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Wed Mar 21, 2012, 12:37 PM

Mike Thompson toon and rant on the oil speculators

Here's the toon:

and here's Mike's rant:

By Mike Thompson
Detroit Free Press

Former Clinton Labor Secretary Robert Reich pretty well summed up the root cause of rising gas prices in a recent post on his blog. “Financial speculators historically accounted for about 30 percent of oil contracts, producers and end users for about 70 percent. But today speculators account for 64 percent of all contracts,” Reich wrote, “relatively few players with very deep pockets are placing huge bets on oil — and you’re paying.”

But Americans’ perception of how gas prices are determined hasn’t caught up with the new speculator-driven reality of how gas prices are determined. The average driver in this country still believes that the law of supply and demand sets the price they pay at the pump. Gas prices are going up because our supply is down and demand is up, right? Not exactly.

Writing for the Houston Chronicle recently, Simone Sebastian noted that the number of oil fields in America has quadrupled in the past three years and quoted an energy researcher who predicted that if America’s drilling boom continues, our country could be completely energy independent in a decade. Late last year, The Associated Press reported that America’s biggest export is now gasoline and other fuels. We’ve got so much of the stuff, apparently, that we need to ship it elsewhere. Add to that the fact that the Great Recession has stalled demand for oil in this country and you’ve punched some gaping holes in the notion that gas prices are being determined by supply and demand.


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