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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The Real Reason for High Gas Prices

Commodities / Crude Oil Jun 09, 2007 - 05:56 PM GMT

By: Clif_Droke

Commodities A major news service ran a couple of feature stories on the Internet this week on the topic of high gas prices. Although different in the details, it was substantially similar to articles they've run off and on over the past two years. This particular article seems to appear whenever gas prices get so high that Americans start grumbling and passing around that chain e-mail about boycotting ExxonMobil.


They really outdid themselves this time, though. The writers offered some not-so-valuable advice on how readers could "profit" from high gas prices: buy stock in the big oil oligopolies like BP Amoco and ExxonMobil. (As if the average American can afford to drop $8,200 on 100 shares of XOM, which, as we're about to discover, is about the same amount they're paying on their yearly gas bills.) With "advice" like this it's little wonder that people are increasingly tuning out the mainstream media and looking to the alternative press to get the real news of the day.

But the most shocking part of the article was the admission that millions of Americans are "feeling broke" yet can't seem to figure out why. The article tells them why: because the average American is spending over $8,000 per year or more on gasoline alone. If you do the math you will find that comes to almost one-fourth of the average yearly income of a single adult. This amounts to highway robbery on the grandest scale imaginable. The government constantly warns us of the so-called terrorist threat, yet the only place one ever sees hostages being taken is at the pumps

Speaking of terrorism, it is becoming increasingly obvious the real reason for the persistently high gas prices. Has it occurred to anyone that we are now four years into a war with Iraq and yet we haven't seen any noteworthy increases in taxes? The Bush Administration has in fact gone out of its way to portray itself as a tax-cutting regime for the benefit of the American businessman. Truth be told, Bush & Co. are so unpopular right now that any attempt on their part to overtly increase taxes would see them all run out of Washington on a rail. Yet have you ever heard of a major war being fought that didn't involve an increase in taxes? After all, wars are brutally expensive affairs that can easily run into the hundreds of billions of dollars. So who is financing this war?

In his magnum opus, "A History of the English-Speaking Peoples" (Volume 1), Sir Winston Churchill, himself and insider who rubbed elbows with the "illuminati" types, wrote that it has always been the policy of big governments from old English times onward to borrow money for war, whenever practicable, from large commercial concerns. For instance, the English kings of old were wont to take out loans from the leading monopolists of the day, the wool merchants, for waging expensive wars. This provided a rather indirect route to much needed monies for the war chest. And it obviated the need to press upon the easily agitated citizenry for funding the most expensive of endeavors....at least temporarily.

Taking a page from this old English custom, the Bush regime is obviously obtaining massive funds for waging the Iraqi war from the major oil companies. In turn, the oil companies are extracting money from the retail end-user, namely you and me, to provide short-term servicing of this war debt. On top of that, the oil conglomerates will reap the further benefits of Middle East colonization as the rich plum of Iraq's oil falls into their collective lap.

Meanwhile, back at home, the debt our government has taken on will have to be paid the only way it knows how -- by passing it on to the citizens in the form of taxation. Yes, fellow citizens, higher taxes are coming. But the taxes likely won't arrive until after the Bush administration exits and the new regime enters (likely the second Clinton Administration). Are you beginning to see a pattern emerging here: a Bush administration comes alone (1988-1992) and with it comes an oil price spike and a war in Iraq. Then along comes a Clinton (1992-2000) and we see falling oil and gas prices but huge increases in bureaucracy and taxation. Then another Bush regime (2000-2008) and more high oil/gas prices and another war in Iraq. When Hillary arrives in 2009 we'll likely witness the return of deflation and more new taxes. (At this point I can't help but think of dear old Churchill, who would no doubt be proud to find that the old British custom of dynastic monarchy has been revived in modern-day America in the form of the Bush/Clinton/Bush/Clinton line.)

We now arrive at the conundrum of the day, viz. how will Americans be able to pay the next round of tax increases in 2009 and beyond if they've been tapped dry by the onerous "tax" of high gas prices? The answer is obvious: the bull market will be allowed to continue but with a twist. This time the average retail investor will be invited along to participate fully without being beaten over the head by the big stick of fear the mainstream press has been using against him since 2004. The return of the retail investor will be accomplished by way of a much needed priming of the money and credit pump, among other things.

Once the banks have done their part to fully re-liquify the monetary system, Americans will use the massive infusions of cash as an opportunity to participate in building up another speculative bubble, which will be bolstered by increases in productivity, job growth and the next wave in the technology revolution. Bubbles are products of forethought by the insiders, however, and this one will be used to increase America's collective bank account for the next round of taxes in 2009 and beyond.

The wise and prudent reader will no doubt use this coming time of temporary prosperity to bolster his financial position and prepare for the coming onslaught of 2009 and beyond.

By Clif Droke
www.clifdroke.com

Clif Droke is editor of the daily Durban Deep/XAU Report which covers South African, U.S. and Canadian gold and silver mining equities and forecasts PM trends, short- and intermediate-term, using unique proprietary analytical methods and internal momentum analysis.  He is also the author of numerous books, including "Stock Trading with Moving Averages."  For more information visit www.clifdroke.com


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Comments

RON
10 Jun 07, 09:25
CLINTON

I am in hopes that the people in the US saw a second CLINTON administration coming before the first one ended. I did. Being a positive personality I can always find something good about the worst situation.

I'm having a hard time doing that already with the second. She has a goal for herself and it concerns her none about it's results to us, the average citizen. If you don't want to shoot yourself, don't load the gun-PLEASE!!!


christian
10 Jun 07, 12:19
Taxes

i like the lead in about gas prices and exposing some manipulation but that does not build enough trust with me to believe the dems will raise taxes and that there will be another Retail bubble and prosperity to pay off these taxes, america will be in debt for a long time and i think the fed will cut rates to inflate away some of the debt i think they will cut spending in key areas much like they did to try to finance the vietnam war (since it was unpopular) like the iraq war is among both parties.

the dollar will fall to dangerous levels, and i think the biggest risk is not rising gas prices but people not being able to make there housing payments. I hope you are right about providing enough liquidity to finance another retail bubble but i don't see it as enough to starve off a bad recession, globally.


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