On her Facebook page this week Sarah Palin laid the blame for rising gas prices on President Obama suggesting that the president wants to see prices increase. She contended that Obama's drilling moratorium -- instated after the massive spill in the gulf -- his proposed elimination of oil tax incentives in the 2012 budget and regulatory practices have caused increased prices at the pump.
"The evidence of the President's anti-drilling mentality and his culpability in the high gas prices hurting Americans is there for all to see," Palin said.
Well if Palin is correct it would be in complete contradiction to what former President George Bush said in 2007 on gas prices. Bush, who happens to know a thing or two about oil, said that that if we opened up every area that is currently off-limits in the United States for drilling “it would have no significant impact on prices and or reducing imports”. Even Bush understood that gas prices are to a large degree affected by Wall Street speculation and to almost no degree on action or inaction by the president.
OPEC at one time was the single most influential force in the oil market but is now only one third of the driving force behind oil price increases. Supply and demand, rampant speculation, and profit taking on the part of the petroleum industry, are arguably the major factors contributing to artificially inflate the price of oil. OPEC generally acts in a pretty even handed manner to set a price relative to supply and demand. They decide what the price will be by setting production accordingly. At the end of the day they are businessmen and the oil business (like most businesses) does not perform at its best when there are wild swings in prices or supply.
On the other hand oil speculators including traders for oil companies, hedge funds and financial firms like Goldman Sachs and J.P. Morgan are always willing to artificially run up prices. They look for every opportunity to turn a profit by exploiting situations like the possibility of further turmoil in the Middle East. The speculators create spikes or bubbles beyond the supply/demand fundamentals and ultimately that is why gas is now $5 a gallon. Goldman Sachs even admitted last week that speculators had pushed prices $20 higher a barrel then where the fundamentals were. Is it a crime? No. It’s legalized speculation that needs to be reined in.
The reality is that gas prices are in fact driven to a large extent by the trading pits of the Mercantile Exchange. This was a market created so that farmers could gauge what their unharvested crops would be worth months in advance, so that factories could lock in the best price for raw materials, and airlines could manage their fuel costs. But like derivative products that were originally created to hedge interest rate risk, Wall Street has manipulated and corrupted the futures market for their own selfish interests.
So Sarah Palin is barking up the wrong tree when she lays the blame of high oil prices on the president. “Drill baby drill” isn’t going to solve artificially inflated gas prices at the pump because of out-of-control Wall Street traders. President Obama this week announced that he was putting in place a task force to investigate the spike-ups in gas prices. The focus will be on the trading practices of financial firms like Goldman Sachs, J.P. Morgan, and others. So instead of pointing the finger at the president for political purposes, Palin should try pointing the finger at Wall Street where the blame should really lie.
"The evidence of the President's anti-drilling mentality and his culpability in the high gas prices hurting Americans is there for all to see," Palin said.
Well if Palin is correct it would be in complete contradiction to what former President George Bush said in 2007 on gas prices. Bush, who happens to know a thing or two about oil, said that that if we opened up every area that is currently off-limits in the United States for drilling “it would have no significant impact on prices and or reducing imports”. Even Bush understood that gas prices are to a large degree affected by Wall Street speculation and to almost no degree on action or inaction by the president.
OPEC at one time was the single most influential force in the oil market but is now only one third of the driving force behind oil price increases. Supply and demand, rampant speculation, and profit taking on the part of the petroleum industry, are arguably the major factors contributing to artificially inflate the price of oil. OPEC generally acts in a pretty even handed manner to set a price relative to supply and demand. They decide what the price will be by setting production accordingly. At the end of the day they are businessmen and the oil business (like most businesses) does not perform at its best when there are wild swings in prices or supply.
On the other hand oil speculators including traders for oil companies, hedge funds and financial firms like Goldman Sachs and J.P. Morgan are always willing to artificially run up prices. They look for every opportunity to turn a profit by exploiting situations like the possibility of further turmoil in the Middle East. The speculators create spikes or bubbles beyond the supply/demand fundamentals and ultimately that is why gas is now $5 a gallon. Goldman Sachs even admitted last week that speculators had pushed prices $20 higher a barrel then where the fundamentals were. Is it a crime? No. It’s legalized speculation that needs to be reined in.
The reality is that gas prices are in fact driven to a large extent by the trading pits of the Mercantile Exchange. This was a market created so that farmers could gauge what their unharvested crops would be worth months in advance, so that factories could lock in the best price for raw materials, and airlines could manage their fuel costs. But like derivative products that were originally created to hedge interest rate risk, Wall Street has manipulated and corrupted the futures market for their own selfish interests.
So Sarah Palin is barking up the wrong tree when she lays the blame of high oil prices on the president. “Drill baby drill” isn’t going to solve artificially inflated gas prices at the pump because of out-of-control Wall Street traders. President Obama this week announced that he was putting in place a task force to investigate the spike-ups in gas prices. The focus will be on the trading practices of financial firms like Goldman Sachs, J.P. Morgan, and others. So instead of pointing the finger at the president for political purposes, Palin should try pointing the finger at Wall Street where the blame should really lie.
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