Gas Price Spike

With the increasing political and social unrest in many parts of the Middle East as well as Northern Africa, the media is beginning to blame their actions on the recent gas price increase. More specifically, networks such as FOX, CNN, and MSNBC, claims that the sharp increase of oil prices are mostly due to the civil war outbreak in Libya. New York Times reports that a rising number of officials in Washington are urging President Obama to release millions barrels of oil from our 727 million-barrel Strategiv Petroleum Reserve (SPR) With the gas prices rising 33 cents a gallon only in the last month, it's a very tempting idea, but do we really need to? Is the civil unrest in Libya even the problem? The answer to both is no. Americans seem to believe that most of our oil comes from the Middle East, but actually the highest percentage of oil reserves comes from our Canadian neighbors. Libya represents a mere 0.5% of U.S. Oil imports, and Saudi Arabia is increasing its production to make up the difference. There have been no reports of sudden increase in demand for oil, nor has the supply been depleting faster than usual. In fact, refineries are operating at 88.4%, which is a relatively low number in terms of capacity load, according to the U.S Energy Information Institute. So then, who are the culprits behind the rising oil prices? Pesky Speculators in investment firms. Investment banks are being allowed to speculate at unlimited levels in the commodities market.
Utilizing media-fueled fear, speculators bet on rising oil prices and a falling dollar using cheaply borrowed money. Back in 2008, when oil hit $147 a barrel the Commodities Futures Trading Commission, the body that keeps the trading pits honest, discovered that 81% of the trading volume in oil was being conducted by speculators. Meanwhile, the businesses that actually use the oil, such as airlines, were only operating 19% of the trading. The reason we have price inflations from time to time is because hedge funds and investment banks want to make a quick buck. While the speculators made enough money to eat the finest caviar and champagne while orbiting in space, we shave off another twenty dollars to fill it up our cars. Luckily, these inflated prices are not bound to stay up forever, but the CFTC needs to put an end to this debauchery. We may be lucky to have fairly low prices compared to most of the world, but knowing that prices are inflated for absolutely no reason at all angers me just a tad bit.