Six dollar a gallon coming up?
With the greenback coming under increased pressure from Federal Reserve policies and investor appetite for more risk, there seems little direction but up for commodity prices, in particular energy and metals.
Weakness in the US currency feeds upward pressure on commodities, which are priced in dollars and thus come at a discount on the foreign markets.
One result has been a surge higher in gasoline prices to nearly $4 a gallon before the summer driving season even starts, a trend that economists say will be aggravated as demand increases and the summer storm season threatens to disrupt oil supplies.
“All we have to have is a couple badly placed hurricanes which could constrain some of the refinery output capacity in some key locations,” says Richard Hastings, strategist at Global Hunter Securities in Charlotte, N.C. “If you get weakness in the dollar concurrent with the strong driving season concurrent with the impact of one or two hurricanes in the wrong place, prices could go up in a quasi-exponential manner.”
Using a model that combines “subtle rates of change” with movements in the dollar index and commodity prices, Hastings figures the low dollar is responsible for about one-third, or $1.31, of the total gas-at-the-pump cost. Regular unleaded Wednesday was $3.84 a gallon nationwide, according to AAA.
While there’s far from unanimity about the dollar’s future course, the proportionate contribution that currency weakness makes to oil prices is clear.
…Hastings sees gasoline having “no problem” getting to $6.50 a gallon over the summer after increased demand and storm disruptions come into play.
And what is Obama doing about it? Why, he’s forcing oil companies to give up on drilling:
Shell Oil Company has announced it must scrap efforts to drill for oil this summer in the Arctic Ocean off the northern coast of Alaska. The decision comes following a ruling by the EPA’s Environmental Appeals Board to withhold critical air permits. The move has angered some in Congress and triggered a flurry of legislation aimed at stripping the EPA of its oil drilling oversight.
Shell has spent five years and nearly $4 billion dollars on plans to explore for oil in the Beaufort and Chukchi Seas. The leases alone cost $2.2 billion. Shell Vice President Pete Slaiby says obtaining similar air permits for a drilling operation in the Gulf of Mexico would take about 45 days. He’s especially frustrated over the appeal board’s suggestion that the Arctic drill would somehow be hazardous for the people who live in the area. “We think the issues were really not major,” Slaiby said, “and clearly not impactful for the communities we work in.”
The closest village to where Shell proposed to drill is Kaktovik, Alaska. It is one of the most remote places in the United States. According to the latest census, the population is 245 and nearly all of the residents are Alaska natives. The village, which is 1 square mile, sits right along the shores of the Beaufort Sea, 70 miles away from the proposed off-shore drill site.
And making the oil companies out to be the big bad guys:
if you’ve got to drive 50 miles for your job, and you can’t afford the new hybrid, so you got that old beater giving you eight miles a gallon — (laughter) — and your budget is already strained, I mean, that’s tough. But let me tell you something, we’re already making a difference.
We have increased oil production (what?), but more importantly we’ve also said to ourselves how are we going to find the kinds of alternative energy sources, the new energy sources that will reduce our dependence on foreign oil but also clean up the planet in the process. That’s something we need to invest in. (Applause.)
Because of you we used to only have 2 percent of the world’s advanced battery manufacturing in this country, a whole new industry. These are the batteries that go into these new electric cars. In five years, we’re going to have 40 percent of that market. That’s because of you, because you were able to get us in a position to make those decisions. (Applause.)
Because of you we’ve increased fuel-efficiency standards on cars that will save 1.8 billion barrels of oil. (Applause.) But we’ve got to do more. And to help pay for it, I don’t know about you but I think it’s time we eliminated the $4 billion in taxpayer subsidies that we’re giving to oil companies. (Applause.)
Now, they are making — keep in mind that the top five oil companies over the last five years, their lowest profits were $75 billion; their highest profits were $125 billion. That’s money coming directly from your pocket into theirs.
But you know what…people don’t care. They don’t care who the President believes are the bad guys, they want the price of gas to go down: (about the 30 second mark)
“Maybe President Obama will step down and let someone else takeover”
I wish lady, I wish.
Instead of allowing oil companies to get our OWN damn oil, he vilifies them and offers up idea’s like this:
Wood chips and algea?
Holy bejesus man….work to get those things made, but let us get our own damn oil NOW! Not next week, next year, or 5 years from now. Right now and watch the prices go down.
No one is saying don’t go looking for alternative sources of energy but we have a HUGE supply of oil and natural gas under our feet so let us use it dammit.
But why should he, especially when the MSM gives him a pass on this whole thing.