I don't know if this was discussed or not. But I was just thinking with our current gas prices the way they are now, why did gas go so high this past spring/summer? Now I'm sure there are plenty of reasons why from supply and demad to speculation but did the Bush stimulus check help to lead to the spike in fuel and record oil profits? I think it wouldn't be far fetched to say that our stimulus checks were geared to help oil companies hit their record profits. I thought about the $1200 extra I got this summer and you know what? I spent it on gas. I could afford all my other expenses but fuel was the one thing that check mainly went to. I can't help but feel this way after reading these bailout threads and how the bank execs made off with bonuses off tax payer's money. Were the initial stimulus checks any different than the recent financial bailout? Part of my reasoning also steams from the fact that Bush and co. had tax incentives for people to buy SUVs in 2003. Hey, what a coincidence!
Stimulus checks have very little to do with the price of gas. China is the 2nd largest consumer of oil and gas, and they didn't receive any checks. Oil is affected by worldwide demand not just the USA.
Futures drive the price of oil. Oil drives the price of gas. Hedgefunds pulled their money from other resources and put them into metals and oil. That in turn drove the price of both sky high. The flaw isn't in your stimulous check - the flaw is letting futures drive the price of a commodity. If you want to bet on the price going up, the fact that you and many others place the bet should not drive up the price of the commodity.
I was looking at the timing of the stimulus and found it coincidental that oil reached record prices at the pumps at the same time.
So what do you do about it? Eliminate futures markets? What about when futures markets drive the price of oil down as has happened recently?
They pulled out to cover loses in other areas. And when this started happening others could see that this wasn't going up any more, it was going down - causing mass exodus. When elephants get in a pool the water spashes over the edge, but when they leave, the pool the water level ends up lower than when they got in. (I'm not a hedgefund fan as I believe they cause more chaos with market manipulation.) I think that prices should be driven by demand. Futures should be a side bet. If I think gold is going to $1000 by Jun 09, I should be able to by a contract IF someone is wanting to pick up the other side of that contract (they are betting it won't reach that level by then). Winner wins - loser loses but the bet has no bearing on gold itself. We always had plenty of oil - anyone that follows oil would tell you there was always ample supply. There was no rational reason for it hitting $147 a barrel. It wasn't driven by demand, it wasn't driven by oil companies, it was driven by greed of Wall Street that found no better place to put their money than in the artifical balloon they created. $30 - $60 range is about right depending on demand which right now has it in the <$40 range. Natural gas is one that needs to come down some more because we have amply supply of that too. It's dropped but not at the same rate and should be lower IMO. Plus I could use a break on my heating bill.
You can limit the influence of purely financial players by limiting the leverage amounts when investing in those futures. Instead of being able to invest at 50:1, you could make it 5:1 (or whatever).
