U.S. Use of Gasoline is Down, Yet Pump Prices are Up as Speculators Move In

Friday, February 24, 2012
Driven in large part by market speculators, the price of gasoline has increased significantly recently—at a time when demand at the pump is down.
 
In fact, demand for oil and gasoline is down so much that the U.S. has become a net exporter of the fossil fuel.
 
Traders on the New York Mercantile Exchange have been buying up oil futures, driving the price per barrel to $106. The brewing crisis with Iran in the Persian Gulf has been cited as one reason for the increase in trading, but speculation would appear to be a bigger factor.
 
“Speculation is now part of the DNA of oil prices. You cannot separate the two anymore. There is no demarcation,” Fadel Gheit, an analyst at Oppenheimer & Co., told McClatchy Newspapers. “I still remain convinced oil prices are inflated.”
 
According to Kevin Hall of McClatchy, historically speculators have accounted for 30% of oil trading, while actual producers and users accounted for 70%. Now however, the oil market is dominated by speculators who are looking for a profit by buying and selling any commodity they think works. The latest weekly report issued by the Commodity Futures Trading Commission showed that producers and merchants accounted for only 36% of trades, while speculators made up 64%.
 
The average price for a gallon of gasoline this week stood at $3.57, compared with $3.38 a month ago and $3.17 in 2011.
-Noel Brinkerhoff, David Wallechinsky
 
To Learn More:
Regular Gasoline Retail Prices (Dollars per Gallon) (Energy Information Administration)

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