Rising Gas Prices Put Pressure on Obama Campaign & Economy

Rising Gas Prices

The recent increase in gas prices has placed a tremendous amount of pressure on the Obama administration & the 2012 Obama Campaign. Peter Goodman of The Huffington Post reports that much of the price fluctuations are due to gas speculators, and not specific administration policy. Mr Goodman writes “But the supply-and-demand story of gas prices is largely a fairy tale. Academic experts, commodity specialists and members of Congress identify one thing that the president could do immediately to alleviate pain at the pump: He could unleash a serious-minded, subpoena-wielding probe aimed at frightening the Wall Street speculators who are responsible for most of the climb in gas prices.”

Speculating in gas prices has become a very popular investment option for many firms. Gas (or Oil) speculation involves an agreement to buy a set amount of oil at a certain price. The person agreeing to buy the oil is betting that the price will rise, while the person selling the oil is betting that the actual price in the future will be lower than what they paid for it. These artificial prices have contributed to the volatility in prices paid at the pump for the last 5 to 6 years.

On March 9th, Obama orders the Oil and Gas Price Fraud Working Group to look into the rising prices. The goal of this group is to determine the factors that have caused the recent increases of the price per gallon Americans pay at the pump. Much of what his group is looking into is the effects of excessive speculation on both the short-term and long-term prices of crude oil and gas prices. Prior to March 9th, the task force was relatively dormant over the past 10 months.

Justice Department representative stated, “With the recent increase of gasoline prices, the working group is monitoring the situation, and if we find any evidence of criminal behavior or other misconduct, we will respond immediately.” According to The Boston Herald, financial speculators represent the vast majority of purchasers of oil futures contracts – around 65%. This is much higher than the historical average of these contracts.

The increased cost of oil and gas negatively impacts the US economy in a variety of ways. Not only are individuals forced to allocate more income to purchasing gas, but increased transportation costs also raise the prices of everyday goods. Most goods transported in the US are shipped by truck, and trucking companies pass along the higher costs of operation to manufacturers who then pass the costs on to consumers. Trucking jobs for owner operators also have pressure on them due to the rising gas prices by making harder to make ends meet.

In addition to the economy feeling the pressure the 2012 Obama Campaign is feeling the pressure from gas prices going up. Republicans are pushing new initiatives in Congress while Obama still trying to promote his “all-of-the-above” energy plan. According to USA Today President Obama ripped into Republicans mocking their “three-point plans for $2 gas” saying, “Why not $2.40? Why not $2.10?” It’s apparent the campaign trails are heating up and taking on the economy and rising gas prices all in one package.

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1 Comment on "Rising Gas Prices Put Pressure on Obama Campaign & Economy"

  1. James Hovland | March 15, 2012 at 7:07 pm | Reply

    The election rules for 2012 are very simple and easy to understand. If gas prices fall and/or the economy does well, Republicans and their allies lose. If gas prices rise and the economy suffers, Obama may lose.

    Considering that both production and inventories are up and demand is down, it’s probably a good idea to at least entertain the idea that speculation might be part of the problem. Republicans may disagree, but since they have a vested interest in keeping gas prices high at least until November, we’ll just ignore their opinion for now and talk about it anyway.

    Regardless of whether speculative traders cause prices to rise or not, every dime of net profit the collective herd of speculative traders, investment banks, etc, takes from the oil markets, costs us at the pump. The exact amount they take is the exact amount they cost us. That’s a fact we don’t need to speculate about. Just crunch the numbers.

    We can’t just blame the traders though. Speculation in the financial news is what actually drives the markets. If you’re looking for a positive correlation between speculation and rising prices, that’s where you’ll find it. The speculative trader is just a tool, one that the GOP, the right-wing news and Wall Street have all worked very hard to keep in place. All while trying to hang the issue of rising gas prices around Obama’s neck.

    If the GOP doesn’t think this is going to come back to bite them, they’re even more ignorant than I had previously thought. Specifically, ignorant about the era in which we live.

    We have solutions. Regulating the markets is one. The government’s on it. We already have new regulations aimed at limiting excessive speculation that should help, we’re just waiting for them to be enforced. Well, kind of. We’re also fighting Wall Street in court and the GOP in Congress over their repeated attempts to block these regulations. For some reason, they don’t want speculative traders to have to change their investment strategies or play by the rules.

    There are other options. Our friends in the media might want to make good use of their connection power and share this among their peers. More often than not, prices rise on speculation that prices will rise. However, sometimes prices fall on speculation that prices will fall. The key is, it’s more about what the so-called experts and analysts in the financial news decide to focus on than anything else. Perhaps rather than waiting for someone to get it their head that the government should do something about them too, they could choose the small government option and correct the problem themselves. Or we can keep an eye out for those who are always so eager to explain why they’re bullish on oil and skin and salt them as needed. Perhaps with enough attention exposing them for what they are, they’ll see the error of their ways, get tired of being labeled as traitors and start speculating their way out of the hole they’re currently digging themselves into.

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