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- Crude Oil Speculators
- By Byron A. Ellis – May 06, 2009
It is time for President Obama to let the crude oil industry know that a return to speculative crude oil prices is not in the nation’s best interest. The price of gasoline has been steadily inching upwards in the absence of supply pressures.
Apparently, big oil believes that the Administration is preoccupied and will not detect creeping gasoline price increases.
Historically, in the United States spikes in crude oil prices precede recessions. A large body of research suggests that spikes in crude oil prices have considerable adverse effects on the economy.
The vast majority of futures crude oil trading is done by the oil industry itself. A New York Mercantile Exchange (NYMEX) studies suggest that the oil industry accounts for about 85 percent of trading.
This would imply that the oil industry itself bids up the future prices of crude oil by purchasing crude oil in the present to be delivered at some predetermined future date and price.
When speculators increase future demand, they artificially bid up the price of crude oil, even in the absence of shortages. As the price of crude rises, consumers pay more for energy and energy related commodities from their fixed income.
Thus, there is a wealth transfer from consumers to speculators, energy conglomerates and energy producing nations. As a result, consumers have less disposable income to purchase other necessities or commodities.
The ability of oil traders to bid up crude oil prices through NYMEX is not beneficial to average Americans. In fact, it jeopardizes the nation’s economic wellbeing and security.
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