Record February Gas Prices Mean It's Time To Blame The Hedge Funds Again

Tyler Durden's picture

As the AAA chart below shows, the gasoline price is now higher than it was a year ago, and has been for the past two weeks, which also automatically means it is the highest it has even been in history (naturally, the implications of this record high gasoline tax on the cash-strapped US consumer are painfully clear).

So with gas prices once again "an issue", it is time to trot out the worn out scapegoating usual suspects - those evil, evil hedge funds, whom everyone is perfectly happy to blame. Or at least pest exterminators and cab drivers. From Reuters:

At a filling station in Midtown New York last week, several people were prepared to blame traders on Wall Street as they paid more than $4 per gallon to fill up their cars.


"It really is not supply and demand. It's definitely speculation," said John Keegan, an exterminator with pest control company Terminate Control, who was filling up his van. A cab driver said he was convinced the price would be just $1 a gallon if the government "stopped Wall Street trading oil."

Of course, what the exterminator and cab driver fail to understand, or just are happy to ignore, is that the same hedge funds that merely allocate the Fed's virtually "open-ended" excess liquidity into stocks, which are now beyond furiously overvalued by any benchmark, and which as we explained over the weekend are trading at a higher forward P/E multiple now than they were in 2007, have increasingly few choices where to park their money, and even with the threat of the Margin Hiker in Chief sending CME margins to 100% across the energy space, sooner or later, those $85 billion in fresh monthly liquidity will go into Brent, WTI, and of course, gas.

However, while everyone is happy when stocks surge courtesy of what little 401(k)'s are left, , very few benefit from soaring gas prices. Which is why the exact same mechanic that has sent the Russell 2000 to all time highs, is responsible for a record high gas price for this day in February. But apparently the logic is too complex, and blaming Bernanke for the same outcome as surging stocks, is a little too convoluted for most. Or at least for one pest exterminator and cab driver.

Ironically, the hedge fund against these accusations makes far more sense, than the blind and idiotic scapegoating of Bernanke's ruinous policies on those who merely serve as a the liquidity conduit implementing Bernanke's policies:

Hedge funds say they are just an easy target and blaming them ignores global reasons for higher oil prices and the benefits they have brought to the U.S. economy.


"Consumers shouldn't complain," said a London-based manager of a commodity hedge fund who declined to be named. "Sustained higher prices led to a massive increase in U.S. production and decreased U.S. demand, which is helping the economy in a big way."

Yet none of this matters to the Micro Manager in Chief who wants his Dow 32,000 cake as well as eating $0.00 premium too.

The way things are going, Americans could spend more on gasoline this year than ever before. The average U.S. household is already spending nearly $3,000 a year on gasoline expenditures, according to a recent government estimate.


That could become a political hot potato for President Barack Obama's administration ahead of the summer driving season, which officially starts on the Memorial Day holiday weekend at the end of May.


Plans by U.S. regulators to curb the number of oil contracts hedge funds can hold are currently on appeal. A judge ruled last year they had failed to demonstrate position limits are necessary because there was not enough evidence linking speculation to big price swings.


"Motorists are paying more for gasoline at this time of year than they've ever paid," said AAA spokesman Michael Green. The average price could rise as high as $3.73 a gallon in May of this year, the U.S. Energy Information Administration said on Tuesday.

And while it was out of control, runaway Brent and gasoline that forced the Lehman collapse in 2008, and with it set off the biggest deflationary episode in 80 years, this time the fuse is far shorter, and will likely come out of China, which when it comes back from holiday and preps for the spring and summer "growth" season, will realize just how hot all the inbound money truly is, send Chinese inflation spiking and just as in the spring of 2011, spoil the party for the "developed world's" central banks once the assorted riots start breaking out as they did in the late spring of 2011, leading to the ECB hike, and various other immediate liquidity tightening processes. Because this will not be different.

But in the meantime, let's all cast the blame for soaring gas prices with the hedge funds, and not where it truly resides: Ben Bernanke, and an administration whose only goal is to push the stock market higher irrelevant of how the underlying economy is actually doing.

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Sudden Debt's picture

Can't we just blame somebody we can invade and kill?

Killtruck's picture

It's those damn evil speculators driving up the cost of Doritos and Pabst Blue Ribbon! We should have price controls, dammit!


greyghost's picture

so it is the speculators after all. why would i give a shit where their money comes from? comes direct from the fed or some trillionaire doen't matter. the one commodity that every country needs to move forward is allow free movement up up. fuck these same asses then step on the neck of gold and silver. makes complete sense to me. does make wonder where the price of oil would be without all the speculators?

QUE: all speculators step forward to defend yourselves and tell us what a wonderful service you provide

QUESTION: how did the world ever get by without you all these centuries?

camaro68ss's picture

We have drones for that sudden debt.


just move the joystick around, throw in a hot pocket in the ol microwave and fire bomb a village at the same time.

 Only in America

LawsofPhysics's picture

The world got by just fucking fine.  Make margins 100% on all commodities motherfucker.  Then who will these politcal puppets blame?  Stupid fucking sheep. 

Bicycle Repairman's picture

Anyone in the commodities market who won't be standing for delivery should be excluded from the markets.  They add nothing, but trouble.  They want to bet, go to Vegas.

Bicycle Repairman's picture

I got some down arrows and I'd like to address them: fuck you, you fucking parasites.

azzhatter's picture

If you would all just buy a Chevy Volt this wouldn't be an issue. Except for fire

marathonman's picture

So when WTI is trading at a $30/bbl discount to Brent Crude, mid-continent and gulf coast refiners with good access to WTI are making a killing selling diesel, kero, jetfuel, and gasoline for world market export prices.  Free trade can be a bitch.

101 years and counting's picture

tell ben to stop printing money and lets see where gas/oil prices go.

Sudden Debt's picture

he already printed enough to make it irreversable

Sudden Debt's picture

The way things are going, Americans could spend more on gasoline this year than ever before

there goes the iTunes monthly budget...

Sandmann's picture

Time to make Physical Delivery a requirement and to reduce transactions in Trading. After all the Velocity of Circulation on Money is falling but the Velocity of Derivative Transactions seems to be very high

scatterbrains's picture

I agree lets seal off oozing fiat from leaking into the energy markets so we can watch the price of gold pop to 3K faster than the time it takes to light a dollar bill on fire.

Squid Vicious's picture

he forgot to add 50 cents just for NY state taxes

WestVillageIdiot's picture

He forgot to add that he is a filthy animal that was pissing and moaning in early 2009 because nobody wanted to ride in his cab.  He then joined the chorus of, "somebody do something" and The Fed and D.C. obliged.  This is where it leads.

Maybe the animals in yellow cabs could learn that customer service is more than slowing down so the passenger can jump out.

tango's picture

The crazy weaving refining mandates must cost millions.  Within a 30 mile radius of our home, gas is $3.44, $3.34 or $3.24.  This differential is a permanent fixture.  I live near a city of over a million and the 20 cents in gas costs due to refining rules adds up to tens of millions each year.  I don't get it. 

GolfHatesMe's picture

Weak ass dollar and Endowments without disclosure requirements.  Harvard's back baby

scatterbrains's picture

What happens to XOM when Oblahblah tries to  cap refined product prices while every country with oil demands a price for their natural resource inline with the amount of green toilet paper BB prints ? Plus can Oblahblah hurry up and slap a carbon tax on gasoline please so we can blow this bitch up allready ?

GetZeeGold's picture



What can we do? It's not like we can drill the Gulf of Mexico for oil. Thanks to those stupid Brits.

LongSoupLine's picture

That's like fucking blaming the fucking sewer treatment plant for smelling like fucking shit.


Start with fucking Congress and crack their fucking heads open, then move to the fucking Fed and end their illegal fucking ponzi operation.  After that, stick a huge hot fucking pipe down the fucking throat of regulators, and finally feet first into a fucking slow rusty fucking woodchipper for TBTF's and fucking hedgies.  fuckers.

NoWayJose's picture

Stole my comment - the Wall Street funded Congress is what empowers Bernanke to do what he is doing.  But the article is great at linking gasoline prices back to the Fed - which is something the MSM and talking heads ignore.

Lord Blankcheck's picture

Wall Street?It's the finacial industry banks i.e. the primary dealers("The Untouchables")They OWN the Government basically.

They love it when Wall St. takes the blame.

Kaiser Sousa's picture

hey soup...your getting a little soft on us man...

only 13 usuages of "fucking"...

you used to be beautiful man.....


847328_3527's picture

I notice pelosi yelling at speculators the other day when NFLX shot up 40%.


Dog-gone speculators!

Sandmann's picture

Let's talk about Unregulated Pools of Capital and Horsemeat then.......Food Adulteration as a means of servicing Debt.

Yet Highbridge IS JP Morgan and it is deeply into Findus the Rodeo Food Groupwhere Cowboys ride steers and eat their horses


conspicio's picture

So wait a second...the hedge funds aren't betting that gas prices will go higher except that they are. SO teh cab driver is right and the rest of the narrative is to blame The Bernank, which is correctly posited. Dunno why we needed the cab driving hedge fund quote, then. All roads lead to Ben. Just get to the fucking tip of the spear already.

Central Bankster's picture

The point is that the layman doesn't understand where inflation comes from and it is why the politicians get away with blaming free markets instead of taking responsibility for spending/printing. 

Canadian Dirtlump's picture

Listening to joe bag of donuts blame the speculator is the equivalent of what Ron Paul has described happens with the West's dogshit foreign policy - blowback.


Most people don't understand the unintended consequences of bad policy, and cannot put it in a proper framework because they don't have all the pieces put together. The same way Iran are bloodthrity terrorists, speculators exist to put the screws to the average joe.


Economic blowback. Thanks Central planners.

Blankenstein's picture


It is not just that they don't have all the pieces. Many are unwilling to do any research because:


1) It would interrupt their all-consuming choice of entertainment (FB, NFL, Honey Boo, etc.)

2) They wouldn't want anything (like being informed) to put in question their blue team, red team fantasies or tarnish their idolization of their favorite politician.  

azzhatter's picture

When you get that raise to $9.00 per hour it won't hurt so much. Thank you Dear Leader

TruthHunter's picture

If they get $9 minimum wage, will they give us a flat tax? If they drop the

earned income credit it would be about break even.

mckee's picture

People are f'n morons

FunkyOldGeezer's picture

Tylers: Do you actually read any of the posts you put onto Zero Hedge?
This would suggest the cab driver and pest exterminator have got it partially right as Brent and WTIC don't move completely independantly of each other.

So where exactly does Zero Hedge Stand on this?

Central Bankster's picture

See the part where Tyler is not the author of the article you linked? 

Buckaroo Banzai's picture

"Manipulated prices" does not automatically translate to "higher prices." For example, consider the gold market.

Catullus's picture

$1/gallon with $.70/gallon in taxes. Taxes that are supposed to go toward road construction. But WE NEED MOAR MONEY FOR BRIDGES to boost our economy and protect the middle class.

This country is a fucking joke.

khakuda's picture

Yellin and Bernanke are going to go down as the idiots who destroyed the value of the world's reserve currency and plunged the markets into chaos all because they wanted to lower unemployment by a mere 1%. 

Vashta Nerada's picture

It just proves that if you tell a lie often enough, some people will believe it.  Ban speculating, and watch prices shift 50 cents every week.

Buckaroo Banzai's picture

In honest markets, speculation aids price discovery. Does that imply that in dishonest markets, speculation hinders price discovery? I'm not so sure of that.

Vashta Nerada's picture

I agree.  Assuming no conspiracy of thousands, and real money on the table, speculation should always aid price discovery, unless the vast majority are making a very foolish bet.

haskelslocal's picture

THis article is a piece of work.

"...What cab drivers fail to understand... that hedge funds have increasingly few choices where to park their money."

Oh. So it's not their fault prices are increasing, because they have nowhere else to speculate.

Talk about an article that shoots itself in the foot.


madcows's picture

So, why are commodities traded like stocks?  And, what is the supposed benefit of commodities "exchanges"?

I see no reason why GS or JPM et al should have the ability to route hot money into manufacturing supplies.  Their ability to immediately flash billions into these markets severely impacts the functions of the system.  How the hell can gas be worth $40 a barrel one day, and $130 another day?  It's fucking ludicrous.

Yes, Bernanke's inflationary policies are behind the hedgies' latest commidities allocations, but why are they allowed to be so influential in those markets in the first place?  The hedgies lobbied to be in those markets b/c it's just another way for them to make money...

Blame Hedgefunds for being greedy and damaging, Blame Congress for being complicit, and Blame Bernanke for being immoral.

Westcoastliberal's picture

Agreed Madcows, you get a gold star.  Limit commodity trading to those with skin in the game.  Ban fuckers like this squid from playing.  I'll bet prices come down real quick.  And if we don't do this soon we're fucked.

Kaiser Sousa's picture

silly question...

could rising cost have anything to do with - 

wait for it....wait for it COST PUSH INFLATION?????????

fucking 99% of dumb ass americans still dont have a fucking clue....

theres a reason why the inflation calculators all begin with the starting date of 1914!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!