Blame High Gas Prices on Laziness and Greed

Just as the U.S. economy seems about to recover, oil speculators are again ratcheting up gas prices. Don't let them get away with it, says Ed Wallace

By Ed Wallace

When John Gambling recently invited me to appear on his popular radio show on WOR-AM in New York City, he had one question: Why had the price of gasoline again topped the $3 mark in America, setting an all-time record high for December?

We agreed that most of the media seem to be rerunning the excuses used in 2008. Those controlling the crude futures market were again blaming the same old suspects: incredible growth in Chinese oil demand, the weakness of the dollar, falling crude oil supplies in the U.S., and so on. To me, however, the most important fact about high gas prices is exactly how much additional money gasoline costs are taking from our nation—just as we're showing the first real signs of a broad-based recovery.

On the morning of Gambling's show, the futures market for gasoline was sitting at $2.41 a gallon, or 58¢ higher than at the end of the summer driving season. And that reverses the historical trend: Over the past decade, gasoline prices on the futures market have consistently dropped by approximately 20¢ per gallon during that period. So that's a 78¢-per-gallon turnaround. (Note: On Aug. 25, Bloomberg covered a story on technical analysis that suggested gasoline futures could fall to $1.34 a gallon by yearend.)

Multiply that 78¢-per-gallon turnaround by the average 344 million gallons of gasoline American drivers buy each day, and you come up with $268 million more per day that's being diverted from consumer spending into higher gasoline costs—or almost $100 billion a year.

Passing (and Intercepting) the Buck

Of course the oil pundits—whether industry analysts, commentators, lobbyists, or executives—validate the high price of oil. They usually do, saying as always that either gasoline supplies or crude oil on hand is in short supply, hence the increased prices. But that hasn't been true. Gasoline inventories on Dec. 17 were 217 million barrels, slightly more than gasoline inventories in the last week of February 2009—when the price of crude neared $33 a barrel in the wake of the previous fall's financial meltdown.

Likewise on Dec. 17, oil inventories in the U.S. stood at 340.6 million barrels. That's only 10 million barrels less than we had in the last week of February 2009—again, when oil had fallen back to $33.

Fact is, we have more oil on hand today (13 million barrels) and just three million barrels of gasoline less than we did at the end of January 1999, a period when gasoline prices were down near the $1 mark. As for strong economic growth dictating higher oil and gas prices, it should be noted that our GDP grew 5.4 percent in late 1998—and growth would improve to 7.1 percent at the start of 1999. Yet gasoline was a buck a gallon.

It's not just U.S. oil inventories that are considered at the high end of the five-year average. Mohammed bin Dha'en al-Hamili, energy minister for the United Arab Emirates, told the Gulf News on Dec. 25 that "global oil inventories are really high, and the current crude oil prices do not reflect market fundamentals."

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