Ron Paul for President 2012 San Diego County Message Board › Why Gas Prices Rise As Demand Falls, Oil Inventories Rise

Why Gas Prices Rise As Demand Falls, Oil Inventories Rise

john_08152002
john_08152002
San Diego, CA
Post #: 456
Self-inflicted Wounds

The US hasn't allowed a new refinery to be built for about 20 years. That constricts the ability of the US to produce gasoline. This ties in with the other artificial variables mentioned in the post a little higher on this page. So, the average Taxpayer gets hit with higher expenses along with higher taxes despite falling gasoline demand.

When we see this many contradictory signals in a market the culprit is almost always Federal Government "help" in the markets.

To compound this avoidable problem the politicians are now talking about opening the Strategic Petroleum Reserve. That will release more oil in the US but as we saw above there is plenty of oil already ----- we lack refined gasoline.

If this weren't so sad and stupid it would be a comedy.


Gulf Oil CEO: Gasoline Prices to Easily Hit $4.50 Despite Weak Demand



Tuesday, 28 Feb 2012 09:00 AM

By Forrest Jones. News Max


Gasoline prices will continue climbing thanks to East Coast refinery closures and are set to approach $4.50 despite weak demand, says Joe Petrowski, CEO of Gulf Oil.

"I think prices are going to go much higher, especially on the East Coast, where we have lost 50 percent of our refining capacity in the last year between the closure of the St. Croix refinery, three refineries in Philadelphia and some bankruptcies in Europe
, so I think we are probably go towards the $4.50 range."

The St. Croix Hovensa refinery, operated by Hess and Venezuelan state-owned oil company PDVSA, closed down recently and crimped supply of refined products to eastern U.S. states.

Meanwhile high gasoline prices are prompting consumers to buy less fuel, which cuts into demand from refineries and forces them to close or cut capacity.

Less refineries in operation cuts overall supply and pushes up gasoline prices higher as part of a vicious circle.

Consumers, it appears, are already buying less these days.


"What's extraordinary is demand is exceedingly weak. Heating oil demand — mainly because of the winter — is down 14 percent and driving is less than it was in 2005."

Nationwide, gasoline prices have been climbing and while some parts along the East Coast have been stable.

Expect price hikes to resume shortly in places where they haven't already.

"Retail prices always lag wholesale, both up and down. They are sticky," Petrowski says.

Most gasoline retailers in the United States are run by small business owners who operate about five stations or less, and their profits come from items sold in the gas-station convenience stores like food and groceries.

Those owners may be holding off on raising gasoline prices at the pump to entice drivers into make purchases inside the convenience stores, which may account for the spotty nationwide increases.

"For example at our Cumberland Farms retail store, if a customer comes in and spends the average ticket of $10, the margin is three times what we make if you come to the pump," Petrowski says.

"Legend has it they like to make money at the pump, but the reality is they use sometimes gasoline as a loss leader to bring you inside the store."

Gasoline prices are averaging just $3.70 a gallon nationwide, according to AAA data, although one key Republican Senator says it's too early to tap the Strategic Petroleum Reserve.

"When prices increase at the pump, and politicians get concerned about the repercussions of that, they look for a quick fix," says Alaska's Lisa Murkowski, the top Republican on the Senate Energy Committee, according to Reuters.


Leigh S.
eleighs
San Diego, CA
Post #: 452
John,

I think this Forbes article explains pretty well why gas prices seem to be rising, because they aren't...the dollar is falling. Which makes it the Fed's fault.

http://www.forbes.com...­
john_08152002
john_08152002
San Diego, CA
Post #: 460
Leigh --- the US Dollar is up almost 10% since last September. It was up again today. The decline and probable demise of the Euro only serves to enhance the international value of the US Dollar as the worlds' reserve currency.

IF you go to Bigcharts.com and get the DXY chart you will see the trend. Many commodities are also down from their peaks over the last 12 months. Cattle prices are one exception.

US Oil prices are increased by gouging on the NYMEX commodity exchange (as explained in another thread here, Presidency Secure From Bailout Banksters) and the lack of new refineries in the US over the last 20 years. If both of these problems were corrected prices would have a significant decline.
Leigh S.
eleighs
San Diego, CA
Post #: 454
John,

That's interesting. I have a precious metals IRA, and the value of the various metals is up more than in quite awhile.

The insiders manipulate gold but they can't do the same to silver because the billion chinese use it as their main medium of exchange. So if the dollar is up and my commodities are up, that would be impossible. I suggest that someone isn't presenting the truth about the dollar. Like the government's unemployment figures that ignore those who have dropped out of job hunting and those who work part time.

While I'm not a fan of Forbes, I still believe their article is valid. If the dollar is up, and prices are up all over the place from inflation that is tied to the dollar, then what gives?
john_08152002
john_08152002
San Diego, CA
Post #: 463
John,

That's interesting. I have a precious metals IRA, and the value of the various metals is up more than in quite awhile.

Since April of last year Gold and Silver have risen and fallen. IF you check your IRA statements from April to May 2011 you should see a severe decline in both metals, more so for silver than gold. Silver rose to about $49 per ounce in April then crashed below $30. Gold later rose to about $1,908 per ounce then fell to about $1,550. As I write Silver is at $35.43 and Gold is $1,720, both are well below the highs of last year but silver more so.

The insiders manipulate gold but they can't do the same to silver because the billion chinese use it as their main medium of exchange.


The Silver market is more complicated than that. As with Oil, Silver is manipulated in both New York and especially in London. These two are the most significant in setting the price of Silver. It's an interesting historical fact that India and China have been buying Silver from Europe and the Americas since the time of Adam Smith in the middle 1700s. In his "Wealth of Nations" Smith dedicates about a chapter to the India and China Silver trade.

The Silver market is smaller in dollar terms than the Gold market. Silver is highly subject to manipulation --- sorry to be the bearer of bad news. There are active investor groups such as GATA (Gold Anti Trust Action) committee which regularly raise the question about the exact amount of metal (Gold and Silver) stored in the London Exchange. GATA estimates that the outstanding contract ounces of Silver in the Exchange far exceed the number of ounces held in the London vaults.

This is exactly the same problem we have in the American Oil market on the NYMEX (New York Mercantile Exchange).

Shorting is the primary method for depressing both the Silver and Gold but is most used with Silver because it is not a bank reserve as is Gold. Naked shorting is illegal but certain brokers in the London and NY Silver exchanges are given a blind eye when doing it. No one else can do it, only the large well connected players such as JP Morgan, Goldman-Sachs (darn those are the same names as in the US Oil markets) and others. JP Morgan (a NY Investment Bank) is the big player in the Silver market.

Naked shorting allows a broker to sell something he doesn't own. Covered shorting allows a broker to only sell something he DOES own. So the big well connected boys can Naked Short and the little honest players can only Covered Short.

It works like this: Suppose I'm a JP Morgan broker and I want to depress the price of Silver in London. I begin to write a lot of Naked Shorts Silver Contracts. I don't have the Silver I'm selling but because I represent the big famous JP Morgan New York Investment Bank the London Exchange allows me.

A Short is a bet that the price of Silver (or any commodity) will fall. Another broker on the London Exchange will buy my Naked Short. He doesn't get Silver at that time but he does receive a written promise from JP Morgan to provide Silver at some point in the future --- usually a few months.

The key is the price of the Naked Short. I can set the price at any point I want. I can set the delivery date too --- 1 month, 2 months, 3 months or longer into the future. If the spot price of Silver is $33 then I can sell a Naked Short for $32. When the other broker buys the Short the effective inventory (not the real inventory) of Silver on the exchange increases by the 1,000 ounces in my Naked Short. That buying broker is free to re-sell my Naked Short on the exchange. No one knows I'm Naked except me and the Exchange so my Naked Short looks as good as the Exchange required Covered Short.

I can write Naked Shorts without limit because I don't have to have any Silver in possession. All the other Short and Long contracts must have Silver in possession. No one else can write Naked contracts. As my big Naked Short contracts circulate in the Exchange the price of the Covered Contracts begins to fall in order to match my Naked Contract price.

Let's say the Silver spot price is $33/ounce. Some broker who thinks Silver prices will rise is looking to lock in a profit by buying today. Imagine you're a Covered Short seller with a price of $33 then you see several big shorts come on the market for $32 --- what would you do ---- everyone is going to buy the $32 Naked Contract (because if prices rise my Contract gives $1 more of profit than yours) before buying your $33 contract --- even though it is a Covered Contract, but no one knows I'm Naked, they just see JP Morgan Company.

So you are forced to match my Naked Short price with your Covered Short price. You lower your price from $33 to $32.

Then tomorrow I'll dump a lot of Naked Shorts for $31, then $30 then $29, I'm JP Morgan and can play this game forever. The International Price of Silver falls across the world.


So if the dollar is up and my commodities are up, that would be impossible.

No, there are times when the US Dollar and the Precious Metals both rise at the same time. It seems contradictory and many people believe as you do but the historical market prices show this isn't always true, though it is probably true more times than not.


I suggest that someone isn't presenting the truth about the dollar.

The economic and political forces on the US Dollar are different than those on Silver and Gold. Many times these forces are congruent but sometimes they aren't. I believe there have been such odd incidents in the last week of trading.


Like the government's unemployment figures that ignore those who have dropped out of job hunting and those who work part time.

While I'm not a fan of Forbes, I still believe their article is valid. If the dollar is up, and prices are up all over the place from inflation that is tied to the dollar, then what gives?

If you pick the same time frame for judging the US Dollar and the other commodities you will see the real trend. For example a few nights ago I did this. I looked at the Dollar and several Commodities over the last 12 months. The Dollar has risen, but Cotton, Wheat, Corn, Hogs, Copper (I believe I included Oil in the sample too) and a few others have fallen. Cattle as I mentioned earlier was the one exception, Beef prices have risen.

There is another common misconception. Remember this little rule. "Inflation always causes the general price levels to rise, BUT not all price rises result from Inflation". There are two other elements that can cause prices to rise: a decrease in supply or an increase in demand.

So there are 3 ways that prices can rise but most people, including some economists and all MSM journalists think inflation is the only cause.

Inflation causes ALL prices to rise, but supply and demand will only affect certain products or services. For example a shortage of used cars will cause the price to rise for used cars but not steaks. Inflation will cause BOTH used cars and steaks to rise in price.

Price increases can be complex, partly due to inflation and partly due to supply and demand.

Of course the opposite applies to Deflation, Supply and Demand when prices fall.

Now you know more about economics than 99% of the people in the US.


Leigh S.
eleighs
San Diego, CA
Post #: 457
In spite of all that, I believe in precisous metals over the dollar any day.
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