{"id":6338,"date":"2012-02-24T07:00:20","date_gmt":"2012-02-24T13:00:20","guid":{"rendered":"http:\/\/stateimpact.npr.org\/texas\/?p=6338"},"modified":"2012-02-24T11:39:17","modified_gmt":"2012-02-24T17:39:17","slug":"pain-at-the-pump-do-oil-speculators-need-reigning-in","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/texas\/2012\/02\/24\/pain-at-the-pump-do-oil-speculators-need-reigning-in\/","title":{"rendered":"Why Are Gas Prices So High? Speculating About Oil Speculation"},"content":{"rendered":"<div id=\"attachment_6343\"  class=\"wp-caption module image center\" style=\"max-width: 620px;\"><a class=\"fancybox\" title=\"Prices creep towards $4 a gallon at a Houston gas station\" href=\"http:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1320touchup.jpg\" rel=\"\"><img decoding=\"async\" loading=\"lazy\" class=\"size-large wp-image-6343\" title=\"img 1320\" src=\"http:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1320touchup-620x465.jpg\" alt=\"\" width=\"620\" height=\"465\" srcset=\"https:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1320touchup-620x465.jpg 620w, https:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1320touchup-300x224.jpg 300w, https:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1320touchup-220x165.jpg 220w, https:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1320touchup-138x103.jpg 138w\" sizes=\"(max-width: 620px) 100vw, 620px\" \/><\/a><p class=\"wp-media-credit\">Dave Fehling\/StateImpact Texas<\/p><p class=\"wp-caption-text\">Prices creep towards $4 a gallon at a Houston gas station<\/p><\/div>\n<p>With oil surpassing $100 a barrel, drivers are feeling the pain at the pump and some wonder if it&#8217;s simply a case of supply and demand. Or maybe something else.<\/p>\n<p>&#8220;It&#8217;s sad, but people are very greedy,&#8221; said Houston driver Jodie Minear as she put $60 of fuel into her Jeep SUV at a Chevron station along Highway 59.<\/p>\n<p>Does she have suspicions as to how prices are set?<\/p>\n<p>&#8220;Definitely, I think everybody does.&#8221;<\/p>\n\n<p>She&#8217;s not alone.<\/p>\n<p><!--more--><\/p>\n<div class=\"related-content alignright\"><h4 class=\"related-header\">Related<\/h4><div class=\"links\"><h5>Posts<\/h5><ul><li class=\"link\"><a href=\"http:\/\/stateimpact.npr.org\/texas\/2012\/02\/14\/this-land-was-your-land-now-its-our-land-keystone-xl-and-eminent-domain\/\">This Land Was Your Land, Now It\u2019s Our Land: Keystone XL and Eminent Domain<\/a><\/li><li class=\"link\"><a href=\"http:\/\/stateimpact.npr.org\/texas\/2012\/02\/17\/ex-shell-ceo-and-peak-oil-researcher-face-off-on-americas-energy-future\/\">Ex-Shell CEO and Peak Oil Researcher Face Off Over America\u2019s Energy Future<\/a><\/li><li class=\"link\"><a href=\"http:\/\/stateimpact.npr.org\/texas\/2012\/02\/21\/how-biggest-power-plant-in-texas-will-use-pollution-to-pump-oil\/\">How the Biggest Power Plant in Texas Will Use Pollution to Pump\u00a0Oil<\/a><\/li><li class=\"link\"><a href=\"http:\/\/stateimpact.npr.org\/texas\/2012\/02\/23\/whats-new-in-obamas-energy-policy\/\">What\u2019s New in Obama\u2019s Energy Policy<\/a><\/li><\/ul><\/div><div class=\"topics\"><h5>Topics<\/h5><p class=\"topic\"><img class=\"alignleft\" src=\"http:\/\/stateimpact.npr.org\/texas\/files\/2011\/09\/BP-oil-spill-60x60.jpg\" height=\"60\" width=\"60\" \/><a href=\"http:\/\/stateimpact.npr.org\/texas\/topic\/bp-oil-spill\/\">The BP Oil\u00a0Spill<\/a><\/p><\/div><\/div>\n<p>Back in July 2008, oil prices topped out at a record $145 a barrel. Some in Congress were convinced it had to be because greedy speculators were gaming the system, running up the price of oil and fleecing American consumers.<\/p>\n<p>&#8220;[The market for oil] has now been taken over by an orgy of speculation. Speculators control these markets, driving up the price, despite the fact there has been no change in the fundamentals.&#8221; said then-Senator Byron Dorgan, a Democrat from North Dakota. He was speaking on the Senate floor in July 2008, railing against what he said had &#8220;broken&#8221; the futures market for oil.<\/p>\n<p>&#8220;Investment banks, hedge funds, pension funds running deep into these future markets, driving up prices. Investment banks buying oil storage capability to buy oil and take it off the market,&#8221; said Dorgan.<\/p>\n<p>Since then, the price of oil dropped dramatically, and a debate began over whether there was in fact speculators manipulating the market and if so, what should be done to stop them.<\/p>\n<p>The oil futures market is under the regulation of the U.S. <a title=\"CFTC website\" href=\"http:\/\/www.cftc.gov\/index.htm\">Commodities Futures Trading Commission<\/a>(CFTC). Its chairman, the Obama\u00a0Administration\u00a0appointee Gary Gensler, pledged to take a more aggressive approach to investigating market manipulation. And in a speech Thursday on his energy policy, President Obama called out speculators as being <a href=\"http:\/\/stateimpact.npr.org\/texas\/2012\/02\/23\/whats-new-in-obamas-energy-policy\/\">one of the reasons behind high gas prices<\/a>.\u00a0&#8220;When uncertainty increases, speculative trading on Wall Street can drive up prices even more,&#8221; he said. &#8220;So there are short-term factors at work here.&#8221;<\/p>\n<p>In 2010, Congress passed the <a title=\"Wikipedia definition\" href=\"http:\/\/en.wikipedia.org\/wiki\/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act\">Dodd-Frank law<\/a> that overhauled financial regulation including rules involving oil futures, callling on the CFTC to enforce new limits on the amount of oil speculators could trade.<\/p>\n<p>Last May, the <a title=\"CFTC news release\" href=\"http:\/\/www.cftc.gov\/PressRoom\/PressReleases\/pr6041-11\">CFTC announced it was charging\u00a0<\/a>a group of companies and individuals who allegedly conspired in a scheme to hoard then dump oil stored in Cushing, Oklahoma in an effort to manipulate the price. The CFTC alleged the scheme netted $50 million in illegal profits.<\/p>\n<p>But there were those who had their doubts about what the CFTC was finding.<\/p>\n<div id=\"attachment_6344\"  class=\"wp-caption module image right\" style=\"max-width: 300px;\"><a class=\"fancybox\" title=\"Craig Perrong: &quot;It's like Casablanca, round up the usual suspects&quot;\" href=\"http:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1312.jpg\" rel=\"\"><img decoding=\"async\" loading=\"lazy\" class=\"size-medium wp-image-6344\" title=\"IMG_1312\" src=\"http:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1312-300x224.jpg\" alt=\"\" width=\"300\" height=\"224\" srcset=\"https:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1312-300x224.jpg 300w, https:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1312-620x465.jpg 620w, https:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1312-220x165.jpg 220w, https:\/\/stateimpact.npr.org\/texas\/files\/2012\/02\/IMG_1312-138x103.jpg 138w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/a><p class=\"wp-media-credit\">Dave Fehling\/StateImpact Texas <\/p><p class=\"wp-caption-text\">Craig Perrong: &quot;It&#39;s like in Casablanca, round up the usual suspects&quot;<\/p><\/div>\n<p>&#8220;I sort of look at it (like) if this is the best they can come up with after all that digging, that suggests the market is actually pretty clean,&#8221; said <a title=\"Bio\" href=\"http:\/\/www.bauer.uh.edu\/directory\/profile.asp?firstname=Craig&amp;lastname=Pirrong\">Craig Pirrong<\/a>, a professor of finance and energy markets at the University of Houston&#8217;s Bauer College of Business.<\/p>\n<p>Pirrong is an outspoken skeptic of the extent of market manipulation. He said the Cushing case was, in his opinion, weak.<\/p>\n<p>&#8220;Frequently, when prices go up, or should I say, invariably when prices go up, it&#8217;s like in <em>Casablanca<\/em>: round up the usual suspects. And essentially, the speculators are the first ones in line,&#8221; Pirrong told StateImpact Texas.<\/p>\n<p>While acknowledging that price manipulation does happen, he said &#8220;it&#8217;s not what&#8217;s driving sort of the big price movement like we saw in 2008 &#8230; and it&#8217;s not driving what we see right now.&#8221;<\/p>\n<p>Pirrong said far more influential is a world oil output that has stagnated, combined with disruptions in supplies from Libya and now Iran.<\/p>\n<p>What&#8217;s more, the commodities trading industry is fighting the new limits on oil speculation, <a title=\"Reuters article\" href=\"http:\/\/www.reuters.com\/article\/2012\/02\/18\/financial-regulation-cftc-idUSL2E8DHCW820120218\">taking the CFTC to court\u00a0<\/a>to block it from enforcing limits.<\/p>\n<p>The CFTC declined to comment to StateImpact on active cases but a spokesperson indicated that the <a title=\"CFTC News Releases on Enforcement\" href=\"http:\/\/www.cftc.gov\/PressRoom\/PressReleases\/EnforcementPressReleases\/index.htm\">commission had brought dozens of enforcement cases<\/a> against energy traders in the past decade, resulting in millions in fines.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>With oil surpassing $100 a barrel, drivers are feeling the pain at the pump and some wonder if it&#8217;s simply a case of supply and demand. Or maybe something else.<\/p>\n","protected":false},"author":53,"featured_media":6345,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[59],"tags":[115],"acf":[],"_links":{"self":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/6338"}],"collection":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/users\/53"}],"replies":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/comments?post=6338"}],"version-history":[{"count":20,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/6338\/revisions"}],"predecessor-version":[{"id":6390,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/6338\/revisions\/6390"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/media\/6345"}],"wp:attachment":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/media?parent=6338"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/categories?post=6338"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/tags?post=6338"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}