Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

$4.35/gallon

Posted by Larry Doyle on April 9, 2012 6:53 AM |

“Do you feel it?”

“Feel what, LD?”

The hand inside your wallet cleaning you out as you go to fill your tank. I felt it yesterday afternoon when I filled the tank and saw the price for regular gas at $4.35/gallon.

Pissed off? You bet I am. I personally think it is likely to get worse as we approach the summer months. What is driving the price of fuel?

Is our domestic economy so strong as to drive this spike in the price of fuel? Real personal consumption expenditures, the primary focal point within GDP, grew at 2.0 in the 4th quarter 2011. I would not qualify that as overly robust for an economy that hit the rocks hard and is now struggling to regain its footing.

What about China? The question many economists are posing is whether The People’s Republic can manage a soft landing. What does that mean for commodities in general? Bloomberg addressed this topic recently in writing, China Soft Landing May be Hard for Commodity Exporters:

The good news: China’s government will engineer a soft landing. The bad news: Even a soft landing is painful for industries that have become dependent on the world’s fastest-growing major economy as their main profit engine.

“China is definitely slowing down,” said Andy Mantel, founder and chief executive officer of Pacific Sun Advisors, an asset manager in Hong Kong. “Over the course of a few months, the numbers will be quite weak.” Mantel said he’s optimistic China nevertheless will avoid a hard landing. “People’s expectations are too high, and you have to allow China to grow as it can.”

Is the tension surrounding Iran singlehandedly leading to higher prices at the pump? It is certainly playing a role. This situation does not appear to be getting better anytime soon.

Are higher gas prices actually desired by the Obama administration? There is a real debate about this point. I personally believe the Obama administration would like to see lower gas prices currently in order to support our economy, personal consumption, and his chances of re-election. I also believe President Obama would not mind seeing higher gas prices in the future in an attempt to change Americans’ personal habits and our dependence on foreign oil. A recent Fact Checker report, The Claim That Won’t Die: Did Obama Administration Want Higher Gas Prices?, covers both sides of this argument. From mid-2008:

First, we’ll discuss the interview between then-Sen. Obama and CNBC’s John Harwood. Here’s an exchange from that meeting:

Obama: I think that we have been slow to move in a better direction when it comes to energy usage, and the president frankly hasn’t had an energy policy. As a consequence, we’ve been consuming energy as if it’s infinite. We now know that our demand is badly outstripping supply with China and India growing as rapidly as they are.

Harwood: So, could these high prices help us?

Obama: I think that I would have preferred a gradual adjustment. The fact that this is such a shock to American pocketbooks is not a good thing. But if we take some steps to help people make the adjustment, first of all by putting more money into their pockets, but also by encouraging the market to adapt to these new circumstances more quickly, particularly U.S. automakers, then I think, ultimately, we can come out of this stronger and have a more efficient energy policy than we do right now.

Interesting. Do President Obama and Fed chair Ben Bernanke define “putting more money into their pockets” as an S&P 500 level of 1400? Are gas prices of $4.35 merely a side effect of monetizing the debt and goosing the markets?

Sounds like a perfectly logical helping of ‘sense on cents’ to me.

I’m still pissed off and I personally believe most Americans will employ a “throw the bums out, anti-incumbent vote” come this fall.

What do you think?

Larry Doyle

Please subscribe to all my work via e-mail, an RSS feed, on Twitteror Facebook.

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

 

  • Rob Phillips

    I am on board with the “throw the bums out, anti-incumbent vote”, but refuse to replace the current administration with another set of stooges.

    Ron Paul | 2012 | The “change” Obama failed to deliver

    • http://www.rswilliamsassoc.com Scott Lake

      Due to our current way of vetting, financing and electing Presidents, “stooges” are all you are going to get, unfortunately.

  • LD

    The consumer price index for March was up 3.6% from a year earlier, quickening from February’s 3.2% pace and exceeding the median forecast of 3.3% from a survey of 15 economists polled by Dow Jones Newswires. March CPI was up 0.2% from the month before, following a 0.1% month-on-month fall in February.

    But the March inflation figure was still within the government’s target of keeping full-year inflation at about 4%, and that should put policy makers in a generally positive mood.

    China Inflation Exceeds Forecast

  • Obsvr-1

    Bernanke’s benign inflation environment and his 2% target may sound good (or moderate), but when viewed against wage stagnation it sucks the 99%ers purchasing power, thereby decreasing Aggregate Demand.

    Without the extraordinary Gov’t deficit spend, enabled by the FED ZIRP, the REAL economy would present a very different picture that what is being painted during this election year.

  • JK

    Another spot on commentary LD”! It is very frustrating to not get “any legit” answers to the present fuel price spike!

  • Bill

    I’ll take the Democrat fashionable approach–it’s all Bush’s fault.

  • Andrew

    Quantitative Easing has siphoned from your wallet.






Recent Posts


ECONOMIC ALL-STARS


Archives