Archive for the 'Gasoline Prices' Category

05
Aug
15

Gasoline Prices – Are they Real?

U.S. Stocks Lower as Oil Prices Drop – WSJ.

The Price of Oil and Gasoline

The big news is that the price of oil is the lowest it has been in years, down to $45.17 of crude oil per barrel. Have you ever wondered why the price of gasoline goes up and down? There is a common misconception that it is all due to “supply and demand”. Supply and demand sometimes does have an effect on the price of gasoline but not in the way that you might imagine. The cost of gasoline has more to do with speculation on Wall Street than it does with how much oil is produced or consumed.

gas signs

How To Think About Why Gasoline Prices Change

In order to understand how Gasoline prices work, think of it this way: You are the consumer. (And you want to purchase gasoline). But, in this similar scenario, you want to buy concert tickets for your favorite artist, let us say, Taylor Swift. And, the offered price from Ticketmaster is $80. However, you are unable to buy these tickets because Wall Street Speculators, similar to Ticket Scalpers, have bought up all of the tickets. And, if this particular time and venue is very popular, the price of the tickets will go up exponentially. However, if there are many concerts near the same venue  and many dates, the scalpers will sell it at its regular price. This is the essence of buying gasoline. See, it is supply and demand, but more having to do with the scalpers (the speculators of Wall Street) than with the actual supply and demand of gasoline. In fact, you have been paying a lot more for gasoline for many years, for no added value and gave it all to a useless middle man (Wall Street speculators). That is where that extra money goes when the price of gas goes higher.

Today’s Price of Crude Oil – $45.17 Per Barrel

Down from a high of $115  of Crude Oil per barrel in June 2014 to the present $45.17 per barrel this week,  August 3, 2015, it makes you wonder how low the price of oil will go. My prediction is $43 per barrel. This is the real value. Remember: everything above $43 is simply profits for the speculators. Link: U.S. Stocks Lower as Oil Prices Drop – Wall Street Journal 8/3/15.

How Does Wall Street Try To Explain the Decrease in Oil Prices

Wall Street is adamant in trying to maintain the myth of Supply and Demand (because everybody is effected by gasoline, just like water and electricity, and no one wants to pay more because of gambling on Wall Street), And so Wall Street makes a weak argument that demand is down, like the Chinese economy is slowing down (it is not, the Chinese GDP grew by a whopping 8% and they consume more oil every year), that the US is not consuming as much oil (this is also false), and that there is an actual “glut” due to overproduction of oil from all countries.

What about there being an actual oil glut? If that were true then all of our reserve tanks would be full, but they are not nearly even close to maximum. If we were truly in an oil glut situation, why would we need to prove more energy projects such as the Keystone XL pipeline? In truth, there is no oil glut either.

Charting Oil Prices

Below is a chart on the price of oil since 1987. Once upon a time, the United States cared about the regular citizen and created the Commodities Futures Trading Commission (CFTC). The CFTC was established by Congress in 1974 specifically to prevent speculation from artificially inflating the price of commodities. However, with Congress, madly in love with deregulation, Free Trade Deals and Wall Street, and thanks to lobbying from Enron (remember them?), in 2000, Congress relaxed the rules of the CFTC and allowed speculation into the price of oil, which has lead to skyrocketing gasoline prices until recently.

oil prices

So why perpetrate this myth of supply and demand regarding oil prices? The answer: the stock market needs to preserve the image, that not just oil but all stocks are based on supply and demand. Wall Street is afraid that if the public knew the truth about the stock market that there would be a loss of faith in that institution which may compromise its status of stability. If you look at the chart – it is speculation that has driven up the price of gas since 2001 (right after they relaxed the rules on speculation on oil). The real cost of gas probably is $43 per barrel.

For more information about the CFTC and speculation see the below reference (a very short and readable article). Also within this link is a 2 minute video called “Who Decides The Price at the Pump?” by John Hofmeister, CEO of Shell Oil, see:  How Does Oil Speculation Raise Gas Prices by howstuffworks

Conclusion

Price of oil and the price of stocks usually have nothing to do with traditional supply and demand. It is based on speculation by high-frequency traders as well as Wall Street banks that have maximized their ability to see trends and make trades before anybody else by using the fastest technology available.

Don’t believe the reasons when the media tries to explain the ups and downs of stocks or gasoline. The Stock Market is shaped by millionaires and billionaires moving around millions of stocks around the board for no apparent reason, except they always make a good profit. With the drop of gas prices, profits have been down for all of the oil companies. For example, Chevron made a measly $571 million in the second Quarter of 2015 and because of their disappointing earnings, Chevron plans to cut more than 1500 American jobs, 950 in Houston, TX and 500 in San Ramon, CA.

08
Jan
15

What You Need To Know About Oil Prices and The Stock Market

Update 2/9/2015: The price of gasoline has just jumped 20 cents per gallon this week. The reason: the price of “Futures”, in other words, the speculative price, has gone up to $52 per gallon. Speculative price has nothing to do with true supply and demand, but is just another vehicle for Wall Street to bet and make money. On the graph below: the real price based on real supply and demand, the price per gallon of oil should be $42 per barrel. That means Wall Street is making the consumer pay $10 more per barrel than the real price (which is better than the $72 more per barrel than last year). As part of the American public, I shoul let you know that we do not have to allow speculators on Wall Street to raise the price of gasoline. Congress passed that law in 2000, and we could demand that Congress repeal that law. If we cared. What I find so funny, is that when you ask people off the street, if they are will to pay more for gasoline by adding a tax that will repair roads and bridges and stuff, most people say no. But if you make the people pay more for gasoline just so Wall Street can profit from your gullibility (without any benefit to anybody), then people are okay with it.

What You Need To Know About Oil Prices and the Stock Market

With the price of oil going down from a high of $115 per barrel in June 2014 to the present $48 per barrel this week, it makes you wonder what controls the price of gasoline. The simple answer is speculation. Speculation is when one purchases or sells stocks in the hopes that the price will go either up or down. With oil prices, we have been carefully taught that the price will go up when there is a lack of resources and will go down when there is too much product. This is total BS and that has been for more than 10 years. When the price of oil started going down this summer, there was no explanation for this which is rightly so because nobody really knew why the prices were going down. But, now that the prices have continued to dip, the oil companies have taken to the media and have tried to push the idea that somehow we are producing way too much energy and that all of a sudden the whole world is not using as much energy as six months ago.

This, of course, is not the case. There is no evidence that there is a global economic slowdown. China, the largest country in the world, continues to grow exponentially with an incredible increase in GDP at 8%, and China continues to build highways and freeways all throughout the countryside and is selling thousands of new cars every day.The United States is also in a boom phase with an increase of GDP of 5% with an average of quarter of a million new jobs being created every month. Obviously there is no economic slowdown.

What about there being an actual oil glut? If that were true then all of our reserve tanks would be full, but they are not nearly even close to maximum. If we were truly in oil glut situation, why would we need to prove more energy projects such as the Keystone XL pipeline? In truth, there is no oil glut either.

Below is a chart on the price of oil since 1987. The CFTC was established by Congress in 1974 specifically to prevent speculation from artificially inflating the price of commodities. Note that in 2000, CFTC  had its rules relaxed thanks to lobbying from Enron (remember them?), and since then the price of oil has skyrocketed.

oil prices

So why perpetrate this myth of supply and demand regarding oil prices? The answer: the stock market needs to preserve the image, that not just oil but all stocks are based on supply and demand. Wall Street is afraid that if the public knew the truth about the stock market that there would be a loss of faith in that institution which may compromise its status of stability. If you look at the chart – it is speculation that has driven up the price of gas since 2001 (right after they relaxed the rules on speculation on oil). The real cost of gas probably is $43 per barrel.

For more information about the CFTC and speculation see the below reference (a very short and readable article):

How Does Oil Speculation Raise Gas Prices by howstuffworks

The Stock Market

When people think of Wall Street, most people think of a TV screen with a ticker tape running across the bottom the screen and thick-necked guys wearing color-coded jackets standing in the pits hollering at each other. That scene went away back in 2007. Today, there were a few human beings working on the floor of the New York Stock Exchange and in the various Chicago exchanges, but they no longer preside over any financial market or have a privileged view inside the markets. The US stock market now  compromise giant black boxes and heavily guarded buildings in New Jersey and Chicago.

What happens inside those black boxes are fuzzy and unreliable-even an expert cannot say exactly what happens inside them or when it happens or why. When the Dow Jones makes a major shift upwards or downwards, nobody can say why. There is always some lame conjecture to explain the reason even if that makes no sense at all. The reason why nobody knows why the stock market goes up and down is that trades all are done electronically. There are no longer any middle men to make transactions. Plus, there are complex computer codes which will automatically sell or buy if a stock hits a certain level. (If you have ever noticed if a financial report comes out that a company didn’t make their arbitrary target which is set by some “Financial Expert”, their stock immediately drops, however, it might come back up the next day after the overselling that ensues.)

Another factor into not knowing why prices rise and fall is the rise of high-frequency traders. These traders make their money by exploiting faster data connections via fiberoptic or microwave transmissions of known information from one part of the country to the other. Simply using this faster data exchange, a single Wall Street bank could make profits of $20 billion per year. (Figure from the book “Flash Boys: A Wall Street Revolt” by Michael Lewis, 2014). It is amazing that billions can be made that have absolutely no social value whatsoever.

Conclusion

Price of oil and the price of stocks usually have nothing to do with traditional supply and demand. It is based on speculation by high-frequency traders as well as Wall Street banks that have maximized their ability to see trends and make trades before anybody else by using the fastest technology available. The morale of this story is don’t watch the ticker tape and try to be a day trader – you will lose your shirt – you will always be milliseconds too slow. Also, don’t believe the reasons that try to explain the ups and downs of stocks. The Stock Market is shaped by millionaires and billionaires moving around millions of stocks around the board for no forseeable reason, except they always make a good profit. The Dow Jones today closed at 17,584 (and had recently topped 18,000). It is over-valued – in reality it should be no higher than 16,250, eventually it will correct but it may take awhile. The Stock Market, like Bitcoins are based solely on the faith of the system – so, just because it is not based on supply and demand – doesn’t mean you should have no faith in the system. But, be realistic, the Stock Market is a highly complex system that even the experts don’t grasp how it all works, and don’t believe their simple explanations about the systems ups and downs.




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