Thursday, February 17, 2011

Who Is To Blame For High Energy Prices?

The upward pressure in the global prices of petrol products have prompted The Economists to ask “Are taxes or crude oil prices to blame for expensive petrol?”

Their narrative....
PETROL prices have risen steeply in rich countries, triggering heated arguments about whom or what is to blame. America’s energy department recently blamed a jump in petrol prices of 3.1 cents per gallon in the space of seven days on the political unrest in Egypt affecting crude oil prices. Japan’s government blamed the high price of crude oil for its tenth weekly price increase at the pump. The British government has given the same explanation for price increases averaging 15% in the year to January. But with the oil price still at only two-thirds of its peak in mid-2008, this is not the only cause—as the three charts below show

Elevated oil prices as we have repeatedly argued here, represents a mishmash of many factors that can be classified into two; mainly

-artificially high demand as a result of central banking inflationism (suppressed interest rate and QE) and

-on the supply side, the perceived shortages as a result of global governments restrictions to private investments (despite the lack of funding or technology) for political reasons, inadequate transparency of the actual state of reserves and attempts to manipulate the oil markets (OPEC cartel)—both of which has led to the escalating prices.

Lastly, taxes, which the Economist also raised, are also government imposed.

As to who is to blame for expensive petrol? I guess the answer is very much obvious: government interventionism.

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