Three Reasons for Gas Pump Gouging

A couple different opinions on explaining soaring Oil and Gas Prices. First, two possibilities from economist Michael Hudson:

1. “It’s the Arabs!”

As the dollar depreciates, OPEC countries have been holding back supply largely to stabilize their receipts in euros and to offset their losses on the dollar securities they have bought with their past export proceeds. For over 30 years they have been pressured to recycle their oil earnings into the U.S. stock market and loans to U.S. financial institutions, taken large losses on these investments, and are trying to recoup them via the oil market.

OPEC officials also have pointed to a political motive: They resent America’s military intrusion in the Middle East, especially in view of how much it contributes to the nation’s balance-of-payments deficit and federal budget deficit.

2. “It’s the Chinese and Indians!”

The U.S. press prefers to blame Chinese, Indian and other foreign growth in demand for oil and raw materials. This demand has contributed to the price rise, no doubt about it.

But the U.S. oil majors are receiving a windfall “economic rent” on the price run-up, and are not at all unhappy to see it continue. By not building more refining and shipping capacity, they have created bottlenecks so that even if foreign countries did supply more crude oil, it would not be reflected in refined gasoline, kerosene or other downstream product prices.

3. “It’s the Central Bankers!”

[Mike Whitney writes at ICH] The whole speculation scam is being executed with excruciating precision by the same carpet bagging scoundrels who engineered the subprime fiasco; the investment bankers. The Wall Street Goliaths are using the futures market to recapitalize their flagging balance sheets after sustaining massive losses in the mortgage-backed securities boondoggle. That's the whole thing in a nutshell.

MarketWatch summed it up like this: “Speculators now account for about 70% of all benchmark crude-oil trading on the New York Mercantile Exchange, up from 37% in 2000 … So it’s not really Big Oil or "greedy Arabs" after all? Nope, it's the cutthroat banksters again.

[Spiegel Online reports] The top five users of swap agreements are investment banks … Bank of America, Citigroup, JP Morgan Chase, HSBC North America Holdings, and Wachovia.