Situation one: Many are saying that financial industry speculators have taken over the oil commodity market hat banks and public and company pension funds are responsible for as much as $1 of the price of gasoline. And these oil futures speculators are major New York banks and even union retirement funds such as Morgan Stanley and state pension and government union funds. (Morgan Stanley is reportedly the biggest holder of oil reserves in state of Connecticut—the bank will never take delivery of one ounce of oil)
Situation two: The price of gasoline in the U.S. is not about the demand for oil in China and India. Nor is it about the supply of oil to refineries that seem reluctant to refine to capacity, but is caused by outright manipulation of the commodity market by speculating big banks and pension funds.
For example: Supply of crude oil to be refined went up nearly 16 B barrels during April. Some congressional representatives are calling the CFTC Market a “casino” and saying that the oil futures market is a den of gamblers who are deeply affecting, if not controlling, the price of oil and subsequently gasoline.
So why so significant? The market factors which seem to be impacting the cost of oil are apparently as much as 80 percent speculative and 20 percent dependent on real supply and demand.
There seems to be support for this free market of commodization of oil even though many people think and know it is “rigged.”
Go see what the CFTC, or Commodity Futures Trading Commission actually does at: http://www.cftc.gov/index.htm
Actions to correct: First, the Obama administration is seeking to get a $100 million of funding for the CFTC as a part of the Dodd Frank Law as it seeks to regulate energy and commerce. Congress and the automotive industry have got to wake up and do something to fix this situation ASAP.
What may happen: Feds and regulators expose this “casino-like” market. The price of crude plummets from the $140 per barrel range now to say, $40 per barrel; a lot of banks and pension funds of the “middle class” are exposed and embarrassed; MPG performance of new cars and trucks keeps improving over the next year; small vehicles with 4 cyl engines increase on the roads; electrics and CNG vehicles operated by fleets keep up.
Bottom line scenario: The issue of gas prices disappears from the rhetoric of the current presidential campaign; Chevron and Exxon Mobil profits decline or become an non-issue with the public; new car sales increase to the 15 million level in 2013 and we all get back to building business and taking the kids to school and soccer games in vehicles powered by ICE and alternative powered engines and power plants-more efficiently and less costly than in years past.
Sourcing of experts and influentials: Watch for the appearance, writings and of course, content by Michael Greenberger of University of Maryland Law School. This man has a complete grasp of the issues surrounding commodities and derivatives and has been on several of the serious night time news shows. Check him out at: http://www.law.umaryland.edu/faculty/profiles/faculty.html?facultynum=059