By Matt Bewig
United States - Despite
a growing consensus that speculators are behind recent price increases,
the government’s almost year-old oil speculation task force has done
little more than talk about the problem. From the beginning of January
to the end of February, the average retail price
per gallon of gasoline jumped 42 cents from $3.30 to $3.72–a spike of
12.7% in just eight weeks. This year’s pain at the pump is eerily
similar to last year’s, when gas prices jumped 77 cents from $3.19 to
$3.96 in just eleven weeks between February 21 and May 9–a leap of
24.1%.
In response to last year’s problem, in April 2011, President Obama
and Attorney General Eric Holder announced the creation of the Oil and
Gas Price Fraud Working Group, which was supposed to root out
speculators who buy and sell oil futures based on the predicted price of
oil. The trouble is, oil industry experts now estimate that financial
speculators account for about 65% of the trading in oil futures
contracts, up from 30% historically, leading many to conclude that the
reversed ratio explains the high and volatile oil and gasoline prices.
One analysis
estimated that as much as 30% of the current price can be attributed to
speculation. While the task force, which has met only four or five
times, has been assisting a Federal Trade Commission
investigation into gas prices since June 2011, a key problem is that
most price speculation is legal, unless a trader relies on insider
information or commits fraud, both of which can be difficult to prove.
Nevertheless, the fact that the U.S. today is producing more of its
own oil than it has in years, and supply is actually outstripping
demand, has many demanding action on gasoline prices. This year,
however, the President is emphasizing his proposal to eliminate tax breaks
that net the oil companies about $4 billion per year. Given the lack of
success of the oil speculation task force, those tax breaks are
probably safe for now.
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