Gas Prices On The Rise

This just in from the Southern California Auto Club…

LOS ANGELES, CA -- (MARKET WIRE) -- November 10, 2006 -- The record-breaking slide that brought gas prices 30 percent below their all-time record has ended, with slight upturns in gas price averages over the past week in most local areas, according to the Automobile Club of Southern California's Weekend Gas Watch.

"After 11 straight weeks of price drops averaging more than a penny a day, prices made a U-turn this week in Southern California," said Auto Club spokeswoman Carol Thorp. "Most other states began seeing gas prices go higher one week earlier than California, and this is the second straight week that the national gas price average has risen. Oil industry analysts say the price increase was expected sometime in November because of OPEC's decision to cut back production of crude oil. That has kept crude prices hovering around the $60 mark, making it difficult for prices at the pump to come down further."

You may recall my comments in an earlier post about gas prices going back up after the elections. My thinking at the time was that there was no fundamental explanation for the dramatic drop in gas prices, so in my mind, it seemed that the oil patch folks (Busch, Cheney) called in a few favors in an attempt to maintain control of congress. Didn’t work, did it?

Here are a couple of comments from a reader at another site…

"I told you already that gas went up a penny yesterday. It went up another nickel today It's now $2.41.”

“I only went as far as our nearest small town, about 10 miles. A friend went to the nearby city, about 40 miles away, and said gas prices there were up 9¢.”

So, gas is headed back up, as I knew it would. Now for the next phase of my conspiracy theory. The oil patch boys got on the phones yesterday and gave the green light to the oil companies to crank the prices back up. Since their plan didn’t go as expected, they have moved into phase two, which calls for letting the economy deteriorate so that the republicans can blame the democrats as they ramp up for the 2008 presidential elections.

Obviously this is all speculation, but it certainly has a certain ring of truth about it in the absence of real causes for the sudden price gyrations. All of the signals coming from the economy are pointing towards a recession in 2007.

The real issue is with all of the manipulation by the Fed here and central banks around the world, the coming recession could spiral out of control. Don’t be fooled, the Fed’s have far less control over the economy than they think. It is like trying to herd a bull through a china shop; all you can hope for is minimal damage.