To Understand Gas Prices, a Little Paranoia Might Help

The conspiracy theorists are on to something when it comes to government loopholes and corporate profits.

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Last week my colleague, Patrick DeHaan, discussed in this blogspace how retail competition works as an integral component in setting local prices, and we agreed that while competition represents an important part of the picture, perhaps it's only part of an essentially lengthier discussion on the many other variables simultaneously at work.

[See the 10 priciest years in history for gas.]

Geopolitical events, weather, supply and demand fundamentals, currency fluctuation, and commodities speculation—there are always many factors in play. And discussion of them often falls on consumers who've grown too angry to listen. At, for instance, where consumers engage on a daily basis in these discussions, there's always a small but vocal group who remain convinced there's a vast network conspiring to take our money and that includes the federal government; federal and state legislators intent on raising gas taxes, transportation taxes, and every other kind of tax; Big Oil's exhaustive greed; "Wall Street" and, specifically, the hedge fund operators like Goldman Sachs and Morgan Stanley that fuel aggressive and often irrational speculation on crude oil; every OPEC member country (it's us against them); and let's remember to include every gas station and convenience store too—the local Citgos, Sunocos, BPs, 7-11s, and Circle-Ks of the world. "They never lower the gas prices as fast as they raise them! The auto companies are in on it too, because they have the technology right now to increase fuel economy exponentially; they're just holding back..." That's what some believe and their numbers are growing. Yes, sometimes, we're told, they're all conspirators; it's all of the above.

[See a collection of political cartoons on gas prices.]

Some of this is simply noise. But close observers know there are disturbing kernels of truth that live here too. The factors impacting daily retail gasoline prices are integrated. But in order for American consumers to truly understand why we see prices at the pump edging closer to $4 per gallon we need transparency and logic. We need our Federal Reserve Board, for instance, to explain why it favors a "weak dollar" and believes it's better to print money than to strengthen the U.S. dollar against world currencies.

We need to know why offshore commodities trading remains exempt from regulation. The "Enron loophole" that Republicans and Democrats agreed three years ago needed to be closed remains untouched. We need to know whether a handful of large oil companies have a green light to manipulate prices by controlling both supply and refinery output rates. After all, it's difficult to argue a need for new infrastructure like the proposed Keystone XL pipeline when U.S. exports of distillates and gasoline—before the pipeline is built—are on the rise.

[Debate Club: Is it time to drill in the Arctic Refuge?]

And, yes, we need politicians to spare us the populist rhetoric deploring those Wall Street speculators who are also among their biggest private fundraisers. When Captain Renault announced he was "shocked" to learn that gambling was going on at Rick's Café, it was droll humor. But, when politicians stuff their pockets while feigning ignorance on commodities speculation, nobody's laughing. It only insults our intelligence and they've done enough of that.

From the consumers' perspective, even rational ones who decline to engage in conspiracy theory say the deck is stacked against them too. As Woody Allen said: "The question is not whether we're paranoid, it's whether we're paranoid enough." After all, he added, "the truly paranoid are rarely conned."

  • See the 10 priciest years in history for gas.
  • Debate Club: Is it time to drill in the Arctic Refuge?
  • See a collection of political cartoons on gas prices.