Who to blame for high gas prices
Gas prices are rising, but the culprit may not be who you think.
Speculators are driving up the price of gas, at least according to Bernie Sanders, former senator from Vermont. According to an editorial from the senator, speculators now control about 80 percent of the oil futures market and are adding a 40 percent premium to the price of a barrel of oil.
Neither tensions with Iran, nor the fundamentals of supply and demand seem to support the current prices for crude oil, leaving speculators to blame.
The quick blame is on Iran. Sanctions on Iran for refusing to answer concerns over its nuclear ambitions have raised tensions in the region to the point some fear a disruption in supply. Speculators are using the possibility of disruption to demand higher prices.
However, according to Sanders, tensions with Iran are a feeble excuse because the fundamental laws of supply and demand do not support the current prices. Indeed, speculators work outside of those laws, placing virtual bets on the future price of oil based on rumors.
Meanwhile, the futures market remains unregulated and Wall Street lawyers buck the implementation of finance reform laws that could restrict the number of futures traders can buy. With reform efforts tied up in courts, and Iran refusing to cooperate with inspectors, the climate is just right for speculators to bet ever higher on oil futures.
Unfortunately, this translates into pain you feel at the pump.
Back on Main Street, oil supplies are higher than they have been in years, and consumption of gasoline has dropped to its lowest since 2007.
Politicians have been quick to take up this issue, especially in an election year. President Obama has been warned that the spike in prices could damage the fragile economic recovery going on and the people have already been warned that any tax savings from tax cut extensions are now going into the pockets of speculators.
This isn't sitting well with the people, a particularly serious fact in an election year.
If there's any consolation, the price of oil is bound to fall, and like a game of hot potato, somebody on Wall Street is bound to lose -- big. On Wall Street, they're known as "pigs" -- investors who try to make quick profits by speculating. The danger is that not every bet can be a winner. At the first sign of good news, such as a deal with Iran that prevents war, the prices will plummet and speculators who are holding high-priced futures will have to pay those prices regardless, literally losing their fortunes in seconds.
In the meantime, the pain continues for Main Street and a fragile economic recovery becomes increasingly uncertain.
© 2012, Catholic Online. Distributed by NEWS CONSORTIUM.
- - -
Pope Benedict XVI's Prayer Intentions for January 2013
General Intention: The Faith of Christians. That in this Year of Faith Christians may deepen their knowledge of the mystery of Christ and witness joyfully to the gift of faith in him.
Missionary Intention: Middle Eastern Christians. That the Christian communities of the Middle East, often discriminated against, may receive from the Holy Spirit the strength of fidelity and perseverance.
Keywords: Oil, gas, prices, speculators, speculation, Wall Street
Rate This Article
Leave a Comment
More Business & Economics News
- BAILOUT: Treasury, UAW health care trust will sell 50 million shares of GM stock at a $10 BILLION loss
- Great Recession took its toll: Americans missing their wealth
- Mom making more than dad in one in four U.S. homes
- Web developer: Earn $60,000 a year - without college degree or debt
- China, India, Brazil could dominate global investment by 2030
- Unemployment in U.S. comes roaring back - in a big way
- Criminally unfair? Why disgraced Enron CEO Skilling could see freedom sooner than you think
- Berkshire Hathaway Inc. hits first quarter record profit at 51 percent
- China and Japan now hold record amounts of Obama debt
- Fr. Paul Schenck: Finding Living Faith on Catechetical Sunday
- The Movie Yellow: Incest as 'Normal' and Cassavates's Slides Into the World of Woes
- The Chicago School Teachers Strike Reveals the Need For School Choice
- The Sexual Barbarians and the Dissolution of Culture
- The Happy Priest Challenges Us to Ask: Who is Jesus to Me?
- Michael Coren on Canadian Public Schools: Teachers, leave those kids alone
- We Cannot Ignore Our Consciences: Cardinal Dolan On Religious Liberty
- In the Face of Danger, Successor of Peter Travels to Lebanon as a Messenger of Peace
- Reflections on the Dignity and Vocation of Women: Who or What?
Disclaimer: The columns, articles, advertisers claims and any other features provided on Catholic Online Business & Economics are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author's own and not necessarily those of Catholic Online and there is no implied endorsement by Catholic Online of any advice or trading strategy.