Posted on 10/28/2012 8:09:06 PM PDT by NaturalBornConservative
OK, a whole lot of taxpayer (actually China borrowed) money was blown on useless green schemes...
and this does WHAT to the cost of gasoline, which kept on running, for all practical purposes, exactly the same fleet of cars it had?
This says refinery issues to me, and a problem that is so bad that no refinery wants to break ranks and sell cheaper.
And in what proportion did the dollar get stronger/weaker? Not by that much. It would have been obvious in the prices of other things too.
Little if any of the $6 trillion borrowed over the last 4 years came from China, most of it has been monetized by the Fed. None of it came from taxpayers, because we have been running trillion dollar plus deficits since 2009.
U.S. demand for gasoline has been on the decline since 2007, and U.S. supply has increased. So it’s not exactly the same fleet of cars (i.e. 14.7% U-6 unemployment, etc...).
Global oil supply has kept pace with global demand.
So I say the problem this round is excessive government borrowing and spending to fund green schemes, as well as other waste. Green schemes only represented about 10% of the stimulus, but that’s still significant, since the funds could have been used to promote new oil refineries or pipelines. And where did the money come from? Mainly the Fed and commercial banks, not China.
OK, so anything substantive gleaned from your narrative is that there is less demand pressure on gasoline, not more.
And the dollar has not fallen in purchasing power by anywhere close to half its value.
The puzzle remains unanswered, again except for... fear.
The price of all goods declined by 3.0% during that 5-month period. U.S. demand for gasoline fell by about 2 million barrels per day between 2007 to 2009, while U.S. supply ticked up by about 1 million barrels per day. This also contributed to the price decline, but wasn’t the sole factor. Yet, U.S. oil demand hasn’t increased at all since 2009, while U.S. supply has ticked up by almost another 1 million barrels per day. So how would you explain the 90% price rise, which was the original question?
The money pumped into the economy in 2008 was for the financial crisis bailouts, not wasted just to spend money that we didn’t have. The 60% added to the national debt since 2009 has been mostly wasted on things that we didn’t need, and that didn’t address the root causes of the recession.
If my anecdotal evidence means anything, we can reduce demand approximately 10% and save a lot of corn costs by taking the corn out of our cars and putting it back on our tables.
Imagine that a million miles of driving my vehicle (if only!) takes around 45,000 gallons of gasoline.
That same million miles takes about 50,000 gallons of gas, plus about 5,000 gallons of corn liquor, when my gasoline is diluted with vegetable matter.
We would rid the air of that many gallons of pollutants, too, if you are ecologically minded.
Stupid, for everyone but people who get a feel good from burning a renewable resource regardless of the actual outcome, and for big oil and OPEC, which enjoy the price uptick from the artificially increased demand.
Since the value of the dollar is not linked to anything other than the number of dollars in circulation, the more dollars there are in circulation, the less they are worth. Right? So if the monetary base was $616.7 billion in 2001, and now it's $2.6 trillion, then how much has the dollar been devalued? 294%?
I started to break down how the dollar is pegged to the Emirati Dirham at 3.67 per U.S. dollar, and what that means to the price of oil. For example, if the dollar declines by 25%, the cost of oil will rise by 33%; and if the dollar declines by 50%, the cost of oil rises by 100%, but I'll spare you the formulas.
Charles Kadlec has an article in Forbes that sums it up fairly well - The Rising Price Of the Falling Dollar.
"Oil prices are up because the value of the dollar is down. Our common sense hides this source of higher prices because we view the dollar as fixed, and prices as moving... Neither the dollar, nor the price of individual items are fixed."
"... the basic reason for higher energy prices is being overlooked, even though it is right before our eyes: Oil prices are up because the value of the dollar is down..."
"If the dollar had been as good as gold [over the past decade], the price of oil today would be about $20 a barrel, and the price of gasoline would be down near $1 a gallon. That’s right, the lower prices produced by the increase in oil and natural gas production have been disguised by the fall in the value of the dollar."
Most of this supposed superabundance of dollars is being soaked up by banks and the like who stubbornly don’t want to invest them because the investment climate is too punitive and risky. Also this does not explain why gasoline would be impacted in such a proportion while other commonly consumed goods are not.
Sorry your dog does not hunt.
I provided the Fed’s chart showing where the money base stands. I don’t know what you mean by the term “dollars being soaked up”. Where are they? The dollar is a fiat currency, it’s not linked to anything of value so its intrinsic value is based on the number of dollars in print and some measure of domestic economic growth.
The definition of hyperinflation is a large increase in the money supply not supported by gross domestic product (GDP) growth. So if GDP grows by 2%, an increase in the money supply of 2% is justified. But if GDP grows by 2% and the money supply grows by 30%, then the value of the dollar just got crushed by 28%. That’s the basic scenario.
Maybe you’re confusing the price of domestic goods and imported goods. Imports cost substantially more when the dollar declines, than domestically produced goods. With global commodities, there are many variables involved, currency exchange rates, global supply and demand, etc... But I know what I’m talking about. The bottom line is too much money has been printed, with little to no economic growth to justify it.
If you look at the price of the barrel of oil in nominal dollars (i.e. what is called a dollar contemporary with when it was sold) it is not 100% higher than when George W. Bush left office. Last I looked it was only 10% or so higher. So your argument about the cost of imports does not hold for this case either, unless imported Chinese dragon tails or the like are an essential component of gasoline.
Go look at the actual dollar-price of oil then and now, and come back with the references of the fact, not the theory you spout.
My charts are on gasoline prices and the value of the dollar. In what part of my post do you see the word oil? You’re trying to make a point, but whatever it is it’s not related to what was written.
Here, go to www.oil-price.net. They go into much more detail. Yes, the abundance of (fiat) dollars has some to do with it -- those extra dollars, which right now are not in the hands of gas consumers to freely spend but some day may in principle be, adds to the fear factor for refineries. Other things add to the fear factor, like the threat of losing tax advantages and the possibility of a hot, nuclear war in the middle east thanks to Iran.
By the way you were mocking me about my IIRC about oil prices. So go get the facts Jack and then see if my IIRC was all that wrong.
And you also lectured me about the effect of relative inflation on the price of a foreign sourced product. I pointed out in counter to that, that oil itself hasn’t followed the theory you are spouting. That’s possible in part because Middle Eastern oil is vastly cheaper to produce than it sells for. So if a place like Saudi Arabia “sacrifices,” they still roll in the dough and are happy. Islamists are not always devout economists, they have a multitude of international relations agendas.
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