High gas prices: Are traders to blame?

Record-high gas prices have been blamed on unrest in the Middle East, a pickup in the economy and rising demand from China and India. President Barack Obama is confronting Americans' anxiety over rising gasoline prices by drawing attention to his energy policies and taking credit for increased oil and gas production, a greater mix of energy sources and decreased consumption.

But it appears rising gas prices are mostly due to the work of Wall Street speculators and traders -- not any increase in demand, according to a new report from Yardeni Research.

Mr. Obama is heading to Florida on Thursday to promote an energy strategy that the administration says will reduce dependence on foreign oil in the long term. But the president's pitch will also have a subtext: That the federal government can do little to halt the current rise in gasoline prices.

Obama to address gas prices, pitch energy policy
Oil prices hit 150-year high
Q&A: What the Dow numbers really mean

That certainly appears to be the case, according to economist Ed Yardeni, president of Yardeni Research. Oil futures traded on the New York Mercantile Exchange have leaped above $106 a barrel. The current national average for a gallon of regular gas stands at $3.61, up from $3.19 a year ago, according to AAA's fuel gauge report. That's the highest price at the pump ever for this time of year.

But speculators in the gas futures markets are largely to blame, according to Yardeni, not demand. "Large speculators and small traders were net long a record 101,926 [gas futures] contracts on February 14," Yardeni writes in a note to clients.

Since each contract is for 42,000 gallons, or 1,000 barrels, of gas, and gasoline inventories in the U.S. stood at 232 million barrels, "speculators and traders, in effect, held a record 43.8 percent of U.S. inventories," Yardeni says.

The economist says speculators must be betting that the confrontation with Iran will worsen, pushing gas prices still higher. "They certainly can't be betting on strong U.S. demand for gasoline," says Yardeni. Over the past year, gas usage fell to its lowest since Nov. 28, 2003.

"Americans are driving less and driving in more fuel efficient vehicles," Yardeni writes. See the chart of gas supplies vs. vehicle miles driven, courtesy of Yardeni Research, below:

(Credit: Yardeni Research)

Also from MoneyWatch: "Ask the Experts" looks at gas prices

[credibility2]

The fact that our president has remained silent on his issue is appalling. He is as much a part of this as traders, geo-political issues, etc. Our president, his party and the enviro-terrorists are hoping the price of gas gets so high that they have the consumer on their knees. All of them are enjoying the pain we're going through.

[tsigili]

Most of the problem is at least exacerbated by traders, yes. Anything that is involved in speculation, and oil is, is subject to the practices of traders trying to make a fortune from the markets.

Greed is killing this planet.

[web6242a]

The price of oil is the direct result of speculators cashing in on the fear of supply disruption, due to Iran's intransigence. The solution is simple -- The President must sign an Executive Order, directing the SEC. CFTC, and all Index Authorities to, "In the Interest of National Security, due to increased speculative fear, all trades, and traders in the oil Futures Market must adhere to a temporary 25% margin requirement, till such times as regulators deem acceptable. " It is the Oil speculators, who are currently playing World Political tension for short term personal gain. Margin Requirements are currently only a paltry 2-10% -- A rise to 25% will flush out the opportunist prognosticators and help stabilize the market. All Countries suffer from high oil prices. It is clearly a National Security Issue.

[ajvw]

Who is John Galt?

[Sno317]

Finally an article with some truth to it been to all other news sites and they keep blaming iran this is what i posted Its all price manipulation by big oil and wall st they were shutting down refineries monthes ago now thy are blaming iran and some fire in washingston its all a bunch of crap i dont care if drill more here or try go more green it dont matter they will still drive up the price

Its all big bussiness and wall st and politicians taking advantage of the little man . We will never get fair representation when you have millionaires and billionaires representing the common man. As long as we keeping letting big corporations sink big money into campaigns and lobbist things will never change. Media outlets need to report the truth.

[GeorgeKafantaris]

Iran is in a serious dilemma. On the one hand it wants to show the world all it's got and put it at ease, while on the other hand it fears that such show 'n tell will give its enemies a roadmap to bomb it.
Saddam Hussein faced a similar dilemma ten years ago. Though he wanted the world to know he had nothing to hide, he also wanted to bluff his archenemy Iran into believing Iraq still had WMD.
Bluffing did not go well for Saddam, and it might not go well for Ahmadinejad.
But since the price tag for ridding Saddam proved high, we ought to reflect what we are asking of Iran now. On the eve of a threatened attack, we are asking it to take us to the depths of its arsenal and show us all it's got.
Such great expectations are a sign we have been talking to our friends too long and are in need of a broader perspective. Exactly when was the last time we asked Pakistan, India, China or Russia to show us their arsenal?
"But those countries are not advocating the destruction of Israel."
True, but Israel is not a thorn on their side either.
Surely, however, we can see beyond the hyperboles and figure out their underlying purpose. Or have we forgotten that not all Iranians are thrilled with Ahmadinejad?
He sure hasn't.
Nor has he forgotten that that his countrymen hate Israel even more. So he tells them that Israel will be wiped from the face of the earth. Expectantly, this nonsense unites them against a common enemy. It even becomes a diversion from the misery and isolation brought on by his anachronistic regime.
Quite clever work by Ahmadinejad -- and not a rial spent or a bullet fired.
So why are we letting the crazy talk about destroying Israel get us all worked-up -- to the point of turning the world topsy-turvy again.
Can we not plainly see the machinations of an unpopular regime trying to hold on to power?

[luckinbi]

There's a load of freshly printed Federal Reserve & European Community Bank money out there that has pushed stock markets higher.

It's no surprise that Oil (Black Gold) is inflating just like Yellow Gold.

We here in the US should be happy that North American oil can be exported, we have a huge trade deficit that hurts the dollars value.

Natural Gas is expensive to export and should be used for our transportation needs. Generating electricity with natural gas is a waste as there are other fuel better suited to non-transportation uses.

[web6242a]

The solution to speculative oil price rising is extremely simple. Raise margin requirements on all players. Right now low margins allow any fool to play with OPM (Other People's Money ) If you raise the margin to 25% the price of oil will drop like a lead balloon. The exchanges need to demand a higher stake from all investors in order to play. That will clear the pipeline in a flash!!!!!!

[DaveInRacine]

"Obama..taking credit for increased oil and gas production." Note that the increase actually started in the Bush administration.

[fiberglass3]

Yes you are totally right. The increase in gas prices certainly did start during the Bush administration.....

[suejack100]

Bullets on subjects that are the reason why oil/ gas is so expensive

Diminishing Commodity

Monopoly With emerging markets oil demand will grow Why do we not have new refineries built.

The countries in the Middle East with oil are BUYING peace They need a high price for a barrel of oil.

At home,our 1%'s life style is threaten with lower gas consuption
SOLUTION Increase the price at the pump to make up the difference. SUCKERS !!!

Law of Supply & Demand: WHAT IS THAT !!!!

[HandyAndy5]

High gas prices are all our fault because we should have switched to electric cars in the '70s.