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  • Obama’s Blame of Speculators, Forming of Gas Task Force Misguided

    Maybe President Obama should start investigating John F. Kennedy’s shooting in his spare time, because he’s not going to find a satisfying conspiracy in gas prices.

    Better yet, he could pick up an economics textbook and turn to the chapter on Supply and Demand.

    His finger-pointing at speculators and formation of a gas task force to investigate prices at the pump ignore the real cause of rising gas prices. Further, President Obama’s blame of speculators is a costly barrier to fixing bad government policy that restricts oil and gas exploration onshore and offshore here at home.

    Oil futures markets can affect prices at the pump by changing the amount of gasoline delivered to gas stations. If producers anticipate higher prices in the future, they might take some oil off the market today and wait to sell it later. But that doesn’t seem to be happening.

    Speculators could marginally increase the price of gasoline if it led to oil inventories building up while sellers waited for higher prices—but even then it would be only in the short run, because businesses have to unload these inventories. That doesn’t seem to be the case right now. The Cato Institute’s Jerry Taylor and Peter Van Doren explain:

    If this is going on we would expect to see some sort of inventory buildup. While crude inventories in the U.S. are increasing, they always increase at this time of year, and this year’s increase is well within the normal range. More important, gasoline inventories are decreasing and decreasing much more rapidly than normal. Hence, there’s no evidence that speculators are reducing the supply of crude or gasoline through increased storage.

    Producers, however, could react in the same way to higher futures prices by decreasing current production to allow more future production at higher prices. Alas, we see no evidence of suspicious reductions in producer output that might give this story credence.

    Yet the allegations of speculators manipulating the market occur every time gas prices rise. They have been investigated numerous times by the Federal Trade Commission and others and found to be without merit, but few critics are ever convinced. Several Federal Reserve studies found no correlation between speculation and the price of any commodity. Yet President Obama remains unconvinced and seems to believe this time the speculators are getting away with something.

    In fact, speculators can also help lower costs in the near term, and one way for that to happen is to increase supply, signaling lower future prices. As my colleague David Kreutzer points out, “A better solution is to increase access to new energy sources. If new sources of oil are allowed to be used, futures markets and speculators will lower the future cost of oil, which will translate into lower fuel prices at the pump.”

    The reality is oil prices have been rising steadily for a year as the global economy is on the mend and countries are using and demanding more oil. A weak dollar is also playing a role. While “Drill Here, Drill Now” is not a panacea and won’t bring gas prices down dramatically, increasing access to oil reserves in the U.S.—both onshore and offshore—would help offset rising demand, increase jobs, and stimulate the economy. Unlike the President’s solutions of increasing biofuel production and bringing more electric vehicles into the market, drilling can be done without the taxpayer’s help. Subsidizing uneconomic sources of fuel and transportation is a bad deal for the consumer and the taxpayer and will do nothing to offset high gas prices.

    Blaming speculators and creating unnecessary task forces is a good way for the Administration to signal it is “doing something” about high gas prices. But the truth is that the federal government is merely diverting attention away from its bad policies.

    Posted in Ongoing Priorities [slideshow_deploy]

    18 Responses to Obama’s Blame of Speculators, Forming of Gas Task Force Misguided

    1. Bob O'Brien says:

      I totally agree that Obama's lack of an oil policy that includes as a centerpiece drilling domestically has caused this raise in prices or at least made us more sensitive to foreign disruptions.

      Question: would it not be a huge benefit for a republican candidate to make a centerpiece of his campaign….to have the US energy independent in say 7 to 10 years….say we include Canada and Mexico…and make the big push in oil. Of course we haver to include gas and coal. I would end all subsidies…including ethonol, green energy and oil. Make it a level playing field. Make it a big deal to have as a goal this independence…energy prices would plumment long before we are actually there. the benefits to our country would be enormous!

      Do you think this would be a good idea and how many years would be reasonable? Thanks. Bob

    2. Brad, Chicago says:

      Has anyone else ever noticed that for every major issue, President Obama steps up and says, "I(we) won't rest until this is solved. I am appointing a commission to study it." While we expect Presidents to exhibit leadership, I don't expect a President to solve every issue, himself. Why isn't there anyone on his staff (i.e. Secretary of X) that can handle these things, though? For all the advisors and "czars" he's put in place, he always needs to create a commission or a panel to spend months studying every problem that occurs (except for the opposition to the health "care" law; that, in turn, didn't exist, was fake, and finally was a product of fear and misinformation). Whether true or not, it only lends credence to the idea that the people in his administration are incompetent.

    3. Robert E says:

      A short time ago Obama, Department of Energy Secretary Chu and others in Washington supported billions of dollars in subsidies and tax credits for Renewable Energy Projects that would reduce our dependence on foreign oil. Now that gas is over $4/gallon and many of these projects are in construction, they are strangely quiet when they should be bragging about their foresight. Could it be solar, wind and geothermal renewable energy produce electricity and have nothing to do with foreign oil and is just another lie perpetrated on Americans by Washington, Lobbyists and Special Interests?

    4. Bobbie says:

      Speculation and speculators, weak excuse! Why is the President not rising above speculation? Why would the President need a task force to investigate gas prices if he didn't know something wasn't already going on that he couldn't correct without the cost of a task force? Isn't there anything Obama can do on his own without needing to hire task forces? No wonder he loves unions so much. He always has something available to hide behind to protect him from his own accountabilities that are leading America to failure.

    5. Pingback: High Gas Prices? Obama Wants a Task Force to Find Out Why! « American Elephants

    6. pip says:

      No need to pay another federal employee for this report. I’ll do it for you. The four reasons why the prices are higher.and I will

      1.The Middle East is unstable.

      2. your administration and the Fed have devalued the currency.

      3. your department of Sec energy secretary Mr Chu said . Somehow we have to figure out how to boost the price of gasoline to the levels in Europe. This will force consumers into buying more efficient cars and living in neighborhoods closer to their work. interview with The Wall Street Journal in September 2008

      4. your administration does not want any domestic drilling. Even after the court found you in contempt, Judge Feldman said “Such dismissive conduct, viewed in tandem with the re-imposition of a second blanket and substantively identical moratorium, and in light of the national importance of this case, provide this court with clear and convincing evidence of the government’s contempt.” Hornbeck Offshore Services LLC v. Salazar, 2:10-cv-01663, U.S. District Court, Eastern District of Louisiana (New Orleans).

      Conclusion of the report fire your secretary of interior, secretary of energy and your economic adviser.

      No need to pay for this report Mr. Obama just use the money to pay down the deficit or by a tank of gas.

    7. Paula Reed, NYC says:

      End the billions in oil subsidies using our tax money. Petroleum is the root cause of most cancers. The oil industry spends tens of millions annually bribing congress according to published PAC records. Every known use of petroleum can be replaced by other green products.

    8. Proof says:

      "Blaming speculators and creating unnecessary task forces is a good way for the Administration to signal it is “doing something” about high gas prices."

      I believe it was Hemingway who said, "Not all motion is action."

    9. Pingback: Brilliant! Smartest President Ever Claims That Eliminating Fuel Subsidies Will Lower Gas Prices | The Gateway Pundit

    10. Pingback: Must Know Headlines — ExposeTheMedia.com

    11. Ravi says:

      Well Mr Obama… you are speculating. You catch up real slow!

    12. Stirling, Pennsylvan says:

      Speculators are part of the free market system, you can choose to speculate or not and with it comes reward or loss, but most speculators are aware of this. The president seems to want no risk/reward in the system, meaning nobody looses money and nobody wins. If he and the people would understand that the fed is the most distructive to the actual price of gas (since it's peged to the value of the dollar) more people would blame the fed and the administrations policies for the rise in prices.

    13. Brian, Michigan says:

      Is there anyone out there that can explain to the media outlets and administration that a PRIMARY cause of fuel prices going up is the DEVALUATION of the dollar, brought on by QE I and QE II?

      It's not the only reason, but at least half the blame belongs to the FED.

    14. Pingback: Morning Bell: Uncontrolled Spending Is the Real Threat | The Foundry: Conservative Policy News.

    15. Spiritof76, NH says:

      The Fed printing money and buying up the US debt is the problem. Obama and his adminsitration is the second major problem. We need to stop them both. Otherwise, US will be a third world country. People either can not or will not put two and two together until they go to the store and the shlves are bare. Stupid is what stupid does.

    16. Pingback: The Sunday ‘Report;’ 05/08/2011 « Justincase505's Blog

    17. Caroline says:

      While I agree that speculators have a marginal effect on pricing, understanding commodity prices is not a foolproof thing – hence why the stock markets are largely unpredictable. Sure, some investments that the government has made in alternative energy – like corn ethanol which has been subsidized for more than 30 years- are failures, alternative energy is necessary to help us cut pollution, climate change emissions, create jobs, and create renewable domestic energy sources.

      All fossil fuels are subsidized by the government – oil companies get tax breaks, are not charged for using public lands, and are not charged for clean up and pollution. Coal companies pay nothing for using public lands and pay only slap on the wrist fines when they violate environmental regulations.The Marcellus Shale drillers are not even getting taxed by Pennsylvania despite the fact that drillers will drill in the Shale no matter what, shale drillers' use of public roads and infrastructure leads to faster deterioration of those public assets, burden public wastewater treatment plants, pollute public and private water sources, and more. The private sector is indeed the way to go to create better energy options, but saying that gas pays for itself is wrong. All energy is subsidized in some way.

    18. Larry Camp says:

      In fact, data exists that shows that coal can be converted to 5-7 barrels of petroleum liquids ( that is $ 116./ton coal = $ 540.00-$630.00 barrel of petroleum ), with the contaminates in coal being removed prior to conversion. I have done the research, and the work at government facilities, but the reports disappear, and nothing was said, since getting the answer causes dollars for research to dry up. I have , however, kept copes of all documentation, but can not even get groups that would benefit like the Charles Koch foundation to even get interested in paying a minimal amount to get this presented before a conference so that those who would dare to dispute it can be silenced. I doubt that anyone here does either, as oil companies aided in closing us down years ago.

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