Thursday, April 28, 2011

$6 Gas in Hawaii, and a Theory on Why Oil Prices Continue To Rise that Will Make Your Head Ache

We learned a truism about Hawaii 38 years ago when we put climate above other considerations and moved to the Aloha State: Everything costs more here, and the ironic anti-counter-balance is that they pay you less, too.

The truth about Hawaii's high prices is that they’re still the highest. Take the price of gas – please.

Premium grade is selling for more than $6.25 on the island of Maui, and regular is above $6, as shown in this photo posted at Civil Beat today. The statewide regular gas average hit an all-time high today -- $4.566, nearly a nickel above the mark set in 2008 when the oil price reached $147 per barrel.

Hawaii’s “metro areas” of Honolulu and Wailuku, Maui also post record prices for regular -- $4.455 and $4.932 respectively. Please note that Wailuku’s average price for regular will soon be $5 per gallon.

Everybody is asking why this is happening. Oil’s price today is still more than $20 below the 2008 record level. What other factors are playing havoc with our gas budget, a month before the summer driving season?

We’re the Speculators?

A staff member at the Natural Resources Defense Council contributes an answer today, and it can only make us worry. Summarizing an author's thesis, the staffer says the futures oil market has become a hot place for investors to place their money. These aren’t just the presumably wicked speculators but mainstream sources like commodity indexes that may be using some of your 401(k) money to place their bets.

According to the author quoted by the NRDC staffer, the Commodity Futures Modernization Act of 2000 “opened the road for new commodity swap instruments to be created away from the regulated exchanges and over-the-country treading…and also paved the way for the sale and marketing of commodity indexes as an investment… Money seeks to buy, and only buy, oil through indexes. The other natural side of the futures trade is missing. The only way you can encourage people to sell something they really don’t wantto sell is to offer an outrageous sum for it.” This cycle, according to the author, is “oil’s endless bid.”

The staffer’s blog has more than enough links to background and supportive material to make your head ache. Don’t say we didn’t warn you.

The tie-in with Honolulu rail, as usual, is the inevitable increase in transit ridership that accompanies increases in the cost of driving. If the author’s theory is right and nothing is done to upset the apparent influence of speculation in the oil futures market, Honolulu rail may have to reduce the headways between trains to meet rider demand.

No comments: