Gas prices spike; blame Wall Street?
WASHINGTON — Gasoline prices are soaring again and eating away at the purchasing power of ordinary Americans. And again, financial speculators appear to be a big part of the story.
The national average pump price hit $3.74 for a gallon of unleaded gasoline Tuesday, up 44 cents per gallon from just a month ago, according to the AAA’s Fuel Gauge Report.
Rising gasoline prices act like a tax on consumers, harming the economy by whittling away at the amount of money the consumer can spend on other things. Gas expenditures as a percentage of U.S. household income hit three-decade highs in 2012, and the recent spike suggests 2013 might not be much better.
It’s not all supply-and-demand.
The rising gasoline prices come even as the United States now produces more than half the oil it consumes. In fact, the nearly 800,000 barrel-per-day increase in U.S. production output from 2011 to 2012 reflected the largest one-year jump since oil drilling began in 1859.
The U.S. Energy Information Administration projects that U.S. oil production will rise from 6.89 million barrels per day in November 2012 to 8.15 million by December 2014. At the same time, the International Energy Agency has lowered its estimates for global demand for oil. OPEC, the oil-exporters cartel, has reduced production.
It all argues for lower oil prices, or at least less volatility in the prices.
Enter financial speculation. Commercial users of oil such as airlines and trucking companies that once dominated 70 percent of the market for future deliveries of oil now represent just 30 percent. Noncommercial financial speculators dominate 70 percent of the market.
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