Looking at the traffic around Dallas and Fort Worth, you never know U.S. was experiencing any kind of oil crisis. Many drivers on the roads seem to think that Texas has already proposed, 85 mph speed limit adopted.
Most do not realize that driving a vehicle rated at 30 miles per gallon on the highway at 85 mph reduces fuel consumption by about 35 percent. This makes the gas that currently pay $ 3.79 to $ 5.11 in real costs. It is reasonable to assume that if you really care about the cost of gasoline, we would do everything possible for these costs. We are not. We complain about the price, but seems unwilling to do something.
Americans think they know who to blame for gasoline prices. The main culprits are the people who are speed, inefficient motors, OPEC, and even China. Although all these factors, but it's like blaming the housing bubble in the timber industry or the abundance of Carpenters. It is a great mystery that is responsible for higher gas prices. As I and others have written in the past, the major culprits are speculators play the futures markets for their own pockets. We all know that. What would be a surprise that they are authorized by the Federal Reserve.
This explains why the oil market and gas is now the consumer and the industry much more than the cost required. Until recently, it was impossible to say if speculators were right to tell the media that the global demand for oil has pushed prices to rise again, pushing gasoline prices to $ 1 a gallon below above where they were a year ago.
It is true that traffic in the United States, a sure sign of an improving economy and it is equally true that shipments of goods around the world are back at the pre-Great Depression. However, MasterCard (MA), and some analysts say oil domestic gasoline consumption has declined by about 3 percent to 3.7 percent over the past five weeks for a country of 400 million liters of gasoline per day, which does not burn small drop. Futures Trading, a decline in demand in reality a cost comparable to what buyers are willing to pay for fuel for resale. This is not the case.Goldman outs speculators
Meanwhile, the media keep saying that gas prices are directly linked to oil prices, which is not quite true. Oil and gasoline are sold to different groups of buyers. You have to buy crude oil for refining gasoline and other markets in the retail trade are legitimate protectionist. Then there are the speculators who jump on the market, seeking to capitalize on all fuels. To demonstrate once again that no one in investment banking really know all the oil, Goldman Sachs (GS) has advised its customers on April 11 to dispose of its products companies, including oil. The Guardian quoted Goldman advisory warning: "The record level of speculation on oil prices pushed up significantly in recent months in the near future, the risk reward is no longer supported these corporate resources ".
"The record level of speculative trading of crude" oil prices have pushed up? Funny, all we have heard that the current oil prices are justified by the unusually high demand due to improving world economy.
The same day, the Financial Times reported that in March, the Saudis' strangled its oil production, which seems to contradict the promise to replace all the oil lost to the world because of the Libyan revolution. According to analysts, Saudi produces about 300,000 barrels more per day, which was enough to satisfy buyers. This assessment is true in the United States began the year with 333 million barrels of oil on hand. Today we have 359 million barrels. Some deficit.
Let Bank of America (BAC) for a completely different outcome to the oil issue April 13, with 30 percent chance that oil could reach $ 160 a barrel this year. Now the water is very cloudy. As an investment bank, it is time to save, because crude oil speculators on the territory of the bubble, another suggests that it is time that the tax on oil because prices go even higher.Forget accused China
If anyone knew what was happening in the oil market, experts could not have investment banking positions diametrically opposed. So who will we blame for all this confusion and high prices that the average American family the strength to pay an extra $ 700 to $ 1,000 for gasoline this year, while companies such as American Airlines (AMR) say they are faced with another fuel crisis? To begin, we'll stop blaming China.
Last year, China imported only 4.79 million barrels of oil per day. According to China Daily, the official government figures show that the country is importing oil at a rate which is a growth of only 5 percent this year, or 239,000 barrels a day more. China also raised the discount rate twice this year to try to cool its economy strong. Both times the price of oil fell slightly in the world.
Who else to blame? It has been observed in refinery utilization and know exactly why gasoline supplies have declined over the past two months, bringing the price of gas: Last week, U.S. refineries ran at only 81.4 per cent capacity is only 39 percent occupancy on the east coast. This is less than the first week of April 2009, at the bottom of the post-crisis economy accident, when refineries operated at only 81.8 percent of capacity.
Now look at the picture to see what gas prices are so incredibly high. Remember that our refinery utilization a week ago, only 81.4 per cent. He was sitting in the same week in 2005 to 93.7 percent from 212.2 million barrels of gasoline on hand. Even in that exceptionally high rate of refining, which were about one million barrels three weeks later. However, we drop our gasoline supplies barrels to 223.2 million barrels to 209.7 million from the beginning of the year and we still have gasoline only slightly lower than it had at hand yet in 2005, amid the blistering economic growth. Our refineries amounted to nearly 10 percent after more use.Flood cheap liquidity from the Fed
The problem starts with Ben Bernanke, no matter how many of its presidents of the Fed say do not blame the high oil prices. The fact is that, by flooding the market with liquidity in excess in almost every interest, funny things happen in commodities and equities. This was true in 1920, has been true in the past decade, and it is always true.
When Richard Fisher, president of the Federal Reserve Bank of Dallas, said that in Germany in late March, Reuters quoted him as saying. "We see speculative activity that can exacerbate price increases of raw materials like oil," said Fisher, who signed the same speculative trading, which led to the financial crisis first.
Here, Fisher is in good company. Kansas City, Thomas Hoenig, president of the Fed, who is an outspoken critic of the Fed's current policy of zero interest rates and high liquidity, suggested that markets do not work under these conditions. And David Stockman, former budget director for Ronald Reagan, recently wrote a scathing article in MarketWatch, "Federal Reserve Trail of destruction" in which he criticized the current policy of the Fed is accentuated Stockman wrote:. This destruction is in fact the exploitation of the middle class investors, the current food price squeeze and severe energy in low-income households ... and the next cycle of the bursting of bubbles accumulate between the asset classes of risks. "
No error. Oil in the world today is worth more than $ 25 a barrel sold for more than a decade ago. But the capacity of functioning markets, based on actual demand and supply equations, is destroyed by leveraging ridiculous and enjoy the unlimited ability to borrow at historically low interest rates.
Fortunately for our elected officials who have the public believe that the greatest threat of government are the taxes and the deficit. In fact, the public should be angry against the rising costs of nondiscretionary items like food and gasoline, the operating current policy allows the Fed.Which side is the Fed?
Back in 1979, when then-Fed Chairman Paul Volcker began to move to inflation to stop Jimmy Carter from the White House, said one benefit of a higher interest rate to give the public would to stop speculation in the oil market, enjoying the year's riots in the Middle East. This is not a new argument.
The economy is improving and that's a good thing. But some say that gasoline could rise to $ 5 a gallon during the summer. The good news is that oil prices have skyrocketed, as horror movies are really scary the first time only. They have less fear through repetition.
There is less fear does not change the basic facts. Do you need both hedgers and speculators to run. Losing his balance, and do not work according to the source of truth and demand.
Ben Bernanke does not seem to understand that while huge profits for banks and investment firms can can cause huge losses to recover from the financial crisis, which shall deliberately damage may be much stronger than misery is to Americans, so are average consumers.
Maybe he does not understand and do not care. It is not always the fault of China.
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