Gas Prices Rising

Oil companies are posting record profits. Just when you thought they could not fleece Americans further, out comes the quarterly financial reports. There's less money for Americans vacations, clothes, food, shows and concerts, and so much more. Why? It's all going into the gas tank.

High prices at the pump are putting a squeeze on the family budget. An Energy Department Report shows for every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent increase. Households spent an average of $369 on gas last month. In April 2009, they spent just $201. Families now spend more filling up than they spend on cars, clothes or recreation. Last year, they spent less on gasoline than each of those things.

As of Memorial Day 2011, the nationwide average for a gallon of unleaded is $3.81. Though prices have drifted lower in recent days, analysts expect average price for 2011 to come in higher than the previous record, $3.25 in 2008. Some analysts say it go as high as $5 per gallon. A year ago, gas cost $2.76.

The squeeze is happening at a time when most people aren't getting raises, even as the economy has a slow recovery. But economic news is taking a turn for the worst. Higher than expected inflation, weather disasters are creating higher food prices, jobs are not being created at a fast enough pace. In fact it was reported on June 3 2011 that the jobs numbers were revised, The claims of 232,000 new jobs now turns out to only be around 174,000 (sourceBureau of Labor Statistics). This report came out after the Labor Department released Mays report.Labor Department report showed that the economy added only 54,000 jobs in May, down from 232,000 in April, and that the unemployment rate rose to 9.1 percent from 9 percent.

So how are Americans adjusting? They are cutting back on gas usage when possible, but mostly they are cutting back on all other aspects of their life. After all Gas or heating fuel is a key part of the household budget.The ramifications are far-reaching for an economy still struggling to gain momentum two years into a recovery. Economists say the gas squeeze makes people feel poorer than they actually are. Companies like Wal-Mart, Target, Large retailers like Sears, JC penny all say the same things. Their sales revenue is down for numerous quarters, Wal-Mart says for the last 8 quarters. The tourism industry is bracing for an uncertain summer. AAA predicts the typical families taking vacation will be down at least 14 percent from last year. Many of those surveyed said they are planning shorter trips and expect to pinch pennies when they arrive. Consumer confidence is sinking faster than the Titanic.

Why did gas prices go up? How can America bring them down? Well there are no shortage, no pun intended, of opinions on these two questions. Some blame the greed of the oil companies and based on their record profits, that argument has some merit, but it not the whole reason. Some blame Bush. While it is true the price of gas shot up towards the end of his Presidency, the causes were not his fault. Even if there was a better energy policy in place, it would not have stopped the fast rise in prices. While Bush signed the executive order reversing the ban on new drilling, it really had no merit. Congress still had a law on the books they would have to repeal in order for drilling to begin. But it did however bring the gas and oil prices down significantly, even if it was for a short time. The reason it was short lived was within the first 100 days after Obama took office, he rescinded the executive order and reinstituted the ban on new drilling. It had the effect Obama wanted, the prices have raised. According to Obama, high gas prices don’t really constitute a problem for Americans. He stated that the reason for our anger is the rapid increase in prices, not the prices themselves. Obama claimed that Americans would have accepted a “gradual adjustment” to the current cost. How out of touch is Obama? Some also blame speculators for the high prices. Now this is defiantly partly to blame. The greed of some investors has gone way past out of control.Speculators who will never take possession of a barrel of oil account for that 70 percent of oil futures trading, and the volume of speculative trading has grown fivefold. When oil prices hit a record $147 a barrel in July 2008, the Bush administration leaned on Saudi Arabia to pump more crude oil in hopes that a flood of new crude would drive the price down. The Saudis complied, but not before warning that oil already was plentiful and that Wall Street speculation, not a shortage of oil, was driving up prices.( source: Department of Energy Report). It has taken many years for congress to understand the extent of the effect oil speculators have had on crude prices. The Obama administration as well as the Bush administration before it, and Congress has been slow to take steps to rein in speculators. Congress is now debating whether or not to regulate speculators. The Saudis, however, have struck a steady theme for years that something should be done to curb the influence of banks and hedge funds that are speculating on the price of oil. (Source Wiki Leaks website). Congress is now debating if speculators should be regulated.

So what can be done? There are several option, all combined should drop oil and gas prices. First, Obama has backed plans for green energy. He has given tax incentives for companies to develop new technologies as well as perfecting ones we already have like solar and wind. Obama also approved of a tax deduction for individuals who purchase Hybrid and all electric cars. Second, let’s start drilling. Now this is not a popular option for environmentalists. They are against such an action worrying about oil spills, a good concern. But depending on the report that is trusted the most, all agree that there is enough reserves underground to cover our demand for the next two to three centuries. Third, regulate speculators and there greed. Putrestrictions on how much of the oil market a company can control. Prevent any single trader from accumulating more than say 5 to 10 percent of the oil contracts being traded. And lastly, conservation.

Any one of these proposals will help the oil price go down, but all of them together will make a major dent.