For some unknown reason the role gas prices played in the global crash are still being discounted. Despite the blame everyone wants to give the "subprime" crisis for the current crash some blame needs to go to the oil and gas speculators who just three months ago were arguing the "fundamentals" for oil prices hitting $200 a barrel by the winter. Here we are entering the winter heating season with oil prices falling below $80 and gas prices following suit. People didn't just wake up one day and decide not to pay for their homes, it took a culmination of a collapse in the auto industry coupled with the higher costs associated with high gas prices to put the squeeze on the economy.
Consider that on this date last year the price of oil was roughly $81 a barrel while gas was hovering around $2.75 a gallon. A year later oil is under $80 but yet gas is still averaging almost $3.28 a gallon. We are paying a 50 cent premium in a depressed economy simply because the gas and oil conglomerate can get away with it. There was never any justifiable reasoning for the high oil prices, if anything any of these experts said had half a truth to them the fall of both oil demand and oil prices wouldn't have been nearly so steep. Consider the repeated statements and presumed long positions of none other than Morgan Stanley. Analysts from the company led the charge for $150 and later $200 a barrel predictions citing demand in Asia and elsewhere. It was always stated that demand in Asia would rapidly decrease immediately following the Olympics and in fact for the first time in ages China has failed to import gasoline for two successive months. The global demand destruction of oil is now becoming a self fulfilling prophecy much like the earlier meteoric rise helped perpetuate the speculative rise.
What isn't being discussed is how much damage the speculation did to the global economy. It was the final straw for many consumers in having to make the decision to drive to work or stop paying their credit card or home loan. It was the final straw for many businesses in deciding to lay off workers or not being able to meet supplier payments. Prices rose so fast not one auto manufacturer had time to adjust their offerings and the result has been a devastating hit to bottom lines with Ford trading under $2 a share yesterday and GM dispelling rumors of bankruptcy. With approximately one in six jobs in this economy somehow tied to the auto industry the impact of the financial calamity being suffered by the automakers will continue to ravage the economy. The airline industry has also been pummeled with costs increasing for all types of travel further stymieing the bottom line of businesses. There is no greater pressure point in the global economy than fuel prices and our elected leaders sat on their hands while the market was manipulated for the last year by rampant speculation on foreign exchanges. They did nothing and are as usual passing the buck on the consumer when their own inability to understand the global marketplace in the end leveled the crippling blow to the economies of many nations.
Lost also in all the non-sensical ramblings of the talking heads is an explanation of why gas prices are 50 cents higher today than they have been on the same historical oil prices in the recent past. Prices increase almost instantly as oil prices rose yet here we are a month after prices have fallen precipitously and we're still at an average of $3.28 instead of the $2.75 we were at on this day last year at the same oil price. Amazing how that works isn't it?
