With gas prices soaring of late, this seems like a good time to re-post an article I wrote last summer about the reasons for fluctuation in the price of oil. I’ve added some additional material at the bottom of this post…..
Why You Are Going Broke Filling Up Your Car
by Arlen Grossman/ The Big Picture Report/ August 24, 2011
“There has been a major debate over the last several years as to whether spikes in oil prices are caused by the fundamentals of supply and demand or whether excessive speculation in the oil futures market is playing a major role…It seems to me that debate has finally ended. We now know that excessive oil speculation is a major reason why oil prices have risen so sharply.”
Senator Bernie Sanders (I-VT) in a letter to Gery Gensler, the Chairman of the Commodity Futures Trading Commission, August 22, 2011
If you have wondered what causes gas prices to go up and down (more often up than down) you are not alone. Americans have been digging deeper into their wallets to keep the fuel tanks of their vehicles full, and wondering about the daily fluctulations in gas prices.
After all, why is the price for gasoline almost a dollar more per gallon than it was two years ago when oil supplies were lower and demand was higher?
The answer is now clearer than ever.
Senator Bernie Sanders released secret information compiled from the Commodity Futures Trading Commission (CFTC) shedding light on the major role that financial speculators–the same ones that brought on the meltdown of our economy in 2007-2008–play in determining how much you are paying at the gas pumps.
According to Senator Sanders, “This report clearly shows that in the summer of 2008 when gas prices spiked to more than $4 a gallon, Goldman Sachs, Morgan Stanley, and other speculators on Wall Street dominated the crude oil futures market causing tremendous damage to the entire economy, The CFTC has kept this information hidden from the American public for nearly three years. That is an outrage.” He believes these speculators “are playing the same games in 2011.” Statement by Senator Sanders
Senator Maria Cantwell (D-WA), during a Senate Finance Committee hearing last May, pointed out that the oil futures market was set up to moderate the price and risk of petroleum for those who use it, but at this time “70 percent of the market being driven by speculators that are not the end-takers of any product.” Senator Cantwell Press Release
Senator Sanders introduced the “End Excessive Oil Speculation Now Act of 2011” (S . 1200) last June that would require the CFTC chairman to impose strict limits on the trading of oil speculators.
In his August 22 letter to CFTC Chairman Gensler, Senator Sanders urged the chairman to convene an emergency meeting of the CFTC “to impose strong position limits that would eliminate excessive oil speculation as soon as possible.”
The Dodd-Frank Wall Street reform law enacted last year required the CFTC to impose strict limits on oil speculators by January 17, 2011. The CFTC is “breaking the law” by not doing so, Senator Sanders wrote to Gensler. Letter to CFTC Commissioner
The Commission claims it lacks enough information. Senator Sander, despite three years of collecting data. Senator Sanders called their excuses “laughable.”
“The American people have a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today.” Reuters articleSenators Cantwell and Sanders
POSTED IN OPEDNEWS.COM 08/26/2011
According to a Seattle Times story from April 17, 2011,
About 64 cents a gallon can be attributed to overspeculation, according to an analysis by Cantwell’s staff and a CFTC commissioner, Bart Chilton.
At the time, gas prices in Seattle were averaging $3.93 a gallon.
And from CNN Money (10/14/2011):
“Speculation will add $600 to the average household expenditures on gasoline in 2011,” a report released Thursday by the Consumer Federation of America said, “resulting in the highest level of spending ever of almost $2,900.