In the past few weeks the price of gas in Los Angeles jumped well above $4 a gallon. It’s being reported that in some spots, premium is now over $5 a gallon. The price is shooting up daily, even though it takes about 30 days to turn crude into gasoline. Why is it that it normally takes weeks before the price at the pump reflects lower crude oil prices, when the threat from Iran to cut oil supplies to Europe has gas prices shooting up overnight?
Is it the supply of crude that’s the problem, or an inability to turn crude into gasoline because of a shortage of refineries? No new refineries have been built in the U.S. since 1976. My former colleague Hal Fishman, used to recite this factoid repeatedly, in the hope that someone would eventually hear.
Who to blame?
Is it the lack of refining capacity caused by tree-hugging environmentalists, or is it more a case of “free-market” capitalism, with producers holding the line on gasoline supplies to maintain prices? Why are some existing refineries being shut down here in the U.S., at a time of record profits? Is it a simple question of gouging, or is it the traders on Wall Street? People who produce nothing, biding up prices to line their pockets as the cost continues climbing for already struggling American consumers? Since these are some of the same “too big to fail” guys that manage our retirement funds, we’re probably better off leaving them alone?
Why isn’t anybody asking these questions? Oh, you can be sure they will, eventually. In committee meetings and during open hearings, months after the damage has been done and the robber barons have taken the money and run, forcing millions of lesser individuals to choose between food and gasoline. Vespas, are suddenly looking pretty good. But you won’t see any on Wall Street. For the first time since the crash of 2008, the Dow has just climbed to 13000, following the rescue of the merchant bankers by those same middle-class Americans who can no longer afford to drive their cars.
All those regulations FDR put in place following the Great Depression, are looking better than ever. Particularly Glass Stegall, which Bill Clinton annihilated with a stroke of his presidential pen near the end of his second term, followed by that great intellectual, George W. Bush, who finished the job of destroying the barrier to unregulated greed in the banking and finance industry.
This is a game for the high-rollers, who come and go in their limos, just as their predecessors did in the 1920’s. The rest of us had better go check the tires on our bikes.