Category — Gasoline Prices
After oil and gasoline prices continued their relentless march up earlier this year, it was nice to have some relief at the pump in May and June. However, since the end of June, prices of WTI crude oil is up over 15%, Brent crude oil is up about 25%, and retail gasoline is up over 7%. Oil and gasoline prices reached three-month highs last week and the Energy Information Administration (EIA) increased their 2012 forecasts of these prices.
There is no doubt that these higher prices will grab the attention of news outlets, policy makers, and the public. With this increased attention, political rhetoric regarding fantasies of governmental regulations and market manipulations will likely reemerge as catalysts to lower these prices.
The less likely scenario is increased awareness on the impacts that central banks, particularly the Federal Reserve, have on these petroleum prices by changes in the money supply. Over the period of this substantial rise in petroleum prices, central banks around the world have taken action from the dismal economic outlook in many global regions.
The U.S. GDP growth rate of only 1.5% in the 2nd quarter of 2012 and unemployment rate of 8.3% in July concern the Fed about economic stability, and several Fed governors recently called for additional quantitative easing measures—purchase of long-term bonds by printing more money. Although the Dallas Federal Reserve Bank President Richard Fisher opposes these additional measures (there are few marginal benefits versus costs), I examine the costs of monetary easing policy based on the relationship between gold and oil prices.
August 24, 2012 3 Comments
Four-dollar diesel (forgive an agricultural bias) is an ugly thing–but not the ugliest of things. To grossly paraphrase John Stuart Mill, the state of moral feeling that thinks that government should “keep prices reasonable” is far worse.
Prices at the pump are (for the most part) an elegant demonstration of market forces at work. It should come as no surprise then, that they tend to raise the ire of those who distrust markets and favor their manipulation. (And what goes up also comes down–the trend is positive right now.)
Whether it’s because the prices are so prominently displayed, or because so many of us so often pay them, fuel prices are a tempting target for the command-and-control set.
Economies (and Psychologies) of Taxation
The keen attention we Americans pay to fuel prices is both a blessing and a curse. It’s a blessing in that it helps hone the system to a remarkable degree of efficiency. Nature abhors a vacuum, and economies abhor waste. The cumulative cost-whittling by thousands and thousands of fuel-sector vendors, each doing his best to minimize wasted resources, delivers fuel as cheaply as physically possible.
The collective price-consciousness is a curse, however, because large groups of people can fall victim to what James Surowiecki, in the Wisdom of Crowds, calls an “information cascade.”
Information cascades are circumstances in which bad information or poorly perceived reality is passed from one individual to another without reasoned inquiry. These examples (stock market bubbles and crashes, riot dynamics, and most of higher education these days) inevitably lead to disturbingly close-minded groupthink.
I have always found it remarkable for instance that people (self included) will drive around the block to hit a gas station priced a penny lower, but couldn’t be troubled to pick up the same penny off the oil-stained parking lot (or even twenty-five of them on an average fill up). It won’t soothe the psyches of dollar-conscious cross-town navigators to discover that the increase in ambient temperature during their ‘economizing’ commute cost them a buck or two more than they saved. [Read more →]
August 15, 2011 9 Comments