NUGENT: Burning cash with gas
Gather around, boys and girls, for another quick lesson in real-world Nugenomics 101. Not “if” but “when”gas prices soar to four bucks a gallon this summer, the impact to our economy will be thunderous.
With the national average price for a gallon of gas already at $3.65 a gallon, our anemic economy already is being battered. Prices for food are already high and going higher. No tax on the poor - right, President Obama?
America’s economy is intrinsically aligned with fuel prices because the lifeblood of our economy is oil. Four-dollar-a-gallon gas will not just sting at the pump but also will put the squeeze on every American for milk and cookies at the grocery store and every product we purchase because they are all delivered to stores by truck.
For the millions of Americans who jostle for position during rush hour each day, higher gas prices mean fewer dollars to invest or spend on other things, such as going on a summer fishing trip.
As gas prices continue to rise, consumer debt probably also will rise as American families, already strapped for cash, will use credit cards to pay for the increased fuel costs.
Ultimately, higher gas prices put the squeeze on all things related to the economy, including job creation.
Interestingly, demand for gas in America is down. Typically, when demand for something such as gas is down, prices fall. But not now. Prices at the pump continue to rise.
Whatever you do, do not blame Big Oil for the price at the pump, as Bill O'Reilly mistakenly does. The oil companies have nothing to do with setting the price of gas. Gas prices are set by oil price futures, which are the prices fuel investors think oil will cost in the future.
There are other things in play besides oil futures that are causing the price to rise. Demand for oil around the world is going up as other nations are using more of it. The higher the demand, the higher the price.
Another reason oil prices are high is the deterioration in the value of the U.S. dollar. Our dollar is the denomination used around the world for oil. Because of our gluttonous borrowing and spending in Washington and the berserk level of our national debt, the value of the once-mighty dollar has plummeted on the international market in recent years. A declining dollar causes oil prices to rise. Getting our fiscal house in order would do much to restore confidence in the dollar’s value and cause oil prices to fall.
Remember this: The stock market hates volatility. With Israel threatening to demolish Iran’s nuclear facilities in the near future before Iran can make good on its threat to incinerate the Jewish state, oil speculators are nervous and obviously think that bombing Iran will create massive international volatility. This is causing speculators to “bet” that oil production and the transportation of oil out of the Middle East will be reduced, thereby causing oil futures prices to rise today.
At four bucks a gallon or even higher, the economy will enter a severe stall. At this price, Americans will further tighten their belts on driving and spending, thereby driving demand for gas even lower than what it already is. But tightening our belts and reducing spending will slam the brakes on our economy, which is, at best, only in first gear.
Ted Nugent is an American rock ‘n’ roll, sporting and political activist icon. He is the author of “Ted, White, and Blue: The Nugent Manifesto” and “God, Guns, & Rock ‘N’ Roll” (Regnery Publishing).