"It should be obvious to you all that (gasoline) demand is outstripping supply, which causes prices to go up." – President Bush, Associated Press, March 5, 2008

On-hand gasoline reserves are at the highest levels since the early 1990s despite refinery cutbacks due to declining margins.  And average gasoline reserves have risen since October, while oil reserves in this country have gone up virtually every week this year, said Ed Wallace, auto expert and columnist, writing in Business Week on April 1.

Wallace wrote that in January, the United States used 4 percent less petroleum than a year ago, and in February oil demand was down 3.2 percent.  Gasoline demand has been falling since last July.

Ronald Bailey of Reason Online has reported that worldwide production of oil has risen 2.5 percent in the first quarter this year, while demand has grown by only 2 percent.

Production is expected to increase by 3.3 percent in the second quarter and by as much as 4.1 percent by the third quarter.  According to Wallace, the U.S. daily buffer for oil production against demand, which was only 1.5 million barrels in 2005, is now up to 3 million barrels in excess capacity today.

Speculation up, dollar down
On the same March 5 that Bodman and Bush stated that demand outstripped supply, Exxon CEO Rex Tillerson said to Marketwatch, "The record run in oil prices is related more to speculation and a weakening dollar than supply and demand in the market."  He added, "In terms of fundamentals, fear of supply reliability is overblown."

Wallace added that as for speculators, in 2000 approximately $9 billion was invested in oil futures.  Today, that number has increased to $250 billion.  "Now, if any publicly traded company had an additional $241 billion put into its stock in that same period, its stock would rise out of sight too-–even if the company was not worth anywhere near that amount of market capitalization."

While the dollar has depreciated 30 percent against the world's currencies since 2002, the price of oil has increased 500 percent.  Although the depreciated dollar has a significant effect on inflation, especially commodity inflation, it is the out-of-control speculation that is driving the price of oil.

Goldman Sachs, always at the center of these manipulations and speculations it seems, forecast on March 7 that turbulence in the oil market could cause a spike in prices up to $200 a barrel.  Although there are no facts yet to justify such an incendiary claim, it remains that Goldman Sachs is the world's biggest trader of energy derivatives and has in the past driven oil prices with aggressively self-serving and sometimes politically motivated purchases of oil futures.

As if there has not already been enough damage to the economy, the financial markets, and the well-being of American small business and its customers from the credit crisis and bank insolvencies, this cabal of financial finaglers seems intent on creating new, contrived bubbles, resulting in rising gas prices, soaring food and raw material costs, and resulting economic upheaval because of "shortages" that do not exist.  

 
As we stand at the threshold of soaring gas and diesel prices, rapidly rising vehicle parts cost, and a customer-base reeling from potential economic melt down, not to mention the effects to the future of your small business, remember this is no natural disaster but one manmade because of financial adventurism, greed, and speculation.