Obama responsible for bringing $5 per gallon gasoline

Gassy rhetoric on gasoline prices
Posted by Glenn Kessler at 06:02 AM ET, 02/27/2012

“Gas prices have more than doubled since the president took office.” — House Speaker John A. Boehner (R-Ohio), Feb. 16

“We’re making new investments in the development of gasoline and diesel and jet fuel that’s actually made from a plant-like substance — algae. You’ve got a bunch of algae out here, right? . . . Believe it or not, we could replace up to 17 percent of the oil we import for transportation with this fuel that we can grow right here in the United States.” — President Obama, in his speech about energy, Feb. 23

If it’s an election year, politicians must be talking about gas prices.

We remember covering the 1996 presidential campaign, when Sen. Robert J. Dole (R-Kan.), the eventual Republican nominee, called for repealing a gasoline tax designed to reduce the deficit to give car owners a break because of predictions that gas might top $1.31 a gallon over the summer.

That number seems almost quaint now, even if Rep. Ron Paul (Tex.) was wrong when he said in a GOP debate last week that gas already exceeded $6 a gallon in Florida.

Readers should immediately discount anything politicians say about gas prices. Let’s take a look at two common rhetorical tricks, involving statements that are more or less true on their face.

Ignoring inflation and other context
Boehner correctly noted that gas prices have doubled since President Obama took office. But he did not mention that they were unusually low in early 2009 because of the economic crisis, when demand for energy plunged. We’re not sure that the economic misery of those days is worth cheap gas.

Today’s gas prices, in fact, reflect more of an upward trend that began during George W. Bush’s presidency, rather than a bounce off the unusual low at the start of Obama’s term.

Moreover, even today’s prices are more or less average when inflation is put into context, according to the Energy Information Agency. For instance, that 26-cent-a-gallon gas in 1921 is the equivalent of $3.35 in today’s dollars. That $1.38 gasoline in 1981 is the equivalent of $3.45. The price of gas was actually historically low — the equivalent of $1.74 — when Dole was complaining about it.

The Washington Post’s graphics department has put together a nifty illustration of how nominal gas prices are so much more misleading than inflation-adjusted prices.

In other words, if gas hits $5 a gallon this summer, that would be an inflation-adjusted high — just not as dramatic as some politicians might suggest.

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bigtexxx, you realize you just described all politicians right?

 

No excuses required, none made.

 

If gas does go up to $5.00 this summer like some predict how much will it come down at election time?

 

Since the Saudis are fine with Obama, I'd say, a lot.

 

predictable actions that will have zero effect on gas prices

1. propose release of strategic petroleum reserve
2. propose windfall profits tax
3. accuse oil companies of price gouging

 

Doesn't everybody know that gas prices rise from winter to summer and drops back down in the fall?

 

yes,

But the GOP is gonna bring back $2.50 gas!

They promise!

 

The investment bankers' ability to take unlimited positions on commodity futures they have no intention of taking delivery on getting overlooked again. Same ole bull**** partisan talking points while banks continue to **** us and line the pockets of our elected officials with campaign donations.

http://oilexchange.org/
http://en.m.wikipedia.org/wiki/Enron_loophole
http://en.m.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000

Deregulation at its finest. Anybody who says they can bring back $2.50 gas is essentially saying (id speculate) they would re-regulate the commodity futures back to the levels they were regulated at in the original 1936 Commodity exchange act that was over turned in 2000 at the hands of pres Clinton. Funny though because candidate Obama cited this very law as a reason for fuel prices In 2008 but has not addressed it as President.

 

I was a little late to the party this year, but I some oil and gas options, a few weeks ago. oh well. Prices will continue to go up for the stocks and the gas. It's like clockwork.

 

You think it's wrong to lock in a price on something you think will appreciate in the future? How exactly is that ****ing you?

Future supply and demand affect prices in the present, as they should.

Buy for a dollar, sell for two. None of your business frankly

 

given the fact that the market has a perpetual upward bias (with Wall Street being staffed with the most inimical of talent, and an incentive structure for all traders that rewards mass folly and stupidity), and that this speculative excess usually has nothing to do with the underlying asset of the value---but rather, some spirit conjured from, as Keynes put it, our animal cousin (the bull), you have just hopped onto one of the greatest failures of markets.

The bubble will pop, as all bubbles will, causing collateral damage along the way. Given that commodities such as oil and food actually have important downward biases on societal welfare even on the way up, the damage is doubled.

This in no way is meant to happen, and even to the most extreme of libertarians, is a flaw worth considering.

 

Supply and demand should rule the day, but oil and food should be commodities that one takes delivery of when they buy the future. Futures are supposed to be a hedge AGAINST speculation and price volatility, but they have become just one more way for Wall Street folks to make money off the backs of people who do real work in the real world.

 

Exactly. There are investment banks pooling $160 billion in cash to buy futures simply because they can. I'm all about working hard to earn a living but there's got to be a certain line where an individaul's right to life, liberty & the pursuit of happiness yada yada yada shouldn't be trumped by someone simply because they have more resources of their own to impose their rapaciousness on others.

 

Oil futures have traded on the NYMEX for over 30 years, and many of the early 80's price flucuations were due to speculation. People were gaming the system back then, especially T. Boone Pickens - an oil man and a speculator.

Besides speculators there are also day traders. Even more so are your average Joe's whose invest their income into 401k's - into companies they probably don't care for beyond their ability to earn income. So then the question would be should any non-dedicated investor be allowed purchase stocks, bonds, commodities, etc?

But at the end of the day, futures were created so people could speculate on prices.

 

No they weren't, if anything they were a derivative created to stabilize risks so that companies wouldn't be subject to volatile prices on commodities, just for example. They definitely were not created with speculation in mind.

Credit-default swaps were a way to mitigate default risk, but now naked credit default swaps can be used to speculate on default risk. it just doesn't make any sense.

 

That's part of speculating: taking high risks to make a profit. Profits/losses can be made when prices go up and when prices go down. One thing speculators and hedgers might be looking at now are Japanese and Indian oil tanker insurers cutting their coverage of ships hauling Iranian crude.

 

The entire point is that these derivatives were originally constructed with hedgers in mind. Speculation is a perverse feature of the market economy, which in small doses, and based on reason, can be of aid---but in large amounts, and constructing the principality of your economy, can become deadly because you can be profiting on emotion, and destruction, rather than on aiding production and creativity.

 

Well put. It's extremely dangerous that a commodity that is a lynchpin of our entire economy can be speculated with to a degree that puts the very economy itself at risk.

 

I've been reading a little about 'Black Swan' events in ultrafast trading. 70% of all stock trades are computer driven, where decisions are made in miliseconds.
A $300 million dollar fiber optic cable is being laid between London and New York because it shaves 6 milliseconds of the delay between the tow cities.

It makes me wonder how much of the futures market is algorithm driven.
Again, I think an entity with enough oil reserves and enough money could control the system by quickly buying any lower offers and countering with higher offers, taking a loss on a trade to control the overall value of the commodity i.e. keep it low enough to choke off competing energy sources and not stifle demand and high enough to keep making killer profits. The Saudi's super low production costs means they make money at any price.

Here's an interesting article within the same subject realm (I made the same mistake Warren Buffet did, am I an oracle?):

A Record Buyout Turns Sour for Investors
http://dealbook.nytimes.com/2012/02/28/a-record-buyout-turns-sour-for-investors/?ref=business