on the bigger picture I consider that negligible as the other side would cause far worse damage.

[salvorhardin]

7. I don't think that's accurate

From what I understand, through Dec.-Jan. the U.S. was a net exporter of gas, but still a net importer of oil. I think, but am not sure, that we're now importing more gas again.

Reich does say, "In fact, we’re starting to become an energy exporter."

[Xyzse]

10. True.

I must have missed that quote from Reich. Thanks for bringing it to my attention.

[Lasher]

26. We are not a net exporter of crude oil - not anywhere near it.

We export a small amount of products such as gasoline because we have refinery capacity to produce them. According to the US Energy Information Administration, our net imports of crude oil and refined products combined is 7,331,000 barrels a day.

http://205.254.135.7/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm

Reich says, "Over 80 percent of America’s energy needs are now being satisfied by domestic supplies." But in fact, about half of the petroleum we use is imported.

http://www.eia.gov/energy_in_brief/foreign_oil_dependence.cfm

Rice's article is clearly about crude oil and its products. But he has apparently cited a statistic about total US energy supply and consumption (including coal, natural gas, and other sources). He is guilty of conflation for having done so without pointing out this distinction.

I do agree with him on one point, however. Commodities traders are significantly driving up the price of petroleum and they need to be controlled.

[sendero]

16. Oil exporter?

Nonsense. We may export REFINED product, but we are not even close to being able to stop importing oil.

Some people think we COULD stop importing oil someday, but very few people with any real credibility think so. We could make a lucky find of a huge pool, but that is not likely to happen.

Domestic oil production is up and domestic natural gas production is way up thanks to frakking, but unless we learn to get by on a lot less oil we are not ever going to be able to produce all we use.

[momrois]

8. And what sets off the speculators?

Loose lipped Republicans (and some Dems) rattling their sabers regarding the Middle East.

[Swede Atlanta]

9. I have my own view on this.....

Once a "product" becomes a "commodity", it is subject to speculation (think corn, oats, soybeans).

Speculators buy and sell in a market driven by future expectations. If they believe there will be higher demand but lower supply - they bid higher, higher demand but higher supply - not so much change in bid price, lower demand but lower supply - possibly status quo price and lower demand but higher supply (why would this happen?) - lower price.

Speculation may be very difficult to control. But "Joe the Plumber", an example of the uneducated, Kool-Aid drinking lugs in this society, don't understand that.

When the economy hums along with higher demand it is met either with higher supply (and less speculation) or higher demand with equal supply.

The markets are affected by speculation and estimates are that up to $.55 of every gallon is driven by speculation....

[librechik]

12. speculation in oil commodities was not allowed at all until 2006 when ICE London started trading

previously thought to be too cruel to allow--but what the heck if the Bushies want it...

http://www.globalresearch.ca/index.php?aid=8878&context=va

[DallasNE]

11. Locally Gas Prices Are 14 Cents Below All Time High In 2008

When you look at the history of the price of crude you will find that West Texas crude is cheaper ($106.55) than it was one year ago and far below the $145 it peaked at back in 2008. The other thing you will notice is how much the price spread has grown between West Texas crude and Brent crude. Back in 2008 the spread was roughly $4 and today the spread is $17. Fear not, that will change shortly as they are currently building a new pipeline from the West Texas fields to the Houston area where they can refine and export diesel and gas to Europe and Latin America and that will drive up the price of West Texas crude to nearly match the price of Brent crude.

The massive spread between crude and what Americans pay at the pump will show as huge 1st quarter profits for the oil companies and those numbers will be reported in roughly 6 weeks, sparking renewed Occupy protests, this time at the oil company headquarters. And rightly so.

While speculation has driven up the price of crude oil somewhat it does not explain why the spread is so much greater than it was in 2008. That can only be explained by old fashioned price fixing so I think more of the focus should be put on the spread and the price fixing aspect of current gas prices. Crude prices are 25% and 35% below where they peaked in 2008 yet gas prices are only about 2% below the 2008 highs. Congress needs to bring the CEO of Exxon-Mobil before Congress and testify on the reasons for the current spread between the price of crude and what Americans are paying at the pump and immediately ask how those numbers compare to the 2008 peak.

[DallasNE]

13. Link On Crude Oil Prices

http://www.oil-price.net/

[ErikJ]

17. Demand Lowest since 97; Domestic Supply highest since 2002

Domestic Demand is Lowest since 1997;

And Domestic oil Supply is highest since 2002

Sounds like speculation to me!

[salvorhardin]

18. Not necessarily

The domestic market is not separate from the international market, so if we're exporting then demand will rise anyway (because of China et. al.) causing even domestic prices to rise. But I'm inclined to believe Reich.

[ErikJ]

19. Yes, Gas is now US biggest export

Some say if we regulated its export, prices would go down. But Big Oil wants higher prices for profit --AND to dethrone Obama. Its a two-fer for them.

[salvorhardin]

20. Well, if that's the case, then it's pretty dumb

Speculators operate in the short term, so if speculators are driving up gas prices, then we should see them get tired of that relatively soon (3-4 months) and move on to jacking up the prices of something else (probably food). On the other hand, if it really is demand that's driving up gas prices then we peons are screwed because that's never going down until alternative vehicles are affordable and practical (e.g. you can buy an electric car for $20K and you can charge it up almost anywhere).

[ErikJ]

21. The old "Pump and Dump" game

This could be another pump and dump by Wall Street like the oil bubble in 2008 when oil went to $140 a barrel and Goldman Sachs cheerleading it on by saying it was going to $400 a barrel. As soon as something happens all the banksters dump their shares and leave everybody else holding the bag.

This is from Reich's post today on his website.

............"The problem isn’t excessive greed. If you took the greed out of Wall Street all you’d have left is pavement. The problem is endemic abuse of power and trust. When bubbles are forming, all but the most sophisticated investors can be easily duped into thinking they’ll get rich by putting their money into the hands of brand-named investment bankers."

[chknltl]

22. 2 other reasons need inclusion for the rise of gas prices.

First reason is political. The gop wants our economy to tank, everyone here knows that. Republicans have ratcheted up the sabre rattling at Iran. The concerns over a potential war with Iran, (and the subsequent decrease in the oil coming out of Iran due to that war), fuels the "uncertainty" which also drives up prices. Ironically, as a major oil exporter, Iran benefits from this rise in price of oil.

Anotherwords, the republicans are DELIBERATELY using the tactic of sabre rattling to drive up oil prices in order to stall any economic recovery. In doing this they not only bring economic damage to our nation, they also render aid to a nation they want us to view as an enemy! Imo, this tactic treds close to treason.

The tactic of using rising gas prices to harm the Democrats in 2012 was predicted by Thom Hartmann and others shortly after President Obama took office. I am not surprised that they were right.

The second reason may be imaginative thinking on my part but I think it needs consideration. I recall at the earliest stages of the XL Pipeline debate, our President was "warned" by big oil to quickly sign on to their program, (heard both on Thom Hartmann and Randi Rhodes). Is some part of this rise in gas a retribution by big oil for President Obama's foot-dragging?

[Dokkie]

28. missed the biggest one of em all

INFLATION of the money supply. don't ignore it, its real and its not the republicans that are causing it

[guss]

23. gas price and drilling

i live in North dakota they are drill all over we had 2 spills in lake sakaweja and one line break in montana that soil their river and feeds into our lake. the lake is a huge resivor it was pure before that. u could catch fish and eat any amount without threat of mercury or chem intake. I as a person of this state dont need anymore frickin oil transportation of any kind like a pipeline so that the no responsiblity companys can ruin farmland and gaming for profit. All oil companys make a mess and leave the it for the rest of us. this is going out there but u can get a $100 fine for littering and bp isnt responsible for polluting the gulf. that devestated the sea harvesting for years. what a load of (stuff that the oil companys and any other lobbing comp will let u suffacate in ) crap

[Curmudgeoness]

24. When even Exxon is saying that 40 percent

of the price of gas right now is due to speculation, I don't know how this does not get reported.

I have a hunch that the speculation is being fueled by not just speculation, but speculation by people who are intending on getting rid of Obama. The big money could be coming from big time Republicans, and they can do this.

[progressoid]

25. And why aren't Democrats saying or doing anything about it.

Oh, yeah, I forgot about the "task force".

That seems to have worked out well.

[B Calm]

29. With our # 1 single export being refined fuels,

I don't think it takes a rocket scientist to figure out we are being screwed by predatory capitalists!

[DCBob]

30. speculators are betting on a confrontation with Iran.

They know if a bomb drops the price of oil spikes.

[tpsbmam]

31. The number one reason they're doing it and getting away with it....

enough Americans are stupid enough to believe them and blame Obama. And enough Americans are bigoted enough to look for any excuse to blame Obama -- they'll buy anything the Republicans say to add to their shit-bucket list of inane, absurd Obama accusations. It's all about votes and we know the Republicans will stoop to any lie to get them. This is just one more instance of Republican lies aiming for their moronic base.

Another sick thing is Obama IS vulnerable here, but the Republicans would NEVER point this out: Wall Street coddling on the part Obama, too many Democrats & all of the Republicans makes all of them vulnerable. They ARE to blame! Too bad we don't have honest mass media to point this out and keep this drumbeat going....instead, they parrot & push the Republican bullshit, as they're paid to do.