The Single Most Important Thing to Understand About Rising Gas Prices

In the attached article Louis Woodhill at Forbes.com explains why it is not that gas prices are rising. It is that the dollar is falling. Priced in gold gas is historically underpriced and so may have much further to go.

What few people know is that oil is priced in US dollars, and the for the most part, only in US dollars. As such, as the dollar goes down the price of oil goes up. So, as the Fed continues to pour dollars into the world economic system one very important result is that the “price” of oil goes up.

For those who want to really delve into this phenomenon, and trust me it is a rabbit hole, start by learning about the petrodollar.

Some have even argued that the dollar is not even a true fiat currency, and that it is in essence backed by oil, though not explicitly.

Louis Woodhill in the attached article rightly worries that our “leaders” in Washington will do something stupid in response to the pressure rising gasoline prices bring. Woodhill raises the specter of price controls similar to those seen in the 1970s. Let’s pray that they won’t do anything so unwise.

This is a very real example of how the meddling and manipulation of the Federal Reserve and other central banks make life harder for most people. Not only can’t you get a decent return on your certificate of deposit, now the cost of gas is about to eat further into your wallet.

Each time that gasoline price notches up in coming weeks you thank the Fed for making your life more difficult; that and the fact that Iran is in our sites.

We are printing with abandon and also rattling a sabre again in the Middle East. Lord knows where we will be by summer. If there was a time to pay extra attention, now is the time.

Click here for the Forbes article.