First, note that the price of gasoline runs in lockstep with the price of oil.
Next, note that the price of oil has risen far faster than the rest of the Consumer Price Index. Since 1/1/2010, Brent Crude has risen about 60%, West Texas Intermediate Crude has risen about 30% and the rest of the CPI has risen only about 4% (meaning the falling value of the dollar can only account for a small fraction of the observed increase in the price oil -- about a 4% increase since 1/1/2010).
So, why is the price of oil rising so much more rapidly than the rest of the CPI?
There are a variety of factors involved. But, the primary driver (by FAR) is the simple fact that global demand for oil has -- for the last 8 quarters -- exceeded global supply.
To better understand the lag times in price response, first click here and examine a more detailed quarter by quarter analysis of the 2008 price spikes.
Click the image to enlarge it:
Data Sources:
Spot Price for Oil:
This spreadsheet from this page.
Sources for global supply & demand
(See “Table 1” in each document below):
2003: http://omrpublic.iea.org/omrarchive/13feb07full.pdf
2004: http://omrpublic.iea.org/omrarchive/13feb08full.pdf
2005: http://omrpublic.iea.org/omrarchive/11feb09full.pdf
2006: http://omrpublic.iea.org/omrarchive/11feb10full.pdf
2007: http://omrpublic.iea.org/omrarchive/10feb11full.pdf
(2008 - 2011): http://omrpublic.iea.org/omrarchive/10feb12full.pdf
2 comments:
"Let's open up our hearts and minds to Derrick Bell."
Umm... no.
Let's open up onshore and offshore drilling to ease the price at the pump.
RICH - Agreed.
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