By Bill Wilson
Another price shock in oil and gasoline prices, with oil above $100 a
barrel and gasoline marching steadily to $4 a gallon nationally, would
not be complete without Democrats again waiving the speculators’ card.
The latest peddler of this myth was none other than Calif. Rep. Xavier Becerra, vice chairman of the House Democratic Caucus, who told a press briefing on Capitol Hill:
“It isn't a shortage of gasoline, it's a manipulation of the gas
prices. You have got to go after the gougers, you have to make it so
that they can't win.”
This followed House Minority Leader Nancy Pelosi’s Feb. 22 assessment
of rising oil and gas prices: “We need to take strong action to
protect consumers from this speculation.”
Meanwhile, the Obama Administration has accounted for rising prices by market forces, saying alternatively that it’s because the economy is recovering and includes increased demand overseas, particularly China.
Perhaps they should get their stories straight, because they are
contradictory. Are prices being manipulated, or are they rising as
supply fails to keep up with increased demand as the economy recovers?
To be certain, demand did increase globally from 88.3 million barrels a day in 201 to 89 million in 2011 according to the Energy Information Agency
— with a 700,000 barrel increase in demand in Asia and the Pacific —
global production also rose to 90 million a day as of Dec. 2011.
So, Becerra is correct inasmuch as there is no shortage of gasoline.
There is something else afoot. But it is not price manipulation.
Instead, both of these divergent explanations miss the underlying
weakness of the dollar that is the real cause for price pressures in
commodities, include food, oil, gasoline, and precious metals like gold.
An increase in one asset or another might be explained by a simple
supply disruption or even overspeculation. But in a broad range of
commodities — which are priced and traded in dollars — it looks much
more like a monetary inflation problem. Commodities are often held as
hedges against a weak dollar.
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