Ten Miles Square


February 17, 2012 2:33 PM A Gasoline Conspiracy to Set Fire to the Obama Administration?

By Rick Ungar

I’ve never been much of a conspiracy theorist as it is not my inclination to see evil lurking behind every bush (no pun intended.) More times than not, things are—for the most part—pretty much as they appear to be.

However, there is a strange anomaly occurring on the highways of America and in the boardrooms of some of our largest investment institutions that has caused me to consider whether a plan is afoot that, if successful, could represent the best possible strategy for ending the presidency of Barack Obama.

According to the Automobile Club of America, gasoline prices have risen, on average, 13.1 cents in the past month—despite the fact that gas prices traditionally fall in the month of February as people drive fewer miles during the wintery month.

What’s more, virtually every projection out there suggests that gas prices are about to make a dramatic rise to, potentially, record levels with some suggesting that $5.00 a gallon gas or more —double the prices of just a few months ago—could very well be in our future.

This becomes a particularly odd statistic when one considers that Americans are using less gasoline than they have at any time in the last fifteen years. Currently, we burn up 8 percent less gas than we did during the peak year of 2006 while most experts expect the trend to continue to where we will be using 20 percent less gasoline by 2030.

Says Tom Kloza, chief oil analyst for the Oil Price Information Service,

Strangely, the current run-up in prices comes despite sinking demand in the U.S. Petrol demand is as low as it’s been since April 1997. People are properly puzzled by the fact that we’re using less gas than we have in years, yet we’re paying more.

How can this be explained?

Certainly, concerns of a potential conflict in Iran, and the impact such an event would have on the world oil market, would drive prices up. Adding fuel to this gasoline fire are the seeds of uprising that are ripening in the eastern region of Saudi Arabia where most of the nation’s oil reserves are located.

And, to be sure, an improving domestic economy typically results in higher oil prices as demand begins to rise. However, experts seem to agree that even this will not return us to our high’s of 2006.

Experts agree that even when the economy rebounds from the recession, gasoline usage will remain below the 2006 figure, which should remain forever untouched barring any massive economic boom periods or drastic fuel price cuts. That reduction can be attributed to a number of factors such as higher fuel efficiency fleet figures for manufacturers, a higher use of hybrids, an increase in bio-fuels like bio-diesel and ethanol, and continued high gas prices, among other factors.

There has to be something else at work here.

According to Kloza, a healthy percentage of the increase is the result of speculative money flowing into gasoline futures contracts since the beginning of the year, mostly coming from hedge fund and big money mangers. “We’ve seen about $11 billion of speculative money come in on the long side of gas futures,” Kloza says. “Each of the last three weeks we’ve seen a record net long position being taken.”

These record positions that are driving up prices could certainly be the result of speculators’ legitimate belief that Middle Eastern instability and an improving economy at home make higher prices a good bet.

And yet, Middle Eastern instability is nothing particularly new. Even if speculators see an Iranian crisis putting more pressure on the oil markets than in days gone by, it is difficult to rationalize how this would result in a 100 percent increase in prices at the pump, particularly in view of the fact that we use less gasoline today than at other times of crisis.

While Wall Street’s ‘priority one’ is to make money, it is clear that, for this year, priority two is the destruction of Barack Obama’s presidency. Accordingly, from a Wall Street point of view, it certainly is a happy coincidence that that priority one, making big money on oil speculation, could directly lead to accomplishing their second highest mission.

I am left to wonder whether this is a happy Wall Street coincidence or a clever strategy that could pay off big-time come November.

Gasoline prices have a ‘real time’ impact on middle-class voters. Can you imagine a better way to make voters good and angry than to insure that they are paying five bucks a gallon for the gasoline that will be powering them to the voting booth in November? And if you subscribe to the theory that the President’s opponents would like to keep economic growth down until the election is over, what better way to accomplish such a goal than to force a precipitous rise in gas prices?

Maybe what we are seeing is nothing more than the natural and completely explainable reaction to events in oil producing countries and the promise of an improving domestic economy.

However, when you consider that we’ve faced these uncertainties more than once in the past fifteen years, and combine that with the understanding that we are currently consuming less oil products than at any time during that period, it is difficult to come up with a rational explanation as to why gas prices would nearly double in so short a period under these circumstances.

Am I simply getting paranoid as the election season is upon us?

Maybe. But there is no disputing that the higher gasoline prices go, the lower the odds that President Obama will be returned to office for a second term.

So, I’m just saying’…..

As a result of what is coming, it might be a good idea for the Obama Administration to start talking about the reasons for rising gas prices and I’d start talking about it now. This is one instance where silence is anything but golden and without a plausible explanation as to why the Administration is not responsible for what might be a dramatic rise in gas prices, it may be President Obama who is left holding the pump nozzle come December.

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Rick Ungar is an attorney in Southern California and a frequent writer, speaker and consultant on health care policy and politics. He is a contributing writer at Forbes. Readers can reach him at rickungar [at] gmail [dot] com.


  • Marc Montefusco on February 17, 2012 5:03 PM:

    I've been wondering about this. I also wonder why we have been so dismissive of Rick Santorum's claim that high gas prices have contributed to the length and depth of the recession (aside from the fact that the source is Rick Santorum.) I completely agree with the good Rick that the Obama administration should start shining some light on this subject as soon as possible, if not a little sooner.

  • Anonymous on February 17, 2012 7:22 PM:

    US demand for gasoline has dropped, but world demand has grown. With the refining capacity in the US, US refiners are selling gasoline to the world market. This has increased the price of gasoline (along with speculative investment). The thin profit margin in the refining business has caused many older refineries on the east coast of the US to shut down (they lack the equipment required to refine all but the "sweetest" crudes -- which sell at a premium). Shutting down the refineries in the east means that drivers in these areas have to pay for transporting the fuel. Bottom line, its my opinion that there is no conspiracy. The market does not always act rationally - but i would doubt there is enough money in the world to manipulate the price to this level

  • Anonymous on February 17, 2012 11:11 PM:

    It's not hard to imagine the Koch brothers, who own Flint Hills Resources, a major oil refiner, and their many oil industry friends are engaging in capacity-cut based price spikes.

    Not that many years ago, electricity generators in California spiked prices by taking generation offline at peak times. I've read that refiners are off-lining their plants at odd times now. Expect this to continue until, ohhh, November 7th, I'd say.

    Of course, I'd not rule out direct price-fixing, too. Who knows what goes on at those very exclusive twice a year closed door gatherings hosted by the Kochs.

  • liam foote on February 18, 2012 5:51 PM:

    Thanks for the article. No, I don't think it paranoid to imagine such conspiracies. Those who guide the current GOP and conservative America are utilizing union busting, voter disenfranchisement and the usual cultural was nonsense, so why not manipulate gas prices?

    I haven't gone back to look at the data, but I recall that in the summer of 2008 as we headed into the heart of the election campaign, the alarmingly high price of gas began for no apparent reason to decline. It seemed to me perfectly obvious that this was occurring for the benefit of the the GOP candidate, Sen. McCain.

  • LRM on February 18, 2012 8:57 PM:

    This has been lurking in the back of my mind for a while now. It seemed that talk of $5+ gas popped out of nowhere not long ago, and I haven't heard a plausible explanation accompanying it. Yes, several factors COULD converge to make prices rise, but that's simply a "what if" scenario while high prices are being reported as a certainty. Where did the story of sky high gas originate? I completely agree that the Obama administration should start talking NOW about the speculation.

  • oscar dean ray on February 19, 2012 8:16 AM:

    It would seem that this is more than just conspiratorial thinking. The American people and not just the Obama administration should be up in arms demanding an explanation. This sort of economic blackmail could impact and even destroy some fledgling businesses and push some families into starvation. Either "we the people" are our nation or the corporations of America are.

  • Neil B on February 19, 2012 10:58 AM:

    Earlier, I already posted the below comment, before that from LRM. It was taken away (why?), and I expect it to stay here this time:

    The very fact that speculators can even drive up the price of gas shows they have too much power. We need to have stiff trading transaction taxes etc. to prevent this from even happening.

  • Rick Ungar on February 19, 2012 12:38 PM:

    Neil B - don't get paranoid! If the comment didn't show up it is likely user error or the system just screwed up. Nobody takes down anyone's comments here unless they include profanity.

  • Bill Jones on February 19, 2012 5:02 PM:

    "Iíve never been much of a conspiracy theorist "

    Well then, you are a moron, The Federal Government files more Conspiracy charges than for any other offense.

    Almost all activity in DC is criminal conspiracy.

  • Rick Ungar on February 19, 2012 5:58 PM:

    I've always wondered why it is that those who say the silliest things are always the ones who accuse another of being the moron?

  • Houston has the answer on February 20, 2012 2:10 AM:

    Blame it on the EPA. Texas said "no" to their outrageous
    regulations (regulations= some edict handed down from
    some faceless nameless person that no one voted for
    which is expected to be followed just as though it were
    law). Out in NJ however, they have not followed the lead
    set forth by Texas, and from what we heard on Houston
    Radio the other day, they are about to close down four
    refineries out east via EPA "regulation" failures!

    So since they provided something like 70 percent of the
    oil used out East, do the math! When they close down
    the oil supply for all of you Easterners will be in

    The Texas Oil company executive said that
    he wants people to be aware of this fact and that he
    and other oil companies are starting a campaign to
    educate the public as to why the price of gas is going
    to skyrocket..The exec said that they are going to put
    signs on the pumps and videos on the video pumps that
    explain all of this to the public, so that they don't
    get outraged with the oil companies.

    So it is not the speculators (even
    though they are evil and no energy should be allowed
    to be speculated on) and it is not the oil companies
    that will be driving the price upwards.. Nope, it's
    not the Middle east conflict possibility either, but
    it is the EPA and the shutdown of four refineries
    out east!

    So when you are squeezing that pump handle
    in a few months and the dial spins so fast you can't
    read the numbers, just know who and what the real
    cause is.. Ironically this very agency answers to
    the President, so go figure! There is hope though!
    The oil exec that said this on the radio, said that
    after they get the customers in Texas taken care of,
    they will be happy to export the rest to the east
    where it is needed.. The bad part is that our refineries
    in Houston ran at 110 percent capacity a few years
    ago, now due to EPA regs, they are only running at
    around 60 to 70 percent capacity.. Hopefully they will
    ignore the EPA and crank them back up so that everyone
    of our friends out east won't run short. :)

    This information was all delivered over the Houston
    talk radio a few nights ago. I am only delivering
    the message that I heard. I don't know if the refineries
    out east are really going to shut down or not. This
    is just what we heard on our local talk radio. You
    will have to check out the validity of the story for