Gas—5 Bucks a Gallon?

• Wall Street set to profit at your expense from rising tensions in Mideast

By Pete Papaherakles

Could prices at the gas pump reach $5 a gallon by Memorial Day? Experts on oil believe that projection is not unrealistic. Gas prices have already reached $4 in some parts of the country since the saber rattling over Iran started.

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Speculation determines the actual price of gas, although we are told that it is based on supply and demand. In the United States analysts claim that production costs account for 68 percent of the price at the pump, refining 13 percent, distribution and marketing 7 percent and taxes 12 percent. However, speculators buy millions of barrels of oil at the auction floor and sell it as “futures,” betting that oil prices will rise. And they do. All that is needed is for the White House, Congress, the Pentagon and Wall Street to work together, creating crises the media can hype. Oil prices go up, speculators make a bundle, and all the 1 percenters are happy. On the other hand, we, the 99 percenters, are left “holding the pump.”

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Some countries can sell gasoline to their citizens much cheaper than the U.S. In Venezuela, gas is 9 cents at the pump. In Nigeria, it sells for $0.38 and Saudi Arabia for $0.49 per gallon. In Qaddafi’s Libya, gas sold for $0.46 a gallon, but now that the country has been “liberated,” the price has skyrocketed to 28 times as much, or over $12. Meanwhile, in Europe, gas goes for as much as $9 a gallon.

The wars in Afghanistan and Iraq sent oil prices soaring in the U.S., although we get no oil from Afghanistan and only about 3 percent of our oil came from Iraq. The price per barrel of oil rose from $27 in 2001 to $38 when we went to war with Afghanistan. Then it jumped to $76 in 2006, well after we gained control of oil supplies in Afghanistan and Iraq.

The mere signing of the defense authorization bill at Christmastime, which authorized sanctions on the sale of Iranian oil, has already sent U.S. prices higher. As the sanctions progressively restrict Iran’s oil sales, it is expected the price will continue rising. This comes despite the fact that the U.S. has not bought Iranian oil for 20 years, and, in the end, we only get 7.5 percent of our oil from the Persian Gulf.

It will be hard to justify how a 7.5 percent reduction in supply, which our other suppliers will gladly fill, could account for a 50 percent increase in price, but there can be no doubt Wall Street will try to pull it off anyway.
Pete Papaherakles, a U.S. citizen for more than 35 years, was born in Greece, is AFP’s outreach director. If you would like to see an AFP speaker at your rally or meeting, contact Pete at 202-544-5977