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June 09, 2007

The Real Reason for High Gas Prices
by Clif Droke

A major news service ran a couple of feature stories on the Internet this week on the topic of high gas prices. Although different in the details, it was substantially similar to articles they've run off and on over the past two years. This particular article seems to appear whenever gas prices get so high that Americans start grumbling and passing around that chain e-mail about boycotting ExxonMobil.

They really outdid themselves this time, though. The writers offered some not-so-valuable advice on how readers could "profit" from high gas prices: buy stock in the big oil oligopolies like BP Amoco and ExxonMobil. (As if the average American can afford to drop $8,200 on 100 shares of XOM, which, as we're about to discover, is about the same amount they're paying on their yearly gas bills.) With "advice" like this it's little wonder that people are increasingly tuning out the mainstream media and looking to the alternative press to get the real news of the day.

But the most shocking part of the article was the admission that millions of Americans are "feeling broke" yet can't seem to figure out why. The article tells them why: because the average American is spending over $8,000 per year or more on gasoline alone. If you do the math you will find that comes to almost one-fourth of the average yearly income of a single adult. This amounts to highway robbery on the grandest scale imaginable. The government constantly warns us of the so-called terrorist threat, yet the only place one ever sees hostages being taken is at the pumps.

Speaking of terrorism, it is becoming increasingly obvious the real reason for the persistently high gas prices. Has it occurred to anyone that we are now four years into a war with Iraq and yet we haven't seen any noteworthy increases in taxes? The Bush Administration has in fact gone out of its way to portray itself as a tax-cutting regime for the benefit of the American businessman. Truth be told, Bush & Co. are so unpopular right now that any attempt on their part to overtly increase taxes would see them all run out of Washington on a rail. Yet have you ever heard of a major war being fought that didn't involve an increase in taxes? After all, wars are brutally expensive affairs that can easily run into the hundreds of billions of dollars. So who is financing this war?

In his magnum opus, "A History of the English-Speaking Peoples" (Volume 1), Sir Winston Churchill, himself and insider who rubbed elbows with the "illuminati" types, wrote that it has always been the policy of big governments from old English times onward to borrow money for war, whenever practicable, from large commercial concerns. For instance, the English kings of old were wont to take out loans from the leading monopolists of the day, the wool merchants, for waging expensive wars. This provided a rather indirect route to much needed monies for the war chest. And it obviated the need to press upon the easily agitated citizenry for funding the most expensive of endeavors....at least temporarily.

Taking a page from this old English custom, the Bush regime is obviously obtaining massive funds for waging the Iraqi war from the major oil companies. In turn, the oil companies are extracting money from the retail end-user, namely you and me, to provide short-term servicing of this war debt. On top of that, the oil conglomerates will reap the further benefits of Middle East colonization as the rich plum of Iraq's oil falls into their collective lap.

Meanwhile, back at home, the debt our government has taken on will have to be paid the only way it knows how -- by passing it on to the citizens in the form of taxation. Yes, fellow citizens, higher taxes are coming. But the taxes likely won't arrive until after the Bush administration exits and the new regime enters (likely the second Clinton Administration). Are you beginning to see a pattern emerging here: a Bush administration comes alone (1988-1992) and with it comes an oil price spike and a war in Iraq. Then along comes a Clinton (1992-2000) and we see falling oil and gas prices but huge increases in bureaucracy and taxation. Then another Bush regime (2000-2008) and more high oil/gas prices and another war in Iraq. When Hillary arrives in 2009 we'll likely witness the return of deflation and more new taxes. (At this point I can't help but think of dear old Churchill, who would no doubt be proud to find that the old British custom of dynastic monarchy has been revived in modern-day America in the form of the Bush/Clinton/Bush/Clinton line.)

We now arrive at the conundrum of the day, viz. how will Americans be able to pay the next round of tax increases in 2009 and beyond if they've been tapped dry by the onerous "tax" of high gas prices? The answer is obvious: the bull market will be allowed to continue but with a twist. This time the average retail investor will be invited along to participate fully without being beaten over the head by the big stick of fear the mainstream press has been using against him since 2004. The return of the retail investor will be accomplished by way of a much needed priming of the money and credit pump, among other things. Once the banks have done their part to fully re-liquify the monetary system, Americans will use the massive infusions of cash as an opportunity to participate in building up another speculative bubble, which will be bolstered by increases in productivity, job growth and the next wave in the technology revolution. Bubbles are products of forethought by the insiders, however, and this one will be used to increase America's collective bank account for the next round of taxes in 2009 and beyond.

The wise and prudent reader will no doubt use this coming time of temporary prosperity to bolster his financial position and prepare for the coming onslaught of 2009 and beyond.

Clif Droke
ClifDroke.com

Clif Droke is the editor of Gold Strategies Review., providing forecasts and analysis of the leading North American small cap, mid-tier and senior mining stocks from a short- and intermediate-term technical standpoint since 1998. He is also the author of numerous books, including "Channel Buster: How to Trade the Most Profitable Chart Pattern" For more information visit www.clifdroke.com

Copyright © 2003-2009 Clif Droke

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