Monday, September 22, 2008

Speculators Return To Oil Market

by Ron Spangler

As Congress debates a plan to save the financial markets on wall street, it appears speculators are leaving the stock market and returning to the commodities market especially in the oil market. After it was announced the oil market was under investigation and some speculators were found to be illegally manipulating the market, they retreated to the stock market and began short selling. As a result the price of oil began to fall. This was by no means the sole reason for the drop in the price of crude oil but it did play a role.

Now while Congress is busy with the Paulson bailout plan and short selling has been temporarily banned, speculators have returned to oil and the result is ever increasing prices for a barrel of oil. Since the current crisis began the price of oil has steadily increased from a low of $91 to the current $120. Most people will attribute the increase on hurricane Ike and the disruption of the supply of oil from the Gulf Coast area. They will also point to OPEC's decision to cut production. I would argue both have played a minor role in the increase for the simple reason that America's demand for oil has decreased dramatically.

The real culprit is nothing more than greed. Across the Southeast there have been increased complaints of price gouging at the pumps. As soon as hurricane Ike landed the price at the pump went as high as a dollar more per gallon. The reason given at the time was speculation that we would see gas shortages nationwide. Contrary to some media reports it didn't happen. Some gas stations have posted signs they are out of regular unleaded gas but are selling higher grade gas at you guessed it, ridiculously higher prices. Reports are coming out that these stations are really closing their lower grade less expensive pumps not because of a shortage but instead they are holding back in order to push the sale of their more expensive fuel. Employees have reported they were told to shut down their less expensive fuel pumps even though the storage tanks were full. As State Attorney Generals around the Southeast and Midwest started investigating these claims the price of fuel went down and overnight stations that didn't have regular unleaded miraculously received delivery and began selling the less expensive gas. Like short sellers and speculators these people succumbed to the greatest sin of all, human greed.

Speculators and unscrupulous business people have no respect for what is in the best interest of the country, instead they are guided by their own self interest. Their daily quest for more and more dollars have blinded them as to the effect their greed is having on the everyday citizen and their country. As Congress debates the Treasury Secretary's plan to save us from the upcoming disaster they must back away from party partisanship and for once consider what is best for the country. They must finally do something to free us from foreign oil, like passing a real energy bill that will allow drilling without all of the restrictions and limitations. They and the regulators of the markets must keep an eye out for the greedy speculator and CEOs that have little or no concern for their country. Our future depends on what this congress does in the next couple of days. If they continue on as a Do Nothing Congress concerned only with winning an election, then our future is grim at best.

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