Incredibly, since the later part of June, the price of crude oil has spiked by $12 a barrel to close at $107/bbl oil yesterday, a jump of close to 15 percent over three weeks. The impact of the rise of oil prices on gasoline prices is already being felt and will become more accentuated in the days and weeks ahead.
Of course the oil patch and their allies are trotting out all the usual alibis: 'drawdown in inventories,' 'summer driving season,' 'geopolitical angst about Eygpt,' etc. -- all of which have been debunked in this corner in previous and recent postings (please see "The Price of Oil: Speculation, Manipulation, Or a Deeply Broken System").
Clearly what has rarely been touched upon is the massive speculation that has embraced this market and the flood of recent speculative money that has hyped the price of oil and in consequence gasoline at the cost to American consumers and at the enormous profit of the speculators. The relationship between speculative trading on the exchanges and the legitimate hedging by actual physical oil producers and physical oil consumers has gone completely off the rails. Only last year, in a report fashioned by an agency of the United Nations reporting that exchange-traded derivatives are 20 to 30 times physical production, and in the case of the recent run-up of oil, one can readily project that those ratios have only become more extreme.
The system stinks. Speculators and Wall Street players and the oil patch win, amassing enormous profits, contributing nothing, while Americans are fleeced for goods vital to their daily lives.
It's time for our government, the Department of Energy, to step in to level the playing field. In their hands is a powerful tool, bought and paid for by America's citizenry -- the Strategic Petroleum Reserve -- over 700 million barrels of oil accumulated well before America's renaissance as an oil producer. Just the release of a small portion of that vast holding would not only have a vast influence on the traded price of oil, it would also send a signal to the speculators that their one way profitability is no longer a sure thing, while bringing enormous benefit to American consumers and the economy.
Make your voice heard. Contact your Congressman and Senators. OUR SILENCE is the speculator's, Wall Street and the oil patch's most effective tool!