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Gasoline Prices Are Not Rising, the Dollar Is Falling
Forbes ^ | 02/23/2012 | Louis Woodhill

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 ...


TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: dollar; dollarfalling; gasoline; gasolineprices; gasprices

1 posted on 02/23/2012 6:19:15 AM PST by SeekAndFind
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To: SeekAndFind

—Gasoline Prices Are Not Rising, the Dollar Is Falling—

Yup. It’s why the market is “rising” too.


2 posted on 02/23/2012 6:19:54 AM PST by cuban leaf (Were doomed! Details at eleven.)
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To: cuban leaf

A weak dollar is not a wholly unmixed curse. It helps exports.


3 posted on 02/23/2012 6:21:33 AM PST by HiTech RedNeck (Sometimes progressives find their scripture in the penumbra of sacred bathroom stall writings (Tzar))
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To: SeekAndFind

State wrestling tournaments have more to do with the prices in our state than any external factors. :-) Prices jumped at many places by 30 cents, because this weekend is the tournament.


4 posted on 02/23/2012 6:22:25 AM PST by knittnmom (Save the earth! It's the only planet with chocolate!)
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To: cuban leaf

Author links the price of gasoline to the price of gold and of course, the weak US Dollar...

__________________________

In terms of judging whether the price of WTI is high or low, here is the price that truly matters: 0.0602 ounces of gold per barrel (which can be written as Au0.0602/bbl). What this number means is that, right now, a barrel of WTI has the same market value as 0.0602 ounces of gold.

During the 493 months since January 1, 1971, the price of WTI has averaged Au0.0732/bbl. It has been higher than that during 225 of those months and lower than that during 268 of those months. Plotted as a graph, the line representing the price of a barrel of oil in terms of gold has crossed the horizontal line representing the long-term average price (Au0.0732/bbl) 29 times.

At Au0.0602/bbl, today’s WTI price is only 82% of its average over the past 41+ years. Assuming that gold prices remained at today’s $1,759.30/oz, WTI prices would have to rise by about 22%, to $128.86/bbl, in order to reach their long-term average in terms of gold. As mentioned earlier, such an increase would drive up retail gasoline prices by somewhere between $0.65 and $0.75 per gallon.

At this point, we can be certain that, unless gold prices come down, gasoline prices are going to go up—by a lot. And, because the dollar is currently a floating, undefined, fiat currency, there is no inherent limit to how far the price of gold in dollars can rise, and therefore no ultimate ceiling on gasoline prices.


5 posted on 02/23/2012 6:22:41 AM PST by SeekAndFind
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To: SeekAndFind

If oil is traded in dollars, why would the value of the dollar make a difference? Seems that it would just make oil ‘cheaper’ for those with currencies of higher value than the dollar.


6 posted on 02/23/2012 6:24:45 AM PST by KoRn (Department of Homeland Security, Certified - "Right Wing Extremist")
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To: SeekAndFind

When Roosevelt was president gold was $35 per ounce. It was and still is the measure of what’s financially real. Now at over $1700 per ounce what has changed, the gold or the dollar in which it is “valued”?


7 posted on 02/23/2012 6:27:03 AM PST by Don Corleone ("Oil the gun..eat the cannoli. Take it to the Mattress.")
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To: SeekAndFind
The Fed is creating fiat dollars like CRAZY and buying government debt. For people with some common sense, this is a problem.
8 posted on 02/23/2012 6:31:44 AM PST by MulberryDraw (Anyone see the democrat budget yet?)
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To: KoRn
If oil is traded in dollars, why would the value of the dollar make a difference? Seems that it would just make oil ‘cheaper’ for those with currencies of higher value than the dollar.
Because a cheaper dollar buys less oil. Energy is the perhaps the most reliable indicator of the value of any currency.
9 posted on 02/23/2012 6:33:45 AM PST by Timaeus (Willard Mitt Romney Delenda Est)
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To: SeekAndFind

The sky is not falling.

The ground is rising!


10 posted on 02/23/2012 6:35:15 AM PST by airborne (Paratroopers! Good to the last drop!)
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To: SeekAndFind

I judge the price of gas, by what percentage of my paycheck goes into my gas tank every week, and that percentage is rising. My number of paycheck dollars are not rising as the value drops.


11 posted on 02/23/2012 6:40:22 AM PST by ZX12R (FUBO GTFO 2012 ! We should take off and Newt washington from orbit.)
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To: SeekAndFind

Gas prices were almost half of what they are now when Barry came into office. Crude was way down because we had a larger supply of oil also. Drill here and drill now and get someone in office that has an energy plan for the American people and not the terrorists.


12 posted on 02/23/2012 6:43:19 AM PST by mountainlion (I am voting for Sarah after getting screwed again by the DC Thugs.)
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To: SeekAndFind
Major BS!

The dollar has been relatively stable for about two years now against the major currencies (excepting the Franc - but thats been pegged since last summer) ...

check this: Historic Exchange Rates

Enter the EUR, CHF, GBP and go back two years ...

You can add Yen too, but that flattens the others ...

13 posted on 02/23/2012 6:48:07 AM PST by An.American.Expatriate (Here's my strategy on the War against Terrorism: We win, they lose. - with apologies to R.R.)
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To: SeekAndFind
This is BS! The dollar is not plunging. The price of gold is spiking.

The same thing happened in the late '70s to early 1980s. The price of gold shot up more than sixfold. Was the dollar suddenly worth one sixth of its value? No, gold crested near $700 an ounce, had some wild swings and settled down below $400 an ounce for most of the '90s, then dipped below $300 an ounce in '98 and stayed there till the next speculative spike.

So, was the dollar worth twice as much in '98 as in '80? No. So, was the dollar worth twice as much in

14 posted on 02/23/2012 6:48:23 AM PST by Dick Holmes
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To: SeekAndFind

Berrwacky and his printing press, everything is rising a 5 dollar coke is on the way.


15 posted on 02/23/2012 6:59:21 AM PST by org.whodat (Sorry bill, I should never have made all those jokes about you and Lewinsky, have fun.)
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To: airborne

“The sky is not falling.

The ground is rising!”
****************************************************

It’ very fortunate that the ground is rising. Were it not for that continental land mass rise exactly offsetting the rise of the oceans, all of our coastal cities would be under water by now.

Just ask Al Gore if you don’t believe that.


16 posted on 02/23/2012 7:00:09 AM PST by House Atreides
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To: knittnmom

Got any wrestlers in the tournaments?


17 posted on 02/23/2012 7:12:59 AM PST by freemama
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To: freemama

The dollar has been stable against other currencies, like the Euro, etc. Every damn currency is weak because the governments have spent our money like there is not end to the printers. Compare the currency to a resource (gold, oil,) and they are all weak, the more $ printed, the less it’s worth. Just saying it’s strong compared to Greek, Italian, French, and Spanish currency is pretty meaningless. We don’t need to use $ to buy Euros to live on. We use it for food, gas, etc. all which take more $


18 posted on 02/23/2012 7:21:13 AM PST by nobamanomore
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To: HiTech RedNeck
A weak dollar is not a wholly unmixed curse. It helps exports.

For a while -- maybe.

But a falling currency is the result of monetary inflation which also eventually causes domestic prices and wages to rise which make imports more attractive to consumers thus increasing the trade deficit.

19 posted on 02/23/2012 7:22:18 AM PST by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: freemama

No, my children are too old, and my grandson is too young. He’s planning on a “career” in soccer, at this time. :-) I just try to keep up on what’s going on so I know where NOT to take a drive!


20 posted on 02/23/2012 7:39:00 AM PST by knittnmom (Save the earth! It's the only planet with chocolate!)
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To: SeekAndFind

mental gymnastics


21 posted on 02/23/2012 7:50:06 AM PST by Vendome (Don't take life so seriously, you won't live through it anyway)
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To: MulberryDraw

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.


22 posted on 02/23/2012 7:53:25 AM PST by JudgemAll (Democrats Fed. job-security Whorocracy & hate:hypocrites must be gay like us or be tested/crucified)
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To: SeekAndFind

bkmk


23 posted on 02/23/2012 7:58:04 AM PST by Sergio (An object at rest cannot be stopped! - The Evil Midnight Bomber What Bombs at Midnight)
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To: BfloGuy

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.


24 posted on 02/23/2012 8:06:32 AM PST by JudgemAll (Democrats Fed. job-security Whorocracy & hate:hypocrites must be gay like us or be tested/crucified)
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To: Don Corleone
No. it is not.

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.

25 posted on 02/23/2012 9:03:45 AM PST by MrEdd (Heck? Geewhiz Cripes, thats the place where people who don't believe in Gosh think they aint going.)
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To: BfloGuy; HiTech RedNeck
BfloGuy is correct that about the weak dollar and exports. Here is a real life example....

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.

26 posted on 02/23/2012 11:25:10 AM PST by 11th Commandment (http://www.thirty-thousand.org/)
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To: BfloGuy

A strong dollar makes imports attractive.


27 posted on 02/23/2012 3:28:00 PM PST by HiTech RedNeck (Sometimes progressives find their scripture in the penumbra of sacred bathroom stall writings (Tzar))
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To: MrEdd

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.


28 posted on 02/23/2012 3:30:06 PM PST by HiTech RedNeck (Sometimes progressives find their scripture in the penumbra of sacred bathroom stall writings (Tzar))
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To: HiTech RedNeck
A strong dollar makes imports attractive.

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.

29 posted on 02/23/2012 3:40:42 PM PST by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: BfloGuy

You’re lapsing into incoherence.


30 posted on 02/24/2012 12:42:28 AM PST by HiTech RedNeck (Sometimes progressives find their scripture in the penumbra of sacred bathroom stall writings (Tzar))
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To: HiTech RedNeck
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.

31 posted on 02/24/2012 2:15:33 PM PST by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: BfloGuy

You are quite incoherent about how such a situation miraculously causes imports to undercut local items. The same weakening dollar chases after both.


32 posted on 02/24/2012 4:15:30 PM PST by HiTech RedNeck (Sometimes progressives find their scripture in the penumbra of sacred bathroom stall writings (Tzar))
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To: HiTech RedNeck
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.

33 posted on 02/24/2012 4:52:19 PM PST by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: BfloGuy

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.


34 posted on 02/24/2012 4:54:35 PM PST by HiTech RedNeck (Sometimes progressives find their scripture in the penumbra of sacred bathroom stall writings (Tzar))
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To: HiTech RedNeck
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.

35 posted on 02/24/2012 5:21:31 PM PST by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: BfloGuy

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.


36 posted on 02/24/2012 5:24:37 PM PST by HiTech RedNeck (Sometimes progressives find their scripture in the penumbra of sacred bathroom stall writings (Tzar))
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To: HiTech RedNeck
You are acting as though the dollar were the stable thing, and somehow tied buddy-buddy to Germany

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.

37 posted on 02/25/2012 3:14:01 AM PST by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: BfloGuy

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).


38 posted on 02/25/2012 1:14:25 PM PST by HiTech RedNeck (Sometimes progressives find their scripture in the penumbra of sacred bathroom stall writings (Tzar))
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To: An.American.Expatriate
It's futile to try and get some folks to understand. It's not as if currency exchange rates, even historicalmdata, isn't widely available in the public domain.

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.

39 posted on 02/25/2012 1:29:40 PM PST by RegulatorCountry
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