Monday, June 15, 2009

Putting The Brakes On The Recovery

The people I ride the bus with during the week have been playing a little game: we watch the signs on the gas stations to find the highest prices. As of Friday, cheap gas in our area of the San Gabriel Valley was up to $2.839 (one station). The most expensive gas was at a station in east Pasadena just before the freeway: $3.019. During most of the Spring, prices hovered in the low $2 range, but from the middle of May on, prices rose quickly.

So, what's going on? Well, according to this article in the Los Angeles Times, a couple of things, and scarce supplies isn't one of them.

The energy price explosion baffles some analysts who have been saying for weeks that prices weren't supported by market fundamentals. There's no economic boom creating more demand and no lack of crude oil supplies.

"The extent of this increase has been unjustifiable," said Tom Kloza, analyst for the Oil Price Information Service in Wall, N.J. "This rally is like that stuff on Donald Trump's head. It's all froth. It's just not real." ...

Phil Flynn, senior market analyst for Alaron Trading Co. in Chicago, said energy prices were being driven by the devil the Obama administration has chosen to dance with to get out of the recession: big spending and big deficits that have pummeled the value of the dollar relative to foreign currencies and driven more investors into oil, raising its price and effect on gasoline. ...

Refinery owners have played a big role by choosing to refine less, said Patrick DeHaan, senior petroleum analyst for, a national system of price-tracking websites. In the Midwest, scene of some of the biggest price hikes, "refineries have been operating at 80% to 85% of capacity instead of the usual 90% to 95%," DeHaan said.
[Emphasis added]

There you have it: speculation and a deliberate drop in refining, both designed to maximize profits at the cost of the recovery.

A lot of people can offset the higher prices by taking public transportation, and more are doing just that, but that's hardly the answer to the problem. Some people have to drive vehicles, such as delivery truck drivers, plumbers, and other trades people who can't possibly carry their tools and supplies on a bus. Further, a lot of public transportation systems still rely on diesel to operate their trains and buses, and those prices are also sky rocketing.

This summer looks to be a replay of last summer when prices reached over $4.50 a gallon nationally before dropping. I suspect this year we'll pass the $5 mark, which means the price of food and essentials will also rise at a time when people are still out of work and scrambling to find the money just to keep a roof over their families.

And all because the big money-makers want to squeeze out every last bit of profit they can.

What fine Americans these corporatists are.



Blogger Nancy Willing said...

A very helpful post, Diane! Enough stink now and prices may recede again.

2:33 PM  

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