For months consumers and the media have more or less been ignoring prices at the pump. But a 6% spike in July now has the media up in arms. Already there are calls for President Obama to consider tapping the Strategic Oil Reserve, and politicians are seeking to stamp out the mysterious "Evil Speculators" who seem to be behind every rise in crude.
Dan Dicker, former oil trader and president of MercBloc, says we should all be used to this by now. "Every year we do this," Dicker notes in the attached video. "We have a spike in gasoline prices; we have screaming from the Congressmen, and then again the prices go down into the fall and everyone forgets."
Theater of the absurd in D.C. is to be expected — and largely ignored. However, gas price volatility is a real problem. Companies can't predict their costs, consumers see their discretionary income whipsawed, and basic financial planning becomes all but impossible for commuters on a tight budget.
What's more concerning is that the howling over the peaks and valleys of prices at the pump drown out the fact that the prices have been moving higher every year since the bottom of the global recession. With more crude available, more refiners online, more efficient cars and decreasing average miles driven, gas prices should be falling instead of moving from $1.60 in early 2009 to the current average of just under $3.70.
Dicker's got a proposal that would smooth out the volatility curve and ease pain at the pump.
He suggests making gasoline prices subject to the same regulations as utilities. Rather than allowing globalized markets to dictate the prices that consumers pay, utilities are forced to pay.
Despite short-term electricity prices being wildly volatile, your utility bill isn't. That's because utility companies set rates in concert with local or regional agencies. The goal is relatively stable prices for consumers, while still allowing the utilities themselves to be financially viable.
Shockingly, this utility model generally works — at least when compared to the almost randomized fluctuations of gas prices.
Before free marketeers lose their collective minds over the concept of sticking the free market between producers and consumers, don't forget the "losers" in the Dicker plan are the same hedge funds, energy traders and speculators that the politicians are constantly railing at to no avail. The "winners" would be anyone who'd like more than a vague idea about what they're going to spend on gas from week to week. In other words, just about everyone.
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