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Gas Prices At Record Lows!

It’s very discouraging to hear the incessant prattling both in the media and on the street corner about high gas prices.  Nobody in the media or on the street seems to know the true cause of high oil prices.  Some of the economic “experts” on TV may know the truth but are unwilling to admit it.  And the truth is that gas prices have never been cheaper.  That’s right, gas prices are actually at record lows!  I’ll explain later in this column.

First the wrong explanations:

1) GREED OF THE OIL COMPANIES.  This one, Obama’s favorite, is completely untrue.  Several large companies, Apple for example, are far more profitable than any oil company.  Exxon clears about 2 cents on every gallon of gas they sell.  So if we took away all their profits we could cut gas prices by 2 cents.  But then we wouldn’t have any gas because they would go out of business.  The reason they generate such huge total profits is because by necessity they are huge companies.  Only huge companies can do the huge amount of work it takes to find the oil, get it out of the ground, refine it and deliver it into your gas tank.  Millions of gallons are pumped every day.  (Federal and state governments, for comparison’s sake, get about 80 cents per gallon on average in excise taxes, so who is being greedy here?)

I might add that tens of millions of Americans, possibly even you, own oil companies in their portfolios and retirement accounts.  Some of the people screeching the loudest may even unwittingly own oil in their own accounts.  So the oil companies’ income is America’s income.  And the oil companies are not being “subsidized” as Obama claims.  Giving them a tax break on some development costs is not a subsidy.  The government is not giving them any money.  They are just not taking quite as much away from them.  That’s like saying that if a thug sees me walking down the street and decides not to rob me that day that he’s subsidizing me.  Oil companies already pay billions in taxes.  I once saw Exxon’s federal tax return on TV and it was a stack of papers like 2 feet high.  Raising their taxes will only raise pump prices and reduce shareholder value for millions of Americans.

One more thing about oil company greed:  Why would they only be greedy sometimes and not others?  If it was the greed of the oil companies at fault wouldn’t gas prices always be high?  Are oil executives only greedy when prices are high, but when prices are low it’s because they are not feeling greedy?  Ridiculous.

2) SPECULATORS.  Speculators do not affect current oil prices.  Their job is to try to predict future oil prices and make contracts based on those predictions.  This is a very important job as their customers (large oil consumers such as airlines) depend on these long term contracts to provide stable costs so they can plan their business.  Imagine if an airline had to change it’s fares every day to react to daily changes in the price of oil.  The speculator is simply being paid to absorb the risk of skyrocketing fuel costs.  Plenty of them bet wrong and lose money.

3) CIVIL WAR IN LIBYA.  Wrong again.  Libya is 18th in the world in oil production.  They are a minor player in the oil markets.  And last I heard they were still pumping oil.

4) INCREASED DEMAND IN CHINA.  This is a factor but a small factor.  Unlike puny Libya, China is a huge oil producer, 5th largest in the world.  They are working hard to become self sufficient in oil, and absent the interference of the kind of environmental nut jobs that we have to contend with here, they will probably succeed before long.

5) GREEDY SAUDI ARABIANS.  Well this is sort of half right anyway.  But greed isn’t the reason Saudis want more dollars for their oil.  They want more for their oil because the dollars we pay them with are becoming less and less valuable every day.  The Saudis are just trying to stay even. And thus we have the true cause of rising pump prices: MONETARY INFLATION.

These days the price of every commodity is at or near record highs.  Gold, silver, copper, nickel, corn, sugar, wheat, soy, cotton, coffee, you name it.  So why not oil? 

Lay the blame for all this at the feet of Obama and his enablers, Geithner and Bernanke.  The Keynesian-inspired explosion in dollars chasing the same amount of resources guarantees that more dollars will be required to purchase them.  Imagine you were at an auction for some rare, valuable  object and each bidder had $10,000 in his pocket.  Since the auction is COD the price could not exceed $10,000.  But suppose you gave everyone an additional $5000 to spend.  Think the final selling price would be closer to $15,000?  Of course it would.   This is what we are seeing.  This is why in order to be secure in our possesions, as we have a right to be, we must have a gold standard or some commodity-based currency.

Gas is actually at a record low when measured in real money, constitutional money, namely gold and silver.  The amount of silver in a real, pre-1965 dime is worth about $4.  There’s your gallon of gas.  It’s a dime a gallon.  Never been cheaper.  The problem is that the dollar, too, has never been cheaper.

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