Oil Price Manipulation, Gas Prices and the Free Market
Gasoline prices at the pump have never been proven to be a direct consequence of oil price manipulation. But it’s widely conjectured.
Believe me, I hate paying more just as much as the next person, but get over it.
Geopolitical tensions, supply constrictions, war, tyrants with spigots and other buyers are the real factors at work and they always have been. When risks go up, so do prices – that’s the way free markets work.
Apple (NASDAQ:AAPL)didn’t produce nearly 115 million iPhones and iPads in 2011 for kicks. They did it because there’s huge demand for their products and they can make big bucks.
Things are just more critical now because we’ve failed to develop a comprehensive energy policy over the past 50 years at a time when global demand is increasing rapidly in absolute terms.
The president wants votes in an election year; this is pure political pandering.
For example, China‘s per capital oil consumption has increased by 350% since the early 1980s.
The International Energy Agency estimates that China alone will account for 42% of global oil demand by 2015. And they’re one of the slow growers with consumption rising a mere 100% in the last ten years.
Other countries like Malaysia have seen per capita usage quadruple since the 1960s. Brazil and Thailand have seen oil demand double to 5.7 barrels/year and 4.8 barrels/year per capita.
And don’t forget the weak dollar. Because oil is generally priced in dollars, Bernanke’s weak zero interest rate policies are helping drive prices higher. Producers have to compensate with higher prices to make up the reduction in margin being forced upon them by greenbacks that have diminished purchasing power.
Speaking of which, the Beltway Boys, in their infinite wisdom have got it in their heads that margined trading – meaning you can borrow money to control more of the underlying asset – gives too much power to financial investors aka the speculators.
What they don’t realize is that:
- Even if you tighten up margin requirements, traders will shift to derivatives like options, swaps and other so-called exotics.
- Higher margin requirements lead to less liquidity which, in turn, actually exacerbates the speculative volatility they’re trying to control.
Think about it.