Posted on 02/23/2012 6:19:12 AM PST by SeekAndFind
Panic is in the air as gasoline prices move above $4.00 per gallon. Politicians and pundits are rounding up the usual suspects, looking for someone or something to blame for this latest outrage to middle class family budgets. In a rare display of bipartisanship, President Obama and Speaker of the House John Boehner are both wringing their hands over the prospect of seeing their newly extended Social Security tax cut gobbled up by rising gasoline costs.
Unfortunately, the talking heads that are trying to explain the reasons for high oil prices are missing one tiny detail. Oil prices aren’t high right now. In fact, they are unusually low. Gasoline prices would have to rise by another $0.65 to $0.75 per gallon from where they are now just to be “normal”. And, because gasoline prices are low right now, it is very likely that they are going to go up more—perhaps a lot more.
What the politicians, analysts, and pundits are missing is that prices are ratios. Gasoline prices reflect crude oil prices, so let’s use West Texas Intermediate (WTI) crude oil to illustrate this crucial point.
As this is written, West Texas Intermediate crude oil (WTI) is trading at $105.88/bbl. All this means is that the market value of a barrel of WTI is 105.88 times the market value of “the dollar”. It is also true that WTI is trading at €79.95/bbl, ¥8,439.69/barrel, and £67.13/bbl. In all of these cases, the market value of WTI is the same. What is different in each case is the value of the monetary unit (euros, yen, and British pounds, respectively) being used to calculate the ratio that expresses the price.
(Excerpt) Read more at forbes.com ...
mental gymnastics
The government will keep spending and consuming gas, getting vouchers and plastic transactions. The rest of us will starve.
Gas stations thus will start raising prices to make up for the increase cost of idleship, because living with a idle industry makes everything rare and expensive. Add to that that some people are getting free money to buy gas, then there is purchase of gas without worry, and that fuels the price up too.
This is a North Korea scenario.
One of the reasons for inflation is that a cost always starts at zero and then can go up indefinitely. The average can be low, but it is the median that counts in the pricing of the dollar and inflation. There is a point when cost goes negative, ie. when people do not pay their bills and advertisement investments do not reap anything.
Our growth and employment rate is based on an average, and not on a median, and that is why it is such a lie about the real state of the economy. The rate of failed investments and NEGATIVE costs is not even factored in their calculations. THey only compute the so called “overpricers” who try to survive instead of looking at the real picture of so many start ups failing, such as SOlyndra etc...
This is utter catastrophy and hypocrisy how they cook the books that way.
bkmk
Indeed, meet the cheap whore, and the dollar fits the bill ever since the gold standard was abandoned. It might have been a weak standard, but at least gold rarely goes negative, although it has happened that people in a panic threw their jewlry out the window in a panic of disgust.
That’s the whore of babylon about to be decapitated, the one free dollar sitting on the beast government, this retard mongrel getting the free money. She will not satisfy and the retard ATF agent will be confused why he cannot have his donut.
When money is poured in idle potemkin green projects meant to shut things down, it has no value there, because it is cheap and not honored in real work. Meanwhile a sort of dollar or fake currency can be imposed on the rest that is starving, and, just like a subway ticket can become surrogate currency, they will start the checkpoints of shakedowns at public travel points.
There were thousands of years when most people desired gold for its permanence and beauty. that was a world wide standard.
Today most people would..rather have a new iPod or a Rifle, or a new car.
The complete and utter uselessness of gold as a means of preserving ones life in bad times has been too irrefutably demonstrated in the last couple centuries.
Things change, even the once universal value of gold.
In the new heaven and the new earth, gold will be a mere paving stone. God is always ahead of the curve.
I am in an Ag trade group. The grain supplier always tout how the weak dollar is driving up exports. This is a supposed opportunity.
However, the weak dollar ultimately drives up costs in the commodity market. Commodities make feed for protein producers such as eggs, chicken, turkey, pork and meet. If the producers can't pass along the price increase to the consumer, the the producer suffers losses. Ultimately, the grain supplier will suffer a bad debt loss or lost business when the producer can't afford to produce anymore.
A strong dollar makes imports attractive.
What we know as Au probably is only symbolic of whatever substances in the heavenly realms might be. We live in a decaying world. Even atoms of Au as we know them would decay given sufficient trillions of years.
Yes! And there's the rub.
A strong dollar makes foreign goods relatively cheap. And a weak dollar caused by monetary inflation eventually causes domestic prices to rise . . . also making foreign goods relatively cheap.
The only solution is a stable dollar, one that isn't fiddled around with constantly by the Fed. Its foreign exchange value would certainly fluctuate, but the domestic economy would stabilize and strengthen.
You’re lapsing into incoherence.
Inflation is what causes the dollar to drop in the first place.
Inflation causes price and wage increases.
Price and wage increases make cheaper foreign goods more attractive.
Price and wage increases wipe out any benefits to exports from a lower dollar by increasing production costs.
Didn't mean to go over your head.
You are quite incoherent about how such a situation miraculously causes imports to undercut local items. The same weakening dollar chases after both.
I've told you -- three times now? -- that when local prices rise due to inflation, but, say, Germany's prices remain relatively stable, then Germany will have the price advantage. And all trade takes place because of price differences.
There is nothing miraculous about it. Monetary inflation causes trade deficits. It's very easy to understand. When the prices in one country rise above those in another, the latter benefits.
For some reason, you are trying not to understand a very simple point.
The same weakening dollar is looking at German goods and local goods. How that is supposed to equate to an effective price reduction for German goods is voodoo mathematics. Period.
Ah. "Voodoo" mathematics. You learned your economics from George Bush, Sr. That explains your difficulty in understanding common sense.
I understand how you have it just backwards.
You are acting as though the dollar were the stable thing, and somehow tied buddy-buddy to Germany, whereas those asinine local producers are just asking more and more in some sort of unshakable union.
NO! It is the dollar that is getting weaker. If the local items were priced in weights of gold, their prices would probably be staying about the same.
No. I've been saying over and over that the dollar is dropping because the Fed is inflating it.
It is the dollar that is getting weaker. If the local items were priced in weights of gold, their prices would probably be staying about the same.
Of course, they would.
On that happy note of agreement, I bid you good morning.
The way you are acting is the only way you could come up with the notion that this inflation (cheaper dollars being more of them around) causes German imports to be cheaper in dollars. No they won’t be cheaper in dollars. Germany wants its gold. Now it will be cheaper to Germany to buy US things, in some measure (since prices lag the inflation by a certain amount).
What this article is, is an attempt by Forbes to rationalize retail pump prices for gasoline, and they're not even using any standard measure of inflation to do it, since that metric does not support it, and neither does exchange rates.
But, off to the races we go. Gas jumped because Iran is rattling sabres and because refinery capacity is lacking, nothing else. The price per barrel for crude is nowhere near the level of summer, 2008, but retail is equal to it and still climbing.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.