A customer fills her vehicle with gas in a county where some grades of gasoline have already surpassed the $4 mark on February 21, in Miami, Florida.(Getty Images)
A customer fills her vehicle with gas in a county where some grades of gasoline have already surpassed the $4 mark on February 21, in Miami, Florida.
(Getty Images)

Gas Price Hits New Record

March 2, 2012  •  From theTrumpet.com
Is this a sign of recovery, or the opposite?
 

Gas prices hit a new record high yesterday. According to aaa’s website, the average cost of a gallon of gas is $3.73. February’s record high gas prices follow the records set in January.

If the rising price was due to the economy drastically improving and Americans using more gasoline, it might be a good sign. However, evidence indicates the opposite is the case.

In January, U.S. drivers used almost 10 percent fewer gallons of gasoline than they did the year prior, according to the Oil Price Information Service. In total, Americans use about 334 million gallons per day—an amount that has plummeted since the 2008 peak of 398 million.

The Los Angeles Times reports that current gasoline usage is plummeting to levels not seen in 12 years. This is all the more astounding when you consider population growth and the fact that 31 million more vehicles are on the road now than in 2000.

But if demand has dropped, why is the price soaring?

There are two reasons. First, U.S. consumers no longer set the price of fuel. Gasoline is traded in the global marketplace, and Americans are competing directly with consumers in Asia and Europe. If other people are willing to pay more, then American refiners can choose to ship the fuel to the highest bidder.

The second reason is more ominous: global credit expansion and dollar devaluation. In an attempt to stave off another economic collapse, central banks around the world, especially the Federal Reserve, are printing and lending money at record rates. All the extra money is designed to increase demand and thus get consumers and businesses spending again.

But the Fed’s plan may be backfiring. All the money printing and debt expansion is driving up prices of all kinds of commodities—including gasoline—but not because the economy is rapidly growing and people are driving more. Instead, the money printing is eroding the confidence in the dollar, and thus its purchasing power is declining.

Expect much more economic volatility in the months and years ahead. Popping debt bubbles and dollar devaluation will play a massive tug-of-war as deflation and inflation ravage the economy and people’s pocketbooks.