Rep. Ed Markey: Oil Speculators Cost Consumers $31 Billion this Summer

As oil prices continued to rise steadily on world markets during the early part of 2008, it became clear to many energy and economic experts around the world that supply and demand were not the only forces pushing prices higher. Market speculators who had no intent of accepting delivery of crude oil were buying and selling futures contracts to make quick profits as the price of oil continued to race upward. Market volatility exploded. During 1998, a barrel of oil traded within a $7 price range the entire year. A decade later, price swings of that magnitude were being seen in a single day. As long as another trader was willing to buy a contract at an even higher price than the original trader had purchased it, the bubble continued to inflate. While this phenomenon has occurred with different commodities and goods since nearly the beginning of markets, never before has a price bubble so deeply affected the pocket books of the American consumer.

On August 21, 2008, the Washington Post reported that the Commodity Futures Trading Commission (CFTC) has now learned that an astonishing 80 percent or more of oil contracts on the New York futures market are held by speculators. “Financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on the NYMEX, a far bigger share than had previously been reported by the agency.” At one point in July, a single foreign energy firm held 11 percent of all regulated NYMEX oil futures contracts for the purpose of speculation…

Saudis reject Bush’s advice to increase oil production
They won’t commit to increasing output, though the U.S. says such a move would be good for everybody.

January 16, 2008 in print edition A-3

President Bush and Saudi leaders tangled Tuesday over the price of oil, with the president reminding this wealthy desert kingdom that U.S. purchases could fall if the American economy slips and with a Saudi official refusing to commit his country to greater production to reduce costs at the pump.

Bush said the price of oil, driven up by growing demand in the United States but an even greater increase in China and India, had become “painful for our consumers.” He suggested that oil-producing nations open their spigots for their own good.

Mr. Bush likely arrived at the same conclusion that many Americans did when he said the price of oil was driven up by “growing demand” in the United States. That certainly was a safe way of describing the problem. But more detail was needed and a “ton of Americans” knew that. Their had to be something in that “growing demand” that warranted investigation.

America loves to solve problems.

And it wasn’t long before America had found and published the likely reason for the escalation in oil prices. The “WHO” has been found. But is there a WHY?

One of the things one might note is “behavior” of the price of gasoline. The price of gasoline followed the upward trek of the price of oil but parted company when the price of oil started to descend. The two were “joined at the hip” going up but not so – going down.

At least the 2008 gasoline price increase did not require the long lines at the gas pumps – that the 1973 gasoline price increase did.

So, the surging oil prices may have transported gasoline to its new price high and opened the door for BIG OIL to drill “where no man has drilled before”.