Nothing drives voter
sentiment like the price of gas -- now averaging $3.56 a gallon, up 30
cents from the start of the year. It's already hit $4 in some places.
The last time gas topped $4 was 2008.
And nothing energizes Republicans like rising
energy prices. Last week House Speaker John Boehner told Republicans to
take advantage of voters' looming anger over prices at the pump. On
Thursday House Republicans passed a bill to expand offshore drilling and
force the White House to issue a permit for the Keystone XL pipeline.
The tumult prompted the Interior Department to announce on Friday
expanded oil exploration in the Arctic.
If prices at the pump continue to rise, expect more gas wars.
In fact, oil prices are rising for three reasons -- none of which has to do with offshore drilling or the XL pipeline.
The first, on the supply side, is Iran's
decision to cut in oil exports to Britain and France in retaliation for
sanctions put in place by the EU and United States. Iran's threat to do
this has been pushing up crude oil prices for weeks.
The second, on the demand side, is rising hopes for a global economic
recovery -- which would mean increased oil consumption. The American
economy is showing faint signs of a recovery. Europe's debt crisis
appears to be easing. Greece's pending bailout deal is calming financial
nerves on both sides of the Atlantic, and the Bank of England and
European Central Bank are keeping rates low. At the same time, China has
decided to boost its money supply to spur growth there.
Neither of these would have much effect were
it not for the third reason -- overwhelming bets of hedge funds and other
money managers that oil prices will rise on the basis of the first two
Speculators have pushed crude oil to $105.28
per barrel, up 35 percent since September. Brent crude, Europe's
benchmark, is now $120.37 a barrel -- also worrisome because many East
Coast refineries use imported oil.
Funny, I don't hear Republicans rail against
speculators. Could that have anything to do with the fact that hedge
funds and money managers are bankrolling the GOP as never before?
But that's okay. The gas wars may come to a screeching halt before
too long, anyway. So many bets are being placed on rising oil prices
that the slightest hint the speculators are wrong -- almost any sign of
expanding supply or declining demand -- will set off a sharp drop in oil
prices similar to the record one-day fall on May 5 of last year.