It costs the United States Mint 2.14 cents to make one penny, but according to Credit Suisse Bank, for every one penny increase in the cost of a gallon of gas takes $1 billion of consumer spending away from other goods in the course of a year. These findings were reported by Bloomberg’s BusinessWeek.
So, a 50-cent hike in gas diverts $50 billion away from consumer spending, Credit Suisse concluded.
That’s a lot of money that the U.S. economy would benefit from. Think about it — local businesses could have more lawn mowers, washers and dryers, cars, and a host of other consumer goods flying out the door if the price of gas would drop or stabilize below $3 a gallon.
This morning at a Senate Energy and Natural Resources Committee hearing, U.S. Senator Maria Cantwell (D-WA) said Wall Street investors are artificially driving up the price of gas for Washington state drivers. Under questioning by Cantwell, the expert panelists testifying before the committee today agreed that the world price of oil – the key factor behind record high prices at the pump – is higher than what it should be based on supply and demand fundamentals, and that excessive speculation by non-commercial users in oil futures was one of those factors.
“Saying that we are going to allow a bunch of investors to treat the commodities market like they want to treat the rest of Wall Street from a securities and investment perspective I think is the wrong idea for commodities, something particularly as vital as gasoline,” Sen. Cantwell stated.
Don’t be surprised if Congress makes a move during this election year to collar commodity traders from continuing their ride on the surging price of oil futures.