Posted on 11/12/2014 11:39:02 AM PST by Kaslin
Oil prices are plunging. Gasoline is now cheaper than milk. Why doesn't Washington do something already?
Since peaking in June, the price of oil has tumbled by 25 percent. Texas light sweet crude futures have fallen to around $77.40 a barrel, a three-year low, while Brent oil, the global benchmark, sank on Monday to its lowest price in four years.
With cheaper oil has come cheaper gasoline. The national average price for a gallon of regular is now just $2.926. Drivers haven't seen pump prices this low since December 2010. Nor have they seen such a sustained decline — the price has dropped for 46 days in a row — since 2008. According to AAA, "the national average could fall another 5-15 cents in the coming weeks, which could make for the cheapest Thanksgiving gas in half a decade."
Clearly the government needs to deal with this situation. What are Congress and the president waiting for?
You're looking at me as if I'm crazy.
Perhaps that's because you know that a drop of this magnitude in crude oil prices translates, as Michael Levi of the Council on Foreign Relations observes, "into more than $200 billion a year of savings for US consumers through lower prices for gasoline, diesel, jet fuel, and home heating oil." Perhaps you've seen the estimates that cheaper oil could boost America's GDP by 0.4 percent. Perhaps you know that shrinking fuel bills have been a godsend for transportation industries: Airline stocks, to cite the most dramatic example, have been on fire, and appear to be heading for their best back-to-back annual performance in 20 years.
So only someone devoid of economic common sense would think of demanding that regulators or lawmakers "do something" about the shift in oil and gasoline prices, right?
And yet when the price of crude oil or gasoline is rising, politicians and their enablers howl for blood. They vow to "crack down" on Big Oil, to investigate price "manipulation" by energy speculators, or to strip oil and gas companies of their tax credits. They freak out about the oil industry's "windfall profits." They haul energy CEOs before Congress. They accuse them of "price gouging."
This past June, when crude oil was trading at $108 a barrel (about $12 more than it had fetched in January), Senator Bernie Sanders of Vermont and 17 Democratic cosponsors introduced legislation directing the Commodity Futures Trading Commission to deploy its emergency powers to "eliminate excessive speculation in energy markets." It wasn't the interplay of supply and demand that was pushing prices higher, Sanders claimed, it was greedy "big oil companies and Wall Street speculators."
Less than five months later, with fuel prices at lows not seen in years, Sanders has lost interest in the subject, and now seeks other dragons to slay. But as University of Michigan economist Mark J. Perry points out, if the Sanders bill would make no sense now, it made no sense in June either — regardless of what oil was selling for on the futures and spot markets.
If wicked "speculators" were to blame for the $12 per barrel increase in oil prices between January and June, Perry asked rhetorically on his bracing economics blog, shouldn't the same speculators get credit for the much bigger drop in oil prices between June and November? Or "are we to assume that greedy speculators only enter the futures markets when they 'smell profits' from rising oil prices, but then they suddenly disappear whenever prices are falling?"
It should go without saying that traders can make — or lose — money both ways. (The Wall Street Journal reported recently on several hedge-fund managers who shrewdly read the tea leaves and profited by betting on a dive in oil futures.) It should also go without saying that the recent free-fall in the price of oil and gasoline is hardly an unmitigated blessing. It is causing no end of pain in great swaths of the economy — from the giant oil companies whose profits are being squeezed, to the small wildcatters who can't survive when crude drops too low, to auto dealers struggling to move hybrids and other fuel-efficient small cars.
But grandstanding politicians would only make it worse. Market forces, not corporate villainy, explain why prices fluctuate. Thanks to America's fracking-driven oil surge, supplies of crude oil are unusually abundant; thanks to the economic slowdown overseas, global demand is unusually low. When rising supply meets falling demand, prices fall. As circumstances change, the pattern reverses. Volatility is normal.
So no — government doesn't need to "do something" about fuel prices. When gas is $2.92 a gallon, the best energy policy is a free and robust economy. It's also the best policy at any other price.
Ruh Roh. How can we ever meet the latest climate discombobulation goals the lyin’king agreed to if gas is cheaper? That just means the rubes will drive more and emit more noxious gasses. What ever shall we do?
I have a question for Ted Baxter (aka Bill O’Reilly). If gasoline prices are not driven by supply and demand, but are rigged by the evil oil companies; why do the evil oil companies allow gasoline prices to go down. Maybe I am not as smart as Ted Baxter is, but I do not see the market manipulation that he is so sure about.
There are a rapidly growing number of electric cars around these parts (optimal commute + gov’t tax credits), costing the equivalent of about $0.97/gal to run.
$2.54 a gallon...Tomball, Texas
Maxine Waters will be holding hearings.
This is very surprising. You would think that by now every politician would be out there claiming that they had something to do with it, starting with Mr. present.
Gas WAS cheaper, now it is going back up.
A local news guy in Dallas said he was getting gas yesterday when a clerk told him to fill up because he had just got the call to raise the price by 20 cents.
bump
The lowest gas price in my town is $2.579, highest is $3.15
let her
I think it’s great. Dunno bout the economy around Texas with such low oil prices, but hey, does my pocket book good.
See there; the Fed's finally made 'em an offer they couldn't refuse.
It took a while; but nasty, dirty Big Oil got the message!
some of the rats are claiming that 0bama has something to do with it. Truth is if it were after him the price of gas would be $10.00 a gallon
Average Regular Gas Price By State
Some are down, some are up and some are steady
There are a rapidly growing number of electric cars around these parts (optimal commute + gov’t tax credits), costing the equivalent of about $0.97/gal to run.
Got a link??
When President Obama in his State of the Union address called for 1 million electric cars to be on the road by 2015, skeptics scoffed. http://grist.org/green-cars/2011-02-08-report-u-s-in-fast-lane-to-put-1-million-electric-cars-on-the/
Golly!
I wonder percentage of these vehicles are used by GOVERNMENT entities?
Oh, and Mary Landrieu wants the senate to vote on the Keystone pipeline. (She’s for it, but she hoped the Republicans stay at home and not vote for her opponent
why does kerosene never come down five bucks a gallon.
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