Tuesday, December 14, 2010

Bernake raises gas prices

Big noise over the rising gas prices. Nobody wants to talk about it but a big reason for this increase is the policy of the First Dope. He has declared the Gulf waters off limits to drilling and exploration. The next step will be to announce that the potential supply of domestic oil is at an all time low. That will be because if the oil companies are not allowed to look for oil, they are unlikely to find it. If they don’t find potential oil fields our “proven” reserves go down.

But the main reason the price is going up is that the dollar is losing its value. The Dope-in-Chief at the Fed keeps announcing that he is printing more money. Notice that oil is not getting any more expensive to those who buy with most other currencies.

Trade Lesson:

Suppose you are Abdul and have 1,000 barrels of oil to sell every month. You are happy to sell it for $60 a barrel and get $60,000. Abdul uses that money used to buy 3,000 widgets from China which he sells for $40 each. He is making $120,000/month until Bernake prints $600,000,000. The normal price of $60,000 now only buys 2,500 widgets which still sell for $40. But that only grosses $100,000 $20,000 less than before. And the $100,000 buys less stuff than it used to. The test question is, what do you do? The answer is, of course, you raise you prices.

Meanwhile the papers are talking about refineries that are closed for repairs. They bury the weakened dollar at the end of the story if it gets in at all.

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