Wackonomics

[alexamenos]

'the traditional laws of supply and demand don't always apply to oil prices.'

seriously, not only is somebody writing this shite but they're getting paid to write it. This person has to be a high school teacher, or a liberal arts economics major, or a chick, or maybe all three to be this muddle headed.

Oil Is Plentiful, Demand Weak. Why Are Gas Prices Going Up?

She's got her facts basically right -- supply is quite abundant and (as the article notes), tank space to store surplus produced oil is at a premium these days.

What she doesn't understand is...well.....she doesn't understand economics. The traditional laws of supply and demand can no more be suspended for the price of a given commodity than the law of gravity can be suspended for baseballs and frisbees.

First...instead of looking at dollar denominated price of oil, let's look at the barrel denominated price of 1 federal reserve note over the last few months --

January '09 -- 1 federal reserve note = 1/36th of a barrel
Late May '09 -- 1 federal reserve note = 1/65th of a barrel


That's a huge decrease in the price of the F.R.N. in the last couple of months -- and this is entirely consistent with the decrease in demand for bernanke-bucks (the chinese ain't buyin' bonds these days) coupled with the increase in supply as bernanke keeps the printing presses whizzing and whirling.

So....

Over the past two months, investors have plowed billions of dollars into oil futures.

and the reason they're doing this is because they're moving their assets out of federal reserve note and into a highly liquid (literally and financially) tangible asset that will retain a great deal of value should the bernanke bucks go zimbabwe.

In other words...

Oil Is Plentiful, Demand Weak. Why Are Gas Prices Going Up? Because oil is priced in federal reserve notes, dipshit.