While politicians deflect, defend and blame and consumers grouse about Big Oil, large profits and offshore drilling, almost no one is discussing what’s really happening to the price of gasoline at the pump.
Conventional wisdom is that gas prices are shooting through the roof. But that’s not the case. In fact, gas prices are right at their historical average.
Gas prices are reflecting inflation. As I have explained before, inflation is not rising prices. It is an increase in the money supply. Rising prices are a product of inflation, and the increasing numbers on the signs at gas stations are a reflection of inflation. Or, to put it another way, they reflect a decrease in the value of the dollar.
This is explained in detail at Forbes. But following is a simple version.
Since Jan. 1, 1971, the price of a barrel of West Texas Intermediate (WTI) crude oil compared to gold has averaged 0.0602 ounces of gold per barrel. Gold is currently trading $1,789 per ounce, and WTI is trading at $108 per barrel. That’s a ratio of 0.0603, and it’s right on the statistical average.
So who or what is to blame for “higher gas prices?” Look no further than the Federal Reserve, Ben Bernanke (and Alan Greenspan before him) and their money-printing policies.
You see, gas prices aren’t rising. The value of those green slips of paper in your wallet is shrinking.