Gasoline has been a hot commodity for years and prices are spiraling out of control again. On Friday, February 24, gasoline futures for April delivery on the New York Mercantile Exchange settled at $3.32 per gallon. That price plus taxes, which vary based on where you live (I add about 70 cents per gallon for suburban Chicago), is a reasonable estimate for where pump prices should be. Currently, the national average is $3.63 with a wide range from Denver’s $3.08 per gallon to San Francisco’s $4.31. These are record high prices for February and portend a very expensive summer driving season. So what’s going on?
Tension in the Middle East has provided speculators with an opportunity to bid up the price but the world’s economies are not exactly over-heating. So what’s the problem? No one seems to know and, if the average driver buys 50 gallons a month and the price goes up a dollar per gallon, the $40 per month savings that both parties spent so much time and political capital on in Congress by passing the payroll tax cut legislation last week will have been for naught.
A few days ago, President Barack Obama said "We know there's no silver bullet that will bring down gas prices or reduce our dependence on foreign oil overnight." Overnight? What about the last three years! The pump price for regular gasoline when Obama took office was $1.84 but has since increased by almost 100 percent. No more off-shore drilling, Alaska drilling or Canadian pipeline. No free oil or even a price discount from Iraq even though we spent over one trillion dollars and suffered over 36,000 killed and wounded American soldiers while liberating that country. Did they ever even say thanks? Americans struggle to pay for transportation at home while our Arab “allies” build indoor ski slopes in the desert because they can’t think of anything else to do with all the money we keep sending them.
We have learned that commodity prices can be high and stay high without strong demand. In the 1990s when the U.S. economy was strong and unemployment was low, oil traded at $10 a barrel and now it’s $110. Corn was around $2 and now it’s over $6. At these prices, we can’t afford to have the economy start growing and drive commodity prices even higher!
