The Bears Explain The Price Of Gas (Special GOP Primary Edition)

Tyler Durden's picture

In their own inimitable manner, the two bears are back to take on gas prices. Dismissing the higher demand thesis, concerns of the lack of supply, instability in the Middle East, and of course speculators (the same ones who were blamed for financial stocks' deterioration), our favorite speakers-of-the-truth point to what is the only relevant factor - the falling dollar. The Bernank once again stars for his schizophrenic perspective of asset price rises. Enjoy.

 

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spiral_eyes's picture

But I though Obama had saved us all by cutting U.S. reliance on foreign oil!!

Oh well, I guess not. 

NotApplicable's picture

threadjack

Somebody (ZHer?) took the Obama pic that Tyler always uses and shopped him up as Gilligan. Enjoy!

http://4.bp.blogspot.com/_yeiwBjhM8UU/S5xhTXs49MI/AAAAAAAAC7w/91XzvGocf4...

/threadjack

BigJim's picture

I've been thinking about this 'increased gas prices are inflationary' meme.

Assuming the money from the rise in prices goes mainly to the countries of export (Saudi, Kuwait, etc), and they turn around and buy increasing amounts of US Treasuries, this could actually be deflationary, if the Fed needs to print less to fund the deficit as a result.

Think of it in this way - if the US government slapped a tax on gasoline imports, and hence reduced the need for the Fed to monetise debt, there would be price inflation, but less monetary inflation, correct? Same thing.

Obviously, if the oil exporters aren't buying more USTs, it won't work this way.

Comments welcome....

nope-1004's picture

More USD in existence = less value per.  Very simple, actually.  Buying UST's with any amount of printed money only extends the game in the short term, which is what we are living through now.  However, as velocity increases (and it has to if "growth" is to take hold), then inflationary pressures could be too hard to control.

At least the bears aren't now claiming some "inside information".  LOL.

 

pupton's picture

But I thought Newt Gingrich was going to lower the price of gasoline to $2.50 a gallon???  If I were to believe this...well that might mean that Newt Gringrich is bullshitting us and fully talking out his ass to get a quick bumper sticker slogan.  He wouldn't do that, would he?  <sarc>

Flakmeister's picture

Son, no need for the sarc flag....

Van Halen's picture

No need to waste time bitching about Newt Gingrich when Barack Hussein Obama is on a wild path of destruction! HE'S the one you should be concentrating on right now.

Seer's picture

And the irony is that a bunch of "conservatives" who lap up His "smaller gov BS" are all too happy to elect Him and have Him MAKE The govt do MORE.

A while back I provided simple math that a two-year-old could use to discredit his $2.50/gal and 2 million bbl/day increase in production.  As Ron Paul and Dr. Albert Bartlett can attest to, people just don't seem able to understand simple math any more.

As we speak, however, Mittens is pretty much tossing out the same, only he's not giving numbers: the polished marketers KNOW that simple "hope" and "change" trumps numbers (whether real or not).  Yeah, Mr. I KNOW BUSINESS Mittens is going to help America be strong again by ensuring that the major oil producers can pump oil out of the US faster.  Maybe we needn't be so cynical, maybe we can make a wager with this guy: we'll elect him, and if he turns out to be wrong we get to eat his children (the disaster might be prolonged until after his natural death, which is how the oligarchs play it- pass off the reigns to their off-spring and it's repeat performance time; by reaching into his genetic future we can wager OUR genetic futures- sounds fair).

BigJim's picture

 More USD in existence = less value per.  Very simple, actually.  Buying UST's with any amount of printed money only extends the game in the short term...

Sure. But my point was that gasoline (and, I presume, crude) is largely paid for by not-freshly-printed money. Therefore, if more of this not-freshly-printed money is being recycled into Treasuries (by the crude oil exporters) so that less freshly-printed money is printed to buy Treasuries, there would be a deflationary effect (a la my tax analogy), at least, in terms of monetary inflation.

Flakmeister's picture

Why don't you compute the flow of funds for the real exporters of oil to the US....

The US has more refining capacity than it needs, therefore as a result, those refiners able to deal with the increasingly sulphurous sludge that passes for oil on the market can exploit the higher crack spreads since the refined goods  are priced off of Brent.... The result of this is that the US exports more refined products than it imports while still taking a lions share of the worlds crude oil exports...

So a import gas tax would not do much...

And I posted this a while back, the oil exporters hold a relatively small fraction of outstanding US treasuries, the big dogs are China, Japan....

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

trav7777's picture

Flak, the gulf recycles through the caribbean and UK

Flakmeister's picture

True.... esp. the Caribb... but that still makes OPEC et al.  relatively minor players....

Back of the envelope estimate gives OPEC+CARIB+UK about 20% of the top 10 holders or about 10% of total foriegn holdings.... 

What is more interesting to me is the fraction of oil imports paid by the coupon (i.e. a captive source of US dollars) that China, Japan, Taiwan currently enjoy....

DaveyJones's picture

China buys Treasuries and oil and they're buying more and more of one and less and less of another. Both factors in the  game

merizobeach's picture

"What is more interesting to me is the fraction of oil imports paid by the coupon (i.e. a captive source of US dollars) that China, Japan, Taiwan currently enjoy...."

 

Please tell me more..

Flakmeister's picture

Japan has rought 1T of treasuries at an average of ~3.8% coupon, that's $38 billion p.a. or ~$100 million per day, that currently translates to ~800,000 barrels per day or ~20% of imports payed by interest..., 

Now go through and do this for oil importers and you will see that the foreign held US treasury is generating dollars to purchase ~8% of the worlds oil that is freely traded....

BigJim's picture

 So a import gas tax would not do much...

I wasn't suggesting there should be an import gas tax, I was using it as an analogy to explain how increased oil prices might actually have (at least, monetarily) a deflationary effect if the additional USDs were being recycled into buying USTs, thereby reducing the need for the Fed to monetize the deficit (ie, just as an increase in taxes would, in theory, reduce the need to monetize our debt).

Most oil is paid for in USDs... most oil is consumed by nonUSD creators, so they need to buy more USDs to purchase the more expensive oil (though I suppose holders of large amounts of USD reserves, might just draw on those reserves directly). This pushes up the price of USDs (relative to other currencies), yes, but then some percentage of those dollars are then sold by the exporters in exchange for USTs, reducing yields, thereby reducing pressure on The Bernank to hit the 'print' button.

I've had too many beers, so I'm not even going to attempt to work out even some of the ramifications of all this. But I'd be jolly grateful if some of my more ruminatively-unchallenged fellow ZHers would take this thesis a bit further...

Seer's picture

I'm not sure how, but I think I follow your reasoning (and, really, I tended to think the "other" way).

"Most oil is paid for in USDs'

What IF that "Most" is decreasing?  Seems that there's increasing pressure to drop the USD: (Iraq - fail; Libya - fail) Iran, China, Russia, Japan (I thought that they'd gotten mixed up in this a bit).

I'm thinking that all sorts of things are being off-set by lots of other things.  The markets, as hammered as they are, are still fairly dynamic.

I personally have never fixated on price, as I figure that the "winners" will always play the other side of the bet and force it their way: side with high oil, then when enough suckers are on board they push the low oil price button as they kill employment and, thus, demand.  At some point, when very few have chips to play, it'll be over: I'm seeing that govt has only been playing the part of the "straight guy," as it and business are just one act; no more middleman left to actually make the game look like there are multiple players.

TruthInSunshine's picture

An instant 'Bears' classic.

Even tards of the world can now understand.

resurger's picture

let the sheeps feed on hope TIS...

 

eatthebanksters's picture

I'm a 'Tard' and the bears are awesome....Bill O'Reilly needs to watch this so he can figure out what the fuck he is talking about.  I wish some MSM news would have the balls to play this....maybe Dylan Ratigan?

kridkrid's picture

Bill O'Reilly is simply doing his job.  Divide and conquer.  The purpose of the MSM to 1. obfuscate and 2. pit have-nots against each other.

His job isn't to know what he's talking about... anyone's guess as to whether or not he does.

resurger's picture

+1

Bill O'Reilly, his job is to rile up people!

why you have mentioned him krid?

FUCK!

Bitchin Bear's picture

Naw man - he's just looking out for the folks don'cha know? 

Flakmeister's picture

The only way he is looking out for folks is if they could take his bullshit and fertilize the south forty....

ken4aub's picture

I agree 100%. If O'Reilly can't understand the BEARS simple logic.......he's a PINHEAD!!

tmosley's picture

The peak oilers still don't get it.

Which puts them where, exactly, in relation to tards?

piliage's picture

Judging by some of the comments on this thread, you might be wrong on your second point. The normal tards' ability to ignore facts is a bottomless well, the depths of which have yet to be fully plumbed.

Fedaykinx's picture

there's lots of tards out there living great lives.

 

my wife used to be tarded, now she's a pilot.

Sunshine n Lollipops's picture

I was once a total tard. Then I got me some ZH. Now I are smart.

Seer's picture

As in "airplane" pilot?  WOW, how NOT future!  People are finding it more difficult to move around in automobiles; the trend is pretty clear...

overbet's picture

100 miles to the gallon possible back in the 30s

 

http://www.gasholemovie.com/

resurger's picture

Shale gas in the United States is rapidly increasing as a source of natural gas. Led by new applications of hydraulic fracturing technology and horizontal drilling, development of new sources of shale gas has offset declines in production from conventional gas reservoirs, and has led to major increases in reserves of US natural gas. Largely due to shale gas discoveries, estimated reserves of natural gas in the United States in 2008 were 35% higher than in 2006.[1]


Seer's picture

And, for those who just accept this reference, here is the source:

  1. ^ Jad Mouawad, "Estimate places natural gas reserves 35% higher,", New York Times, 17 June 2009, accessed 25 October 2009.

Citing an article in the New York Times.  Hm... I wonder if there's 35% more WMD in Iraq now?

OK, so the RAG references the "Potential Gas Committee" (how fucking Kremlin-esque is that name?), so who are They?  From http://www.earthisland.org/journal/index.php/elist/eListRead/how_neutral...

Rather than explain to its readers why the Potential Gas Committee (or its member volunteers) might have a vested interested in encouraging hydraulic fracturing as a new energy policy is hashed out in congress, the paper of record simply states that for “advocates of the gas industry, the report vindicates the potential of natural gas in the economy.” Then they close by quoting the managing director for policy analysis at the American Gas Association, Chris McGill, failing to mention that it is one of the institutions listed among the Committee’s volunteer members. Not only that but McGill himself, according to Committee program assistant Linda D’Epagnier is an observer with the PGC and, in his role (he’s been involved for several years), handles all press releases and acts more or less as a PR official for the organization. He’s also a Director on the board of the Potential Gas Agency. That’s a fact the Times should have pointed out.

Yup, we can all TRUST lobbyists!  There's a reason GW Bush was "elected" twice; same reason why Obama was "elected" (number or times TBD).

Flakmeister's picture

Wow... that is some serious spin...

Riddle me this, how could the fraction of distillate from foriegn sources go down during a period of increasing imports and demand...

Could it be that refined goods are being slyly equated to crude?? Or some other slight of hand, the homespun figures are not standard measures....

Looks just like the games that guys like Lindzen play...

And no, I am not defending Obama by any stretch.....

r101958's picture

Agreed Flak. It is amazing that the only finite resource recognized here is the money printed by the Fed (not really finite in the truest sense). Of course; no, no, no way is oil a finite resource! We use less now so demand is down and that means higher prices have to be caused by the Bernank. Yes, in part, they are. But, the other part of the equation is that 1; Other members of the world community are demanding more oil and so they hungrily consume all that we don't use and 2; Oil is finite. Oooops! Sorry! Too much reality there.

DaveyJones's picture

they would never lie about this subject

piliage's picture

No silly, he did it by giving us a big warm hug and pissing away gobs of tax money for solar panel producers. Can't you just smell that low carbon economy coming? It smells like...victory....

Flakmeister's picture

Where were you when Bush's baby Range Fuels bit the biscuit?

Similar amount of money, but wait, it gets better, a completely undemonstrated technology...

You were aware that the Repubs put into a law a mandate that required an unproven technology to be producing millions of barrels of ethanol by now...  Now that is what I call *winning*.....

PS I know why you did not know about Range Fuels... Rush and the Boys at Fox swept that one under the rug....

tmosley's picture

Fallacy: Piliage opposes solar boondoggles under D, therefore he supported other boondoggles under R.

Flakmeister's picture

Nope... I never implied he supported Range Fuels...

I only implied his outrage at Solyndra should have been matched by outrage at Range Fuels...

If he was really being upfront and honest about flawed energy policy, he would be aware of the larger Administration failures and evenhanded in his criticism...

My main point being the Faux News crowd never mentioned Range Fuels because of the politics....and given other things he has parrotted here, it is pretty clear where he gets his news...

So, if anything I am suggesting that he has been manipulated....

Nice try Cliff....

tmosley's picture

Bullshit.  You are explicitly excusing Solyndra and decrying his justifiable outrage about it by citing some bullshit that no-one has ever heard of before, and telling him his opinion of it.

Nice try, church lady.

Flakmeister's picture

You really got to work on that reading comprehension Cliffy...

You can't just see what you want to see....

And another strawman, no less... I should start keeping track...

Silver Bug's picture

All you truly need to know is that the bernak will continue to print massive amounts of money. Therefore the price of real goods will continue to go ahead. Hold your wealth in the ground.

 

http://ericsprott.blogspot.com/

Seer's picture

But... as long at the EU continues to do the same, and as long as the US continues to steal from the future to feed its MASSIVE military, well... the USD will continue to be the best looking horse at the glue factory.  Yeah, eventually it stops.

If you really want to meet the future head-on you'd look to be sustainable outside all this make-believe world.  Works for the overwhelming majority of people on the planet.

BeerBrewer09's picture

Anyone else get that advertisement about Obama's foreign oil dependance on pandora?

They left out the part about oil prices rising. Honest mistake I'm sure.