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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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Wed, 02/13/2013 - 10:36 | 3240119 Sudden Debt
Sudden Debt's picture

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

Wed, 02/13/2013 - 10:47 | 3240161 Killtruck
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!

</sarc>

Wed, 02/13/2013 - 11:05 | 3240215 greyghost
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?

Wed, 02/13/2013 - 11:22 | 3240261 camaro68ss
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

Wed, 02/13/2013 - 11:23 | 3240268 LawsofPhysics
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. 

Wed, 02/13/2013 - 13:47 | 3240581 Bicycle Repairman
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.

Thu, 02/14/2013 - 13:37 | 3243543 Bicycle Repairman
Bicycle Repairman's picture

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

Wed, 02/13/2013 - 10:51 | 3240175 azzhatter
azzhatter's picture

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

Wed, 02/13/2013 - 11:18 | 3240256 MFLTucson
MFLTucson's picture

No one left!

Wed, 02/13/2013 - 14:11 | 3240637 marathonman
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.

Wed, 02/13/2013 - 10:38 | 3240123 101 years and c...
101 years and counting's picture

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

Wed, 02/13/2013 - 10:39 | 3240129 Sudden Debt
Sudden Debt's picture

he already printed enough to make it irreversable

Wed, 02/13/2013 - 10:38 | 3240124 Sudden Debt
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...

Wed, 02/13/2013 - 10:38 | 3240125 Sandmann
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

Wed, 02/13/2013 - 10:46 | 3240151 scatterbrains
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.

Wed, 02/13/2013 - 10:39 | 3240128 Squid Vicious
Squid Vicious's picture

he forgot to add 50 cents just for NY state taxes

Wed, 02/13/2013 - 10:58 | 3240189 ParkAveFlasher
ParkAveFlasher's picture

+1 lmao and TRUE.

Wed, 02/13/2013 - 11:02 | 3240205 WestVillageIdiot
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.

Wed, 02/13/2013 - 10:39 | 3240130 TheLongKhan
TheLongKhan's picture

MOAR!

Wed, 02/13/2013 - 10:40 | 3240131 tango
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. 

Wed, 02/13/2013 - 10:40 | 3240134 GolfHatesMe
GolfHatesMe's picture

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

Wed, 02/13/2013 - 10:41 | 3240140 scatterbrains
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 ?

Wed, 02/13/2013 - 10:45 | 3240146 GetZeeGold
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.

Wed, 02/13/2013 - 10:46 | 3240153 LongSoupLine
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.

Wed, 02/13/2013 - 10:50 | 3240172 NoWayJose
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.

Wed, 02/13/2013 - 11:54 | 3240339 Lord Blankcheck
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.

Wed, 02/13/2013 - 11:01 | 3240203 kralizec
kralizec's picture

Fuck!

Wed, 02/13/2013 - 11:22 | 3240266 Kaiser Sousa
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.....

cheers.........

Wed, 02/13/2013 - 15:23 | 3240834 Westcoastliberal
Westcoastliberal's picture

Film at 11.

Wed, 02/13/2013 - 10:48 | 3240166 847328_3527
847328_3527's picture

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

 

Dog-gone speculators!

Wed, 02/13/2013 - 10:49 | 3240169 Sandmann
Sandmann's picture

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

http://www.fis.com/fis/worldnews/worldnews.asp?monthyear=&day=7&id=49694...

http://www.fis.com/fis/techno/newtechno.asp?l=e&id=55804&ndb=1

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

 

Wed, 02/13/2013 - 10:51 | 3240177 conspicio
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.

Wed, 02/13/2013 - 11:04 | 3240213 Central Bankster
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. 

Wed, 02/13/2013 - 11:18 | 3240258 Canadian Dirtlump
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.

Wed, 02/13/2013 - 12:24 | 3240395 Blankenstein
Blankenstein's picture

+1 

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.  

Wed, 02/13/2013 - 10:52 | 3240180 azzhatter
azzhatter's picture

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

Wed, 02/13/2013 - 12:04 | 3240357 TruthHunter
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.

Wed, 02/13/2013 - 10:57 | 3240190 mckee
mckee's picture

People are f'n morons

Wed, 02/13/2013 - 10:59 | 3240197 FunkyOldGeezer
FunkyOldGeezer's picture

Tylers: Do you actually read any of the posts you put onto Zero Hedge?

http://www.zerohedge.com/contributed/2013-02-13/brent-oil-contract-sham
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?

Wed, 02/13/2013 - 11:06 | 3240220 Central Bankster
Central Bankster's picture

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

Wed, 02/13/2013 - 11:12 | 3240241 Buckaroo Banzai
Buckaroo Banzai's picture

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

Wed, 02/13/2013 - 11:03 | 3240210 Catullus
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.

Wed, 02/13/2013 - 11:09 | 3240230 khakuda
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%. 

Wed, 02/13/2013 - 11:12 | 3240239 Vashta Nerada
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.

Wed, 02/13/2013 - 11:14 | 3240248 Buckaroo Banzai
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.

Wed, 02/13/2013 - 12:18 | 3240387 Vashta Nerada
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.

Wed, 02/13/2013 - 11:24 | 3240267 haskelslocal
haskelslocal's picture

THis article is a piece of work.

"...What cab drivers fail to understand... ...is 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.

ClownTown.

Wed, 02/13/2013 - 11:24 | 3240271 madcows
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.

Wed, 02/13/2013 - 15:19 | 3240816 Westcoastliberal
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.

Wed, 02/13/2013 - 11:25 | 3240275 Kaiser Sousa
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!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 

Wed, 02/13/2013 - 11:26 | 3240276 forwardho
forwardho's picture

Oil, like gold is priced in dollars, as dollars are worth less it will take more to buy same quantity.

However, unlike gold which can be manipulated oil is a commodity which is used.

It is not a hypothetical store of value, it is energy.

Energy use is reality.

Wed, 02/13/2013 - 11:33 | 3240298 fijisailor
fijisailor's picture

Sure. Hedge fund traders work for some banks.  Some banks own the FED.  The FED prints TP.  It's not the hedge fund traders per se that tell the FED to print money but it is certainly in their best interest since they all make a fat commission.  It's all a big circle jerk and you're not part of the club.

Wed, 02/13/2013 - 11:50 | 3240330 PicassoInActions
PicassoInActions's picture

From point A to point B there will be bunch of explanations, interpretations, opinions, tecnicality and other bs....

One thing we know it's not a suply a demand, the other thing we know is all of the above.

Why don't we jsut try for 3 month that no1 bets on oil if they don't get the delivery. Than we can talk and see if speculation is the problem. Constatnly tells us that speculation has nothing to do and does not affect, and without speculation everything would much worst and so on.....

Lets check it out than we can buy one bs over another.

 

Wed, 02/13/2013 - 12:09 | 3240360 steve from virginia
steve from virginia's picture

 

 

More inflation propaganda from ZeroHedge: what nonsense! Most of the analysis here shows ignorance of how central banks work.

 

If the central banks are 'printing money' where is this money? Before the 2008 crisis there was $800 billion in currency in circulation, there is still $800 billion in circulation.

 

"The Fed balance sheet has expanded $3 trillion," the inflationists cry. The private sector balance sheet has contracted far more than $3 trillion and there is more contraction to come. $3 trillion was not added to currency. Everyone is broke, nobody has any money! If there was inflation, people would pay $4 per gallon for gas then look forward to paying $5 then $8. Wages would be increasing along with costs because there would be more currency in circulation.

 

Any dollar 'printed' must be in someone's hands, where are the hands? The Fed/central banks offer loans taking on old loans on as collateral. There is no increase in the amounts of money in circulation, only credits on accounts at the Fed/central banks, debits on other accounts! The only way for these credits to flow toward the public is if the banks' balance sheets contract to the degree that liabilities are shrinking  ... a bank run.

 

The Fed component of fuel price is Moral Hazard for investment banks. The Fed DOES NOT create excess liquidity, it cannot. It must take in more as collateral than it lends. It MUST DO SO or it is INSTANTLY INSOLVENT and there is no lender of last resort. Central banks do not have a capital structure they are reserve banks not depository banks. 

 

Fed discount window operations (QE Etc.) do not add liquidity, there is a swap of illiquid (???) securities for other securities or credit ... not currency.

 

What makes up the money supply of modern countries is daisy-chains of cross-collateralized and unsecured loans. Adding 'money' adds to the amounts of the loans as well as adding to the loans' costs. Adding money does not create inflation it creates added potential for future deleveraging and deflation.

 

Currency is a fiscal-not a monetary good or property. Fed issue is ALWAYS credit and nothing more: the Fed IS A BANK. It makes loans, it always requires collateral in excess of the amount loaned. The Fed CANNOT offer unsecured loans only private sector banks can do so. SORRY, this is not opinion but a condition LIKE GRAVITY. Bank runs (Japan, Europe) are evidence that central banks are perceived by market to be making unsecured loans. 

 

MEANWHILE: the increase in gasoline price relates to the closure of refineries and increased cost of producing new crude. This cost and declining borrowing power of customers squeezes refiners. Midwest refiners who can buy Canadian or northern plains crude can earn a profit, the coastal refiners have margin problems and must charge high prices which results in declining sales. Rationing by price/access to credit WORKS. When it stops working rationing will be by physical shortages.

 

KEEP IN MIND shortages resulting from customers being unable to afford crude/products WILL BE PERMANENT.

 

... as in 100 million years, permanent ... suckers.

 

 

Wed, 02/13/2013 - 12:39 | 3240428 Blankenstein
Blankenstein's picture

No inflation? You must not do the grocery shopping in your home.  There has been tremendous inflation in food prices, personal products, paper products, etc. since 2008.  And not only are the prices per unit higher, the product size has been reduced. 

 

Wed, 02/13/2013 - 12:44 | 3240434 PicassoInActions
PicassoInActions's picture

you are arguing on the defention of the word "print"

WHat about money supply, M!,M2,M3...

WHile there is no need for physical dollars anymore since everything is the credit. We are paying interes not on the physical money like you referring , we are paying the interess on the debt which is created by Fed.

As for collateral - its the diff story since yesturday collateral was your house today it's just a paper or illusionarry asset. And since they are all interconnected , 1 collateral goes down and takes much more with that.

Wed, 02/13/2013 - 13:19 | 3240519 waterhorse
waterhorse's picture

"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,"

Aw, poor babies.  I couldn't give a shit if the hedgie assholes have no place to park their money.  Fuck them.

Wed, 02/13/2013 - 13:52 | 3240591 Raging Debate
Raging Debate's picture

Picasso, I did an experiment with the Bush Admin and Fed to dry up the money at the discount window for one week in 2008 which was going into oil. The rough benchmark per barrel was a 17% premium due to speculation.

Wed, 02/13/2013 - 14:52 | 3240739 mercenaryomics
mercenaryomics's picture

Haha sad but Reuters is actually reminding me of the Onion's "American Voices" section. 

Wed, 02/13/2013 - 15:02 | 3240762 Uber Vandal
Uber Vandal's picture

I like the E85 MPG/BTU adjusted price of fuel.

Too bad they do not do the same to the ethanol blended regular fuel as well.

I refuse to buy that garbage, for what I may save in spending less at the pump is made up for in less fuel economy, higher food costs, and potentially higher vehicle maintenance costs.

I also wonder how the price of Iowa farm land would react if the ethanol subsidy dried up?

http://blogs.desmoinesregister.com/dmr/index.php/2012/10/25/new-record-f...

http://www.motherjones.com/kevin-drum/2012/01/ethanol-subsidies-not-gone...

Thu, 02/14/2013 - 06:34 | 3242503 EZYJET PILOT
EZYJET PILOT's picture

This article is bullshit. Bernanke is printing money soley to bail out banks and hedge funds, they own the Fed, they tell Bernanke what to do. Another ZH disinfo piece methinks.

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