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Speculators' Pogo Stick Sends Oil Prices Bouncing

As gas prices approach $4 a gallon this summer, American families who depend on cars to get to work, school, groceries, etc. are feeling a bit bent. These higher fuel prices were not in the budget, but now they must be.

Even Big Box stores are feeling the pinch. Wal-Mart’s Michael T. Duke told an audience in New York last week, “There’s no doubt that rising fuel prices are having an impact on our customers.”

But relief may be on the way. A major “correction” in oil prices began this week, and consumers should see the results at the pump soon.

How did it happen? Did the White House release thousands of new offshore oil permits on Thursday? Did Congress lift environmental protections, allowing Big Oil free reign, as some in Congress are demanding?

No.

On Thursday, the price for a barrel of oil fell from triple digits to double digits. At the close of the market, the price for a barrel of oil hovered in the $90's. So what great act of environmental de-regulation caused such a miraculous crash?

There wasn’t one. Oil speculators on Wall Street caused this miracle.

Here’s how Reuters describes what went down: "With Osama bin Laden dead, the market is adjusting the geopolitical risk premium down accordingly. Given this, speculative money is being taken off the table," said Chris Jarvis, senior analyst, Caprock Risk Management in New Hampshire.

In more crass terms, the smart money went home and left the suckers holding $110-per-barrel tickets.

Is it possible that environmental regulations are not really the problem here?
 

Tags:  oil

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