"It is not enough to know that there is a shadow government pulling the strings of the visible government- we must also act to expose it, and defeat it!"-Mark Matheny
Friday, October 5, 2012
$4 gas: Get used to it
CNN News October 5, 2012
A new U.N. report says the massive bets placed on the commodities markets are the "root cause" of the volatility in oil and gas prices. And that's not about to change.
By Leah McGrath Goodman
FORTUNE -- President Obama may have a lot more to worry about than bombing the debate this week. Traders are starting to get particularly bullish over gasoline prices – and that is bad news for the average driver, who may also be looking to vent his spleen at the voting booth.
Reports of gas shortages along the high-demand west and east coasts may be fleeting – although deeply concerning – but they highlight a problem that's expected to persist in the U.S.: our refineries are getting old. Given that a new refinery has not been built since 1976, commodities desks on Wall Street are bracing for more refinery outages and fires just as the nation needs to gear up for the busy winter heating season.
What does that mean? Probably more weeks where we'll see U.S. crude oil inventories hovering above the upper limit of the average range for this time of year, yet gasoline inventories tunneling into the lower half of their average range, as the U.S. Energy Information Administrationreported Wednesday.
Translated in dollars and cents, retail gas prices likely won't be moving off the $4 needle anytime soon. In fact, some gasoline buyers think this may even usher in a run to $5 a gallon (especially out west where gas stations are shutting down because they cannot buy gas at price levels low enough to turn a profit).
The firmness in gasoline also is giving oil prices a boost, the knock-on effects of which cannot be understated.
Oil price spikes and consumer prices have been "highly correlated" over the past decade, according to the EIA, the nonpartisan statistics branch of the U.S. Department of Energy. The upshot? Americans are increasingly grappling with unchanged paychecks in the face of higher energy prices. Their money is buying them less, the EIA says, citing the Bureau of Labor Statistics' Chained Consumer Price Index.