The Chicago Tribune reported today that gas is going up to $5 a gallon in Chicago. Nationally, gas prices have increased by 19 cents over the past three weeks. Conventional wisdom would argue that because there's conflict in the Middle East -- in particular, Libya -- we'll have higher oil prices. But given that supply has not been disrupted, one must point to another culprit: speculation.
An article on Bnet.com quotes the following statistic regarding oil speculation:
Mohsin Khan of the Peterson Institute for International Economics estimates that three years ago, speculation pushed up oil prices by nearly $70 a barrel. Now that linkage between Wall Street and prices at the pump is more alarming than ever: Speculation on oil futures is at a record high. As Chilton said in another presentation, since June 2008 the number of energy contracts held by such investors has risen 64 percent.
The Dodd-Frank bill was supposed to curb this level of speculation, but ink hasn't touched the paper, so to speak, as traders and advocacy groups push back against any proposed changes to the current system.
A Huffington Post blog piece points out that more than 30 complex rule-making areas exist in the area of speculation, and the Commodities and Futures Trading Commission has "given up trying" to craft a rule on position limits for derivatives trade until 2012.
Why the wait? And who's going to hold the CFTC's feet to the fire? Though the new rules were supposed to be in place by February, nothing has gotten done. And in the meantime, the price of gas continues to creep up and up and up.