President Obama declared that there is no silver bullet for rising gasoline prices. What he can do of course is waste tax payer's money, slander and investigate speculators that have carried the risk of the global economy on their backs while keeping the markets functioning.
Why are oil speculators being singled out when every commodity on the globe (except for our abundantly supplied natural gas market) is exploding? If energy speculators are to blame for running up prices, then why then are they leaving natural gas alone? Perhaps it is because we have plenty of supply and it is a domestically traded market that is less susceptible to the value of the dollar overseas.
Yet the president does have a magic bullet to bring down prices. It is called the budget. If President Obama can get spending under control, then the value of the dollar would increase and the price of oil would fall. Just look at what happened to the price of oil and the value of the dollar when Standards & Poor's lowered the outlook on U.S. debt. The day of the downgrade on the U.S. outlook on April 18, 2011, the June dollar index hit a high of approximately 76.05 before it retreated ignominiously to a low of around 73.93 on April 22, 2011. The price of oil hit a low of approximately 106.54 on the day of the downgrade and now has surged to as high as the 113.07 area overnight.
Deficits do matter and they cost all of us. The other silver bullet for gas prices remain with the Federal Reserve. The Federal Reserve with QE2 has dramatically increased the price of oil. In August of 2010 oil was as low as approximately 70.76 and now, as the QE2 comes to a close, we see oil hitting about $113.00 a barrel. QE2 drove investment and demand in the emerging markets. The price of Brent crude in august of 2010 was as low as approximately 74.64 and now has soared trading as high as around s$127 plus. In his historic Fed press conference this week, Ben Bernanke will have to explain why this has happened. My bet is that he won't have a good answer.