Actually this is a simple question to answer. Typically in October the price of gas drops as the refiners move to ‘winter blend’, this is a cheaper product to produce as less additives such as Ethanol are used.

I saw an overnight leap of 10 cents a gallon. What is causing this?

We are in a perfect storm! Yesterday West Texas crude was at $78 a barrel and Brent $81. Analysts predict that both markets will hit $100 a barrel before the end of the year.

The reason is simple, the US sanctions against Iran are set to hit in 3 weeks, and it is already making the oil futures market very unstable. The lack of Iranian oil on most of the worlds markets will cause a lack of supply, hence increase in price. This is simple supply and demand. The US is producing more oil than it needs, but it imports refined products because it does not have the refining capacity, so the US consumer gets to pay the price for the sanctions.

Sure Iran is not a top player, but is a significant one. Neither Saudi Arabia of Russia are keen to produce more oil. The Saudi’s view Oil as a diminishing resource and Russia need the cost of crude to be $100 to make a profit.,

The EPA ia also set to change the rules on Ethanol, permitting it year round and increasing the amount from 10% to 15%. While this is a gift to the Midwest corn farmers grumbling about tariffs, it does nothing to help the 97% of people that do not live in the corn growing region.

If you shop at Dollar Tree or its subsidiary Family Dollar you are also in for some changes. Family Dollar will be increasing prices and Dollar Tree will likely be forced to carry a smaller range of items. Prices at Walmart are also destined to rise before Christmas. Sure the freight cost will be impacted by fuel costs, but that is insignificant to the effect of the US tariffs on China. This is from Fox News, so it must be real. 

Oh and the steel and aluminum tariffs already are taking their toll on manufacturing. Ford claims they have paid a $billion so far and are looking at layoffs.

 

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