Video: Gas Prices Explained
I missed this one from Omid Malekan a few weeks. You can tell based on a reference to winter gasoline prices being the highest ever in the video. It’s still a good primer on gas/petrol prices for those of you who are interested.
Speculators probably do have something to do with oil prices though. Remember that commodities have been financialized and that means when the Fed is artificially suppressing rates, people get killed in fixed income and annuities and this buoys demand for alternative investments. It’s called risk seeking return. I wrote a premium article on this last week saying:
What is clear is that the high oil prices are a tax on lower-income workers and emerging markets where a larger percentage of take-home pay is used up by food and energy. This makes the rise in oil and commodity prices generally a socially combustible issue that could lead to riots as it has in the past. Some are predicting just this for 2013… My sense is that politicians will not be able to get to grips with this problem during the election cycle because there are multiple problems (Mideast tensions, supply bottlenecks, peak oil, commodity financialization, etc). So it is likely that the oil price will rise until we hit demand destruction again. That’s my prediction of what is likely to occur.
Omid also wrote me:
I got a bunch of requests from people for a cartoon on gas prices so I threw one together. It amazes me how you could read 10 MSM articles on why gas prices are so high, and not one will reference the falling dollar. I put a chart into the cartoon at the end that to me speaks volumes. Even I was surprised as to the level of the correlation.