Hey Brother, Can You Spare $4.00 for a Gallon of Gas?

Your lucky a UK citizen pays more than double for his/her fuel.

Hugh,

I see you missed my story from earlier yesterday: Should we be worried about inflation right now? For a closer look at what is going on with Oil, the currency and other factors, take a look if you are so inclined.

China is playing a much bigger role in the currency issue than most realize.

Gas here has gone up by about 20 cents a gallon in the past week. Isn't it amazing how all of the independent gas stations all seem to raise prices in tandem? They watch the daily change in the price on unleaded on the commodity markets, and raise prices according to current pricing. Not what they paid for the gas in storage or in their tanks at the station. When the price on the market declines,decreases at the pump don't go down as quickly as when rising.

Maybe if the price gets too high, Obama can release some of the strategic reserve to ease pricing. But then, critics would just say it's another example of the socialist agenda.  The economy is in near free fall, and the government is just supposed to sit by and watch the action.

The US is where the big money is at for them.They tie the yuan to the dollar for that reason....

The bigger part of  that statement is that China doesn't allow the yuan to float in the currency markets. The effect is that they are able to manipulate their own currency to the point where the value is declining, when the reality of their economy indicates it should be increasing in value. This would have the "undesirable" effect (from China's point of view), of making their exports more expensive. The US is in no position to criticize China monetary policy? Or is that not the case? What happens if China decides to stop purchasing dollars? Krugman says they''ll be doing us a favor. It will in fact devalue the dollar further, but it will make our exports cheaper in foreign markets and have a positive impact on our trade imbalance. The problem is that politically the US monetary policy cannot advocate for a weaker dollar.

Will a weaker dollar add to the cost for imported oil. More than likely, which is part of the recent run up in pricing. As you noted though, it seems like more speculation than demand side pricing at play here. Once gas goes above the retail average nationwide of $3.00 per gallon you'll see consumers start to cut back on consumption. They've already experienced $4.00 per gallon gas, and are in no mood to see it again. Especially under current economic conditions.

The problem with cutting consumption of gas, is that it effects almost everything else as well.

From the article: Rising gasoline costs also dramatically depress consumer spending, sentiment, and long-range plans. We simply stop going out as much, cut back on non-essentials, reduce long term purchases, and hold on to what we have left.

That happened last year. We are still living with the effects.

No easy answers or solutions here HA. We need to increase our savings rate, and our economy is so dependent on consumer spending. Upwards of 70% of GDP, with approximately 18% of that cost being health care. Current trends suggest that health care cost will double from 2007 levels by 2018, without any changes to the system. Think about that! 34% of GDP. And you think gas is expensive? lol

First my compliments to HA, for his sharp analysis. In explaining the background of this symptom: don't look further than the Fed. Banks speculate on gold, oil and stocks, along with everyone else. In other words the feds' bailout and stimulus money pushed all these speculative trades into profit and lifting share values. The sucker - the consumer taxpayer - is paying the price of the sins made by B&B. The impression is that the economy is out of the doldrums, because the banks make profit again... but this is just squeezing the market that already is in dire straits, further devaluing the US Dollar in the process, which is another force to lift the price of fuel at the pump. As long people don't recognize the government is lying, there won't be any turn for the better. In the far end a public revolt may happen. Lets hope it won't come that far.

HA: Any kind of monetary intervention in a market economy is bad. And leads to discrepancies of the market system, inviting the crooks to play the roulette in the casino with taxpares' money, instead of their own! Interventions on a massive scale as happens at present are the worst enemy of the economy only temporarily intervention on a limited scale sometimes is helpful. This started already under Reagan as I recall correctly. All the governments after Ike are to blame. Nixon by abolishing the gold backing of the dollar as a reserve currency was the first in my opinion.
  

Yep, under Nixon we had a decade of "stagflation" following Viet Nam. That was fun. Then the Opec embargo, and Jimmy Carter (seemingly clueless). Then the gas spike with the Iranian hostage mess, followed by the recession than didn't want to end, with massive government spending - much of it for defense.  Then the bubbles started, following the first Iraq war. Finally, the "froth".

That "froth" must of contained some kind of deadly gas - seems to have killed the economy.

 I can match up many things from the 1920's to the things that led to this latest bust. I haven't ever checked to see how the prior decades line up with the 50-70 years prior to the Great Depression. You are vastly more schooled than i on these matters, PIM, what do you say?