Why Are Gas Prices Going Up With Low Demand?

With the economy improving on most fronts, and an upward trajectory for quite some time, it is no longer assured that the Republicans can win on "it's the economy, stupid." Because, if the economy is improving under President Obama's leadership, why should we change horses? An excellent question.

But one sticky wicket is gas prices. Gas is at about $3.50 per gallon on average right now, which isn't--by far--an all-time high, but it is higher than it has been in a while. Why? Demand is down. Republicans are sure to zero in on President Obama. They're wrong, and they're right. First, Obama isn't the reason for high gas prices. But, Obama could have lead the charge to reign in oil speculators, who caused gas prices to rise into the near-$5 range in 2008, and seem to be behind the most recent rise.

We got screwed by speculators in 2008. Why on earth didn't Obama, or hell, even the Republicans do something about it after that?

UPDATED JUST TO ADD: Notice that anything you read about this will say that we can expect gas to go over $4 this summer, and possibly $5 by the end of it. How. In the world. Does anyone. Know this? Speculation!!! (cue the scary music)

[Excerpt]

Oil Prices Are Rising Despite Lowest Demand Since 1997

. . .Strangely, the current run-up in prices comes despite sinking demand in the U.S. “Petrol demand is as low as it’s been since April 1997,” says Tom Kloza, chief oil analyst for the Oil Price Information Service. “People are properly puzzled by the fact that we’re using less gas than we have in years, yet we’re paying more. . .”

Read more at: Think Progress

John McCain's Oil Drilling Hoax

Photo from AMS Bow Fishing

I think it was P.T. Barnum who said, "You'll never go broke underestimating the intelligence of the American people." Whether it was Barnum or not doesn't matter, because the sentiment is absolutely true. Dangle a bit of "truthiness" in front of the average American, and he'll swallow it whole.

Fortunately, this election season, it would seem that a few more than usual Americans are paying attention. I can only hope that's true, because the Frank Luntzian phrasing and logic are in overdrive at the moment, particularly as it applies to oil. We've got Newt Gingrich with his "drill here, drill now, pay less" campaign, and John McCain is trumpeting that line too.

Logically, it falls apart. But it makes a great soundbite. If you're one of those people who has swallowed that line though, take a read of this article, and then tell me if you still feel the same way.

[Excerpt]

McCain's Oil Drilling Hoax

Forced to cancel a planned visit to an oil platform off the Mississippi coast last week because of inclement weather — and the untimely leaking of hundreds of thousands of gallons of oil by a shipwreck in the vicinity — John McCain finally got his photo op at a Bakersfield derrick on July 28. Speaking on site, the Arizona senator delivered extraordinarily good news to the beleaguered gasoline-consuming public as he explained why we must drill offshore. . .

Read more at: Yahoo! News

Gas Prices, Conservatives and Ann Coulter

My good friend Les has been trying to get me to read a recent column by Ann Coulter on the price of oil, and how that subject fits in the political arena. Knowing that I'm not a fan of Ms. Coulter's work (to say the very least), he thought this was a column where she was spot-on.

I didn't. . .um. . .see it that way. But that is a fun part of having a diverse group of friends: difference in opinion and spirited (but never nasty) discussion. Hopefully, Les won't mind getting feedback here on a public forum--particularly since my portion of the blogosphere is rather invisible! I'm aware that my response is somewhat disjointed, because there are so many areas in the piece that I disagree with! Oh well. . .

[Excerpt]

You can't fuel all of the people all of the time

Democrats couldn't care less about high gas prices. The consistent policy of the Democratic Party, going back at least to Jimmy Carter, has been to jack up gas prices so we can all start pedaling around on tricycles. [snip]

B. Hussein Obama's response to soaring gas prices is to have the oil companies collect even more money from us at the pump, proposing a "windfall profits tax" on oil companies. "Corporate taxes" sound like taxes on rich people, but all they do is force corporations to collect taxes on behalf of the government. . .

Read more at (of all places): Jewish World Review

Nothing backhanded about any of that, right? On to my disjointed, rambling response:

Les,

I'm not as enamored of the piece as you are. For instance, the "oil companies pay too much taxes" bit. What about the massive subsidies given to the oil companies by the Bush Administration? I would say that offsets their tax burden by quite a bit.

"B. Hussein Obama?" C'mon. . . there's only one reason she's doing that.

Windfall profit taxes come AFTER the profit is declared, which would be (at least in the short term) a difficult tax to pass on to consumers. . .because then they'd make more profit. . .and then pay more taxes.

I'm not an expert on this subject, but I have a problem with the logic in Coulter's column (and elsewhere in conservative opinon). The question not being asked: what happened in the last 18 months or so to make oil spiral upward? There seems to be a complete disregard for a big part of the real problem: speculators. We've had pretty much a status quo in where and how we get our oil over the last couple of years. Not drilling, or exploring, or getting new leases or whatever didn't just happen in the last year and a half. But it's only in the last year and a half that gas has doubled in price.

It can't be supply and demand. Demand is down. Supply is not curtailed. And yet gas is $4.30. I'm not sure how getting more oil (5 or 10 years down the road) will help that at all, I really don't. And if the oil companies have to go to the expense of drilling all over the place, getting new leases, etc., don't you think they're going to pass on THAT expense to consumers?

And why are so many conservatives so defensive of big oil, anyway? From my perspective, if the cost of materials for making a product go up, you raise your price accordingly. But your profits in that case would remain flat. The oil profits have ballooned bigger than any profits ever recorded for anything in human history. How did that happen?

Some links (which from another perspective might be as irritating as Ann's column was to me):

• Speculators – not supply and demand – are to blame for skyrocketing gas prices
• Wall Street fights to protect oil speculation
• The Great Oil Swindle: manipulation or fraud?