The President cannot control retail gasoline prices. However, does his behavior affect prices? Is he The Tail That Wags The Dog of what we pay at the pump?
Let us see how gasoline price is determined, then see if the President is helping or hurting us.
The oil business is huge with many moving parts. Gasoline is refined from oil. Most of gasoline’s cost is based on the price of raw oil.
Raw oil out of the ground is a commodity. It is traded globally and priced in U. S. dollars.
This global trade is both day-by-day—the spot market—and activity for “future delivery—the futures market.
The purpose of the futures market is to help producers and consumers of commodities nail down future price uncertainties. These people do this by agreeing to buy or sell the commodity at a future date at a particular price. Since there are often insufficient buyers and sellers, the market is aided by so-called “speculators”—investors who neither take delivery nor make delivery of the commodity. Speculators’ cash makes the futures market work. Occasionally, however, speculators can push the futures market to irrational extremes.
Futures prices are also affected by perceived supply and demand. Although economists represent all this mathematically, reaction to perceived supply and demand is highly emotional.
Factors that drive these emotions:
- Geopolitical risks–war, depression
- Weather catastrophe risks
- Actions of producing countries, especially OPEC’s price fixing and supply manipulation
- Actions of consuming countries, especially the ”unofficial” U. S. energy policy
OK, so exactly what factors–emotional and otherwise–are affecting gasoline prices now?
Geopolitical: Iran’s behavior, risk of war and supply reduction
Producer politics: OPEC, Middle East instability
Politics and policies of the United States:
Weakening US dollar caused by Federal Reserve and our fiscal problems. (Remember, global oil prices are “in US dollars”. So when the dollar looses value, we pay more for oil and gasoline.)
Over-regulated local and seasonal gasoline blends
Lack of adequate refinery capacity in the U.S due to over-regulation. No new refineries in decades.
President Obama behavior and his strange unofficial energy policy:
- Obama’s expressed hatred of fossil fuels
- Obama’s call for tax penalties on oil companies
- Obama’s gross understatement of US oil reserves (Note below)
- Obama’s constraint of Federal drilling permits
- Obama taking credit for increased oil production on private land. (He had nothing to do with this.)
- Obama’s killing the Keystone XL pipeline from Canada
- Obama’s costly aid to failed “Green Energy” schemes
- Obama’s actual expressed desires to raise gasoline prices
- Obama’s “confused” Energy Secretary who cannot decide whether he wants higher or lower gas prices
- Obama’s campaign sloganeering that increasing the oil supply will not lower gasoline prices. (Huh?!)
Conclusion: The President’s every action is driving oil and gasoline prices higher. Obama is hurting most Americans.
Notes
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