There are numerous commentators who are saying last week’s ‘open
ended” QE initiative announced by Fed Chairman Ben Bernanke is a desperate move
on the part of the Fed to save the Presidency of Barrack Obama. I won’t jump
into that political speculation directly, but I would like to point out that
the Fed’s work may be all for naught in the coming months if the price of
gasoline hammers consumers to the point of taking their frustrations out on the
D.C. incumbents, including the President, on election day.
On September 13th, I commented on the ill timed
rise in gasoline for the President:
“Sorry to my
Obama fan readers. But this needs to be said. The high price of gasoline is
just the oil industry's way at settling some scores with Obama. How convenient
that prices go UP before the election this time? Just bad timing, or planned?
The higher prices shall be worth some near term pain, if it can get that guy
out of the White House. No one forced the big O to waste so much money on
green, or to act as he did with the XL pipeline, or to put the Middle East
region in a state of greater tension because he favors the
"brotherhood". I could go on and on. Sure, Brent has remained
persistently high, but that's just one factor. The recent fizzled storm that
shut in some Gulf production is a tiny factor and is over emphasized by the financial
press. Sorry to politicize gasoline, but I see this move as more than just a
coincidence in an election year. If these prices don't miraculously soon come
down, this high profile pocketbook issue might very well tip the scales to
Romney who needs all the help he can get.”
I made that comment on my http://www.financialbalderdash.com
blog. One subscriber even cancelled after I made the post! Lol. Yes it was on
the partisan side – how dare I point out a few failures of our present leader.
As it is turning out, perhaps it is not a conspiracy by ‘Big
Oil’ against Mr. Obama, but one of the first unintended fruits of the world’s
central banking policy of unlimited printing. Gasoline is up over a half dollar
a gallon in the last two months, or since the European Central Bank moved to a
stance of blind creation of reserves (printing).
Did someone forget that as the U.S. and Europe race to fiat
currency oblivion that maybe commodities prices, such as gasoline, might just
rise?? It makes me chuckle in a disparaging sort of way as these Central
Bankers are such fools.
It may very well be that they forgot that in the daily grind
for the average person (a majority of whom do not own houses), that the price to
fill up a tank to enable the grind to continue might draw more negative scrutiny than the thought of mortgage rates coming down another ½ a point in the coming
weeks? Are these policy makers a bunch of schlubs, or what? One must always consider Unintended consequences
and think outside of one’s reality. In the case of the Fed head, I would wonder
the last time he actually filled his own car with gas? Or, if he recently has
done such an average thing (which I am doubtful of unless he puts on a toupee,
sunglasses and skinny jeans to go out incognito), pump price might not resonate
in his mind since he could pay any price for gasoline as part of being of the
In other words, they either never thought about what could be a
brick wall to the QE tricks, or they forgot about the masses who would be hurt by
high gasoline and what that could mean for the election outcome if there was
pressure put on the Fed to act in September to help the president.
Obama could very well lose the election come November if
gasoline prices continue to trend higher. The SPR Solution Non Solution
BUT, and this is a big BUT: The president has already talked
about using the Strategic Petroleum Reserve (SPR) to attempt to force pump
prices lower. This little saga could bring some further surprises, though an SPR gambit to lower gas prices might fail. Here's why:
The SPR is
intended for real emergencies like a sudden cutoff of overseas of supplies, or
to supply crude oil for national defense purposes. The SPR was not intended to
be a solution to lower the price of fuel before an election.
Given the state of
the oil industry, a release from the SPR would bump into constrained refinery ability.
The solution is not more oil to lower pump prices. Another four years has passed with little progress on the issue of national energy. While I am thinking that Romney would not necessarily make a greater difference over the next four years on the matter, I highly object in the short term for the potential that the SPR may be misused.
I can already see it now. What was supposed to be an energy savings account (SPR) gets used to try to lower pump prices for the convenience of holding on to political power, setting a new precedent that would fritter the energy savings account away.
The solution to getting whacked at the gas station would actually
be to have a sane Fed, better foreign policy for a more peaceful world and a
long term energy plan to reduce the need for oil from most countries that hate
us to begin with! But that would be hard to do as the real solution lie in the real of serious structural reform and in today’s society it’s all
about taking the easy way out with band aid repair that fail to cure the core problems.
And when push comes to shove, the situation will boil down to an Administration's power grab and not something aimed directly help people reduce to cost to drive. They will sell it as help to us, but you should know better that it is really help for them.
Nothing would surprise me anymore – even a vain
attempt by the present Administration to use the SPR for political gain. If
they do, they should be wary of unintended consequences. Stay tuned.