Another price shock in oil and gasoline prices, with oil above $100 a barrel and gasoline marching steadily to $4 a gallon nationally, would not be complete without Democrats again waiving the speculators’ card.
The latest peddler of this myth was none other than Calif. Rep. Xavier Becerra, vice chairman of the House Democratic Caucus, who told a press briefing on Capitol Hill: “It isn't a shortage of gasoline, it's a manipulation of the gas prices. You have got to go after the gougers, you have to make it so that they can't win.”
This followed House Minority Leader Nancy Pelosi’s Feb. 22 assessment of rising oil and gas prices: “We need to take strong action to protect consumers from this speculation.”
Meanwhile, the Obama Administration has accounted for rising prices by market forces, saying alternatively that it’s because the economy is recovering and includes increased demand overseas, particularly China.
Perhaps they should get their stories straight, because they are contradictory. Are prices being manipulated, or are they rising as supply fails to keep up with increased demand as the economy recovers?
To be certain, demand did increase globally from 88.3 million barrels a day in 201 to 89 million in 2011 according to the Energy Information Agency — with a 700,000 barrel increase in demand in Asia and the Pacific — global production also rose to 90 million a day as of Dec. 2011.
So, Becerra is correct inasmuch as there is no shortage of gasoline. There is something else afoot. But it is not price manipulation.
Instead, both of these divergent explanations miss the underlying weakness of the dollar that is the real cause for price pressures in commodities, include food, oil, gasoline, and precious metals like gold.
An increase in one asset or another might be explained by a simple supply disruption or even overspeculation. But in a broad range of commodities — which are priced and traded in dollars — it looks much more like a monetary inflation problem. Commodities are often held as hedges against a weak dollar.
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