$4 gas! We're being ripped off by big oil corporations and speculators

Feel like you’re being hosed every time you pull up to the gas pump? Sam and I have been trying to figure out who’s to blame for $4-a-gallon gas.

First, who benefits the most? It’s got to be the big oil boys. Exxon Mobil profits are up 69% over 2010, to $10.7 billion; Royal Dutch Shell is up 30% to $6.3 billion; Chevron is up 36.5% to $6.2 billion; Conoco Phillips is up 43% to $3 billion. BP, still reeling from the Gulf of Mexico disaster, saw profits drop 2% from 2010, but still earned $5.5 billion.  (Lynn Mucken, msnmoney.com)  Even if oil companies aren’t totally to blame, they certainly are benefitting from the current market speculation.

Oil futures speculators - hedge funds, banks and investment firms like Goldman Sachs (remember bailing them out?) also are prime suspects. The flow of billions of dollars in and out of the market from such funds encourages oil producers to manipulate energy prices by hoarding crude to sell at a later date when it fetches more money, according to Professor of Law Michael Greenberger, a former director of the Division of Trading and Markets, Commodity Futures and Trading Commission (CFTC) . (Herman F. Trabish, Green Tech Media)

But the “little guy” speculator – you and me baby - also may be to blame. Whereas we could not previously buy oil futures because we had to purchase gazillions of dollars worth of barrels, now an entity called The U.S. Oil Fund, “allows anyone to participate in energy markets without having to find a place to stash a 42-gallon barrel of oil or other commodities like natural gas.” (Chris Kahn, Associated Press)  It’s as easy as buying pork bellies or wheat or copper futures.

Speculators now reportedly account for 71 percent of the oil futures market, up from 29 percent in 2000, per the CFTC. Overall, commodity index speculation has jumped from $13 billion in 2003 to some $260 billion today.  The CFTC says that oil market speculation is sending a false demand signal to the market, driving the per-barrel price far beyond the supply-demand-driven $75-to-$85 range and wreaking havoc with gasoline’s per-gallon price, as well. (Gail Russell Chaddock, Christian Science Monitor)

Our government does not escape blame either.  Attractive interest rates have nearly lowered the cost of owning commodities like oil to near zero.

“There is a financial incentive to participate in the commodity market,” says Lynn Mucken of msn.com. ”When interest rates are zero, money will seek out a higher return. The Fed wants people to take money from their checking and money market fund and put it to a more useful purpose.”

The weakened U.S. dollar also has contributed to higher gas prices. David T. King, a former chief of the New York Federal Reserve's Industrial Economies Division, noted in the Wall Street Journal earlier this year that the current spike in oil and other commodity prices coincides almost exactly with the Fed's decision to “turn on the monetary spigots to save Wall Street.”

And just this past Tuesday, the Senate blocked a bill that would have repealed about $2 billion a year in tax breaks for the oil companies.

Sam and I might not mind high gas prices quite so much if we felt the big oil companies were willing to share our pain.  But Chevron CEO John Watson said at the recent Senate hearing that, “The American people don't want shared sacrifice. I think the American people want shared prosperity.”( Lynn Mucken, msn.com)

Okay bigshot. Share the prosperity. Send the American people a couple billion dollars to fix our towns destroyed by twisters and floods and (yes) oil spills. We’re tired of bending over and grabbing our socks.