that wreak havoc on the economy can only be prevented by government over-sight and management of price increases. Of course, the idea of government price increase management is considered heresy by the capitalist class and the champions of capitalist economics. But price controls have worked in the past (during World War II) and they are the only means of preventing the economic disorder that caused the 2008 Recession. The idea is for the government to prevent significant price increases that impact the entire economy as well as monitor and regulate the basis for price increases. Besides preventing price increases which significantly impact the economy (national, state, and local), the various governments (Federal, state, county and local) must control the outsourcing of jobs. American corporations and American CEO’s have a moral responsibility towards the people of the United States, all people.
Everything within an economy is related and inter-connected. For most goods and services, there is a series of suppliers, each connected to each other, most of which add value to the good or service as it is transformed from raw material to finished good or finished service. This series of suppliers is often referred to as the supply chain of the finished good or finished service. Obviously, the efficiency of the various supply chains is essential to the proper functioning and balance within the national, state and local economies. Supply chain efficiency results from collaboration among the various elements of the supply chain, the lack of domination of the supply chain by one or a few corporations and the prevention and elimination of any link that adds no value to the final product or service.
Over the past one hundred and fifty years there has developed a network of nodes within many supply chains that add absolutely no value whatsoever. They do however add price. These businesses function within commodity markets and trade commodities adding no value whatsoever to the commodities that they are trading. These so-called investors will buy commodities, yet never physically receive the commodity, nor store it, nor transport it, nor transform it in any way. Nor are these so-called investors even capable of physically receiving, storing, transporting or transforming the commodity that they buy. These so-called investors merely buy the commodity with the intention of selling it a short time later at a higher price and yielding a profit for themselves. From a supply chain efficiency point of view, from an economics point of view, and from the final consumer’s point of view, these investors represent a gross inefficiency since they add no value yet increase price.
Commodity market trading is a major factor in the present economic situation that the United States is in. Commodity market traders are adding significant price to commodities and yet there are no controls whatsoever on their activities. Consider the various commodities which are traded and whose supply chains are impacted by non-value added activities and whose prices are higher than they should be because of these non-value added activities: corn, oats, rice, soybeans, rapeseed, wheat, milk, cocoa, coffee, cotton, sugar, frozen concentrated orange juice, hogs, cattle, sheep, chickens, electricity, crude oil, natural gas, heating oil, gasoline, propane, iron ore, aluminum, copper, lead, nickel, tin, zinc, scrap steel, lumber, gold, platinum, silver, rubber, wool, and others. How much is added to the price of food, the price of energy, the price of furniture, the price of appliances, and the price of cars because of the price manipulation caused by buying and selling these commodities without adding any value whatsoever to the commodity.
Again, the role of the government (Federal, state and local) is to manage, direct and regulate the economy so that the economy can most efficiently and effectively satisfy the needs and desires of all people for food, water, clothing, shelter, furniture, appliances, energy, transportation, education, healthcare, disability care, old age care, etc. The government is failing in its responsibility to supervise and manage the economy by failing to regulate the commodity markets and eliminate these non-value-added actions by investors. The government must regulate the marketplace for commodities. The government must require and enforce that any person, persons or business that wants to engage in buying and selling commodities of any kind whatsoever (crude oil, metals, grains, farm animals, etc.) must be capable of physically storing, handling and transporting the commodities that they will buy and sell in the quantities that they intend to buy and sell. Furthermore, every purchase must result in the physical possession of the commodity before it can be sold. The practice of individuals and businesses who buy and sell commodities without ever taking physical possession of the commodity is a serious problem within any economy. These individuals who engage in buying commodities with the only intention of selling those commodities at a higher price without adding any value constitute a serious economic disorder that needs to be corrected immediately. It has been claimed that forty to fifty percent of the price of crude oil is due entirely to so-called investors who add no value to the crude oil supply chain and are not even capable of adding value to the crude oil supply chain. And this is true for other commodities as well. There has been a global food crisis for the ten several years with high prices for rice, wheat and corn and the non-value-added activities of commodity investors is one of the main causes of this crisis.
The government; Federal, state and local, regulate who can engage in a business or profession. The government regulates who can practice medicine or dentistry, who can sell drugs, and who can practice law. Even electrical contracting, plumbing contracting, and the various building contracting professions are regulated by the government. The government will only allow a qualified person, persons or business that can perform the work according to industry standards, to engage in a particular enterprise. The government is fully within its power to regulate the commodities trading industry and require those people engaging in the buying and selling of commodities to be qualified, that is, capable of handling, storing, transforming or transporting the particular commodity, or adding some value to the commodity.
While commodity speculators were partly responsible for the significant rise in the price of oil from 2000 to 2008, the major oil companies themselves are mainly responsible for the extreme and disordered rise in oil that precipitated the recession. In the same period that oil prices saw significant increases, oil company profits saw corresponding significant increases. Profits represent the difference between sales and costs. Oil companies either produce petroleum from their own fields, produce petroleum from non-owned fields for which they have contracts, or they buy petroleum on long-term contracts. It is important to note that the oil companies, like any fiscally conscious company, seek to control their costs. To control their costs, oil companies will enter into long-term contracts with their suppliers to stabilize the costs of petroleum. Unfortunately, most people naively think that the oil companies are paying commodity market price for the oil that they use to produce gasoline. That is absolutely incorrect. The cost of crude oil for the major oil companies has remained relatively stable from 2000 to 2008. This should be clear from the fact that during that time they realized record profits. The extremely high profits that the oil companies realized were the result of extremely high prices, artificially manipulated by Big Oil, with relatively stable costs. Profit equals price less cost. Profits increased dramatically because prices increased dramatically while costs remained the same.
The price of gasoline in the United States is primarily the result of manipulation by Big Oil. Through a long-term campaign by capitalist economists in which people have been brainwashed to think that all prices are the result of ‘supply and demand ’, through propaganda associated with commodity market trading, and through the subordination of the Federal government through its lobbying efforts; Big Oil is seeking to maximize its profits by maximizing the selling price of gasoline, diesel fuel, heating fuel, natural gas, propane, chemicals and all of the other derivatives of petroleum. And there is no one and nothing to control them. Big Oil has significant influence on the government (Federal, state, county and local). National energy policies, environmental policies and even foreign policies are dominated by Big Oil to the detriment of most of the US population.
What can be done to manage the price of gasoline, diesel fuel, heating fuel, natural gas, propane, chemicals and all the other various derivatives of petroleum which have a major and critical influence on the entire US economy ?
First, gasoline, diesel fuel, heating fuel, natural gas, propane, chemicals and all the other various derivatives of petroleum need to be declared national strategic economic resources. National strategic
