Gas Price Speculation

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What Is Speculation?

Wildly fluctuating oil prices have been blamed by independent researchers and Commodity Futures Trading Commission staffers on Wall Street speculators. Oil cost $65 per barrel in June 2007, $147 in June 2008, $30 in December 2008, $72 in June 2009, and $97 in May 2011.[1] The sharp volatility is explained by the outsized role of speculators like hedge funds, investors, and banks that bet on the fluctuation of oil prices, consequentially shrinking the role of oil end users like airlines that use commodities as a form of insurance.[2] Speculators corner producers and buyers out of the market by stockpiling oil contracts and investing in long futures trades. Crude oil futures have surged 22 percent in 2011 while gasoline has risen 34 percent, with both contracts reaching their highest levels since 2008.[3]

2008 Commodity Bubble


In June 2008, billionaire businessman George Soros attacked the financial speculation inflating commodity prices as "intellectually unsound, potentially destabilizing and distinctly harmful in its economic consequences."[4] Legislators, economists, and other investors joined Soros in tracing the origins of the 2008 commodity bubble to the increased role speculation played in commodities markets. Many speculators bought oil in the spot market and then sold it in the futures market, knowing the future price would net them a high profit.[5]This strategy pushed up oil prices by putting enormous quantities of oil into storage, thereby reducing the supply available to consumers.[6] By July of 2008, when oil prices shot above $140 per barrel, Democratic senators had introduced "The Stop Excessive Energy Speculation Act of 2008," which targeted oil speculation and sought to prevent large-scale investment banks from using exchange-traded futures.[7]Excessive speculation ultimately created higher prices and artificial markets not by bound by basic economic principles[8]


Academic Studies



Steve Kroft investigates how financial speculation triggered historic swings in oil prices-60 Minutes
Consumer Federation of America Director Mark Cooper discusses how "buy, buy, buy" oil speculators drove up demand more than the Chinese-CSPAN

2011 Commodity Bubble



Public Citizen's Tyson Slocum explains the disconnect between crude oil prices and supply and demand fundamentals-MSNBC

Dodd-Frank Powers to Crack Down on Speculators

Position Limits

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act granted new authority to the Commodity Futures Trading Commission, enabling the agency to set position limits in energy markets.[9]

Americans For Financial Reform Letters

Americans for Financial Reform is a coalition of more than 250 national, state and local consumer, labor, investor, civil rights, community, small business, and senior citizen organizations that have come together to spearhead a campaign for Wall Street targetted reform.[10] Listed below are some of the letters written by their staff to members of government arguing for improved regulation of securitization markets.

Articles and resources

Related SourceWatch articles


  1. Christopher Hayes, "Will Federal Regulators Crack Down on Oil Speculation?" The Nation, March 8, 2011.
  2. Christopher Hayes, "Will Federal Regulators Crack Down on Oil Speculation?" The Nation, March 8, 2011.
  3. "Remember Libya?" MarketWatch May 6, 2011.
  4. Chris Flood, "Soros blasts commodity bubble," Financial Times, June 4, 2008.
  5. Jon Birger, "Oil Speculation: It's Back,"Fortune, December 5, 2008.
  6. Jon Birger, "Oil Speculation: It's Back,"Fortune, December 5, 2008.
  7. Laura Mandaro, "Reid, Dorgan Introduce Oil Speculation Bill," MarketWatch, July 16, 2008.
  8. David Cho, "A Few Speculators Dominate Vast Market For Oil Trading," The Washington Post, August 21, 2008.
  9. Commodity Futures Trading Commission, Proposal to Set Position Limits in the Energy Futures and Options Market
  10. "About Us"