1. photo

    laliberty: I took this picture this morning. When I passed the same station on my way home tonight, less than 12 hours later, regular was up to $4.29 and supreme was at $4.49. The economically ignorant (there’s really no polite way to say it) like to blame so-called “speculators” - the same boogeymen allegedly responsible for seemingly every socio-economic malady. The greater culprit (though certainly not the only one) is the dollar itself:  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. … 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. Federal Reserve Chairman Ben Bernanke uses a “core CPI index” that excludes food and energy to guide monetary policy. From Big Ben’s point of view, rising gasoline prices are not a problem. For the rest of us, they are becoming a big problem.

    laliberty:

    I took this picture this morning.

    When I passed the same station on my way home tonight, less than 12 hours later, regular was up to $4.29 and supreme was at $4.49.

    The economically ignorant (there’s really no polite way to say it) like to blame so-called “speculators” - the same boogeymen allegedly responsible for seemingly every socio-economic malady. The greater culprit (though certainly not the only one) is the dollar itself: 

    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. …

    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.

    Federal Reserve Chairman Ben Bernanke uses a “core CPI index” that excludes food and energy to guide monetary policy. From Big Ben’s point of view, rising gasoline prices are not a problem. For the rest of us, they are becoming a big problem.