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Gibson writes: "Oil prices are currently down by 40 percent from where they were in June, and the economies of oil-exporting countries like Russia and Venezuela are tanking. Coincidence? A simple case of more supply than demand? Cunning moves in a global chess game between a desperate empire and its rivals? Maybe."

Will gas prices drop further in 2015? (photo: Getty Images)
Will gas prices drop further in 2015? (photo: Getty Images)


Like the Low Gas Prices? They Could Be Even Lower in 2015

By Carl Gibson, Reader Supported News

30 December 14

 

il prices are currently down by 40 percent from where they were in June, and the economies of oil-exporting countries like Russia and Venezuela are tanking. Coincidence? A simple case of more supply than demand? Cunning moves in a global chess game between a desperate empire and its rivals? Maybe. But even if current geopolitical situations are temporarily causing oil prices to drop, the U.S. government may be about to implement new regulations that would stick it to oil speculators while helping ordinary Americans keep more money in their pocket, and wants to hear from you on whether or not reining in Wall Street is a good idea. If you’re not sure, think back to six summers ago, when oil prices were at an all-time high.

In the summer of 2008, I drove my grandpa’s pickup truck to my unpaid internship at an NBC affiliate in Lexington, Kentucky, five days a week. It was an hour-long round trip in a vehicle that got less than 20 miles per gallon, and gas was around $4.25 a gallon then, and even higher in urban areas like Chicago and the Bay Area. The fuel needle came close to E every few days, and it cost right around $70 every time I filled up. Almost all the money I made working on my grandpa’s farm during those long, hot summer days went right back into the tank. So why was gas so expensive back then?

In 2011, a report from the Commodities and Futures Trading Commission (CFTC) found that a large reason for the high gas prices that summer was that oil speculators were dominating 80 percent of the market; they controlled just 30 percent of the market in the late 1990s, when gas was a little over a buck a gallon. ExxonMobil CEO Rex Tillerson and Goldman Sachs both admitted that speculation on Wall Street caused oil prices to rise by as much as 40 percent. During the record-high oil spike of 2008, Saudi Arabia told the Bush administration that roughly $40 of every barrel of oil was the result of speculators driving up the price. It’s also worth noting that unlike airlines and trucking companies, who buy oil in futures, speculators don’t actually contribute to the economy, as they don’t use a drop of the oil they bet on – they’re just out to make a shitload of money in a short amount of time. Their jobs don’t need to exist.

So what exactly does a speculator do? One textbook example can be found in Cushing, Oklahoma, during the first quarter of 2008. Five big energy traders, three of them from outside the United States, bought up actual crude oil for sale in Cushing, which is a major junction point for oil delivery, then turned right around and “shorted” it in sales to other investors between January and April of that year. This made the price of oil fluctuate rapidly in the process, and those speculators pocketed the profit. The market was mobbed by speculators like those in the Cushing scheme, all of whom wanted to make a quick buck by manipulating oil prices. By the time summer came around, oil was at $147 a barrel.

In July of 2010, two summers after the one where speculators mugged Americans at the pump, the Dodd-Frank Act, which was intended to rein in the financial industry, was signed into law. One of the provisions of Dodd-Frank intended to cap speculators’ share of the market at 10 percent, which Wall Street fought tooth and nail. In December of 2011, the International Swaps and Derivatives Association (ISDA) and the Securities Industry and Financial Markets Association (SIFMA) sued the CFTC for trying to write regulations that would comply with the Dodd-Frank law’s mandate for tighter rules on speculators. To put that in plain English, a bunch of casino gamblers who make money off of other people’s misery sued the government for trying to do its job. And the first time, they won.

In September of 2012, a federal judge sided with Wall Street and ruled that the CFTC’s proposed rules on speculation had not been proven necessary under the law. The ISDA and SIFMA, who represent some of the big banks responsible for the global financial crash of 2008 like Goldman Sachs, Morgan Stanley, and JPMorgan Chase, celebrated the ruling and hoped it would establish precedent to stop any future attempts at reining in their destructive greed. However, U.S. District Judge Robert Wilkins wrote in his ruling that the decision didn’t invalidate any future attempts to more closely interpret the law and write new rules. As recent history shows, the CFTC didn’t back down from the fight. It appealed the decision, and vowed to try again.

In November of 2013, the CFTC voted 3 to 1 to pass a new set of rules that would limit speculation on 28 core markets, including crude oil, fuel oil, gasoline, and natural gas. So far, the CFTC has received 13,000 public comments on the proposed rules. And in December of 2014, regulators re-opened the public comment period for the new speculation limits. Comments can be submitted on the CFTC’s website, and all will be considered until the January 22, 2015, deadline. If public comments are overwhelmingly supportive, it’s likely the CFTC’s rules will become official in the spring, making the prices for everyday needs like groceries and gasoline drop as a result.

Obviously, everyone is happy that filling up the tank doesn’t cost as much. We can celebrate that new, sustainable forms of energy are becoming more prevalent, and that our economy has become less dependent on fossil fuels. But keeping speculators in check is exactly what our government is intended to do. If the CFTC’s new limits on speculators go through, it’ll be a big victory for working people, and that should be celebrated more than anything.


Carl Gibson, 26, is co-founder of US Uncut, a nationwide creative direct-action movement that mobilized tens of thousands of activists against corporate tax avoidance and budget cuts in the months leading up to the Occupy Wall Street movement. Carl and other US Uncut activists are featured in the documentary "We're Not Broke," which premiered at the 2012 Sundance Film Festival. He currently lives in Madison, Wisconsin. You can contact him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it , and follow him on twitter at @uncutCG.

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

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+57 # intheEPZ 2014-12-30 12:01
We can still vote with our pocketbooks--dr ive a hybrid, fill up at CITGO in honor of the Venezuelan people and Hugo Chavez, not Exxon Mobil or the other big American oil co's. Why has it taken this long to find a way to limit the disastrous effect Wall Street, speculators and other financial schemers have had on the economy and our cost of living? I hope everyone will go to CFTC's website and comment.
 
 
+32 # jamesnimmo 2014-12-30 12:36
It's taken so long because, regardless what the ballot shows, this country has only one major political party acting as a monopoly. The controversies we see in the news are only a show for the low-information observer.
 
 
+24 # reiverpacific 2014-12-30 12:53
Quoting intheEPZ:
We can still vote with our pocketbooks--drive a hybrid, fill up at CITGO in honor of the Venezuelan people and Hugo Chavez, not Exxon Mobil or the other big American oil co's. Why has it taken this long to find a way to limit the disastrous effect Wall Street, speculators and other financial schemers have had on the economy and our cost of living? I hope everyone will go to CFTC's website and comment.

Fine ideas -if you can afford a Hybrid or electric vehicle and if you have a CITGO fuel station in your immediate area but many of us can't and don't.
Sadly -like the draft and perpetual wars- until somebody in the halls of power -or their spawn, close family or friends get hurt or bothered by these non-contributin g unnecessary speculators (as the article points out) who use other's money to enrich themselves- they'll keep getting away with it.
With all the talk about government being the problem, most people don't realize that it's government bought, owned, kept on a short leash by these same greed-driven thugs, the extractive industries and the military war machine which relies on them whatever the price, in a vicious circle of nepotism, exploitation, destructive plundering of this and many other countries that makes the issue hard to tackle.
Most people -I 'fess I'm CAUTIOUSLY one- are glad of plummeting pump $, but there's two sides to every coin.
I'm waiting until I can afford solar power at home -a better way to combat the problem.
 
 
+9 # betsyviola 2014-12-30 13:40
I just did! Thanks!
 
 
+26 # nogardflow 2014-12-30 14:47
Unfortunately many of the American public never seem to learn, as soon as gas prices started to go down, the sales of gas guzzling vehicles went up. America needs to understand it's not just about gas prices it's also about carbon footprints.
 
 
+40 # jdd 2014-12-30 12:42
Despite the best efforts of Sen.Warren and others, and thanks massive pressure on Congress by President Obama, Wall Street can rest knowing that with the recent repeal of Section 716 of Dodd-Frank, the trillion or so in shale-oil related derivative paper is now insured by the taxpayers through the FDIC. The solution has never been more clear - a return to Glass-Steagall separating commercial banks from high-risk investment banking.Let the Wall Street speculators
put their own money at risk. We don't need them.
 
 
+24 # kevenwood 2014-12-30 12:53
I'm torn over low gas prices. On one hand, I am glad to be paying less at the pump (even with our hybrid car) and less to the oil industry and speculators. I am also glad for the potential boost for our economy. However, I am concerned over alternative sources of energy and renewables, as they will be hurt by this since they are typically more expensive, thus becoming less attractive. Anyone see this differently?
 
 
+13 # Nominae 2014-12-30 14:04
Quoting kevenwood:
I'm torn over low gas prices. On one hand, I am glad to be paying less at the pump (even with our hybrid car) and less to the oil industry and speculators. I am also glad for the potential boost for our economy. However, I am concerned over alternative sources of energy and renewables, as they will be hurt by this since they are typically more expensive, thus becoming less attractive. Anyone see this differently?


Well said !

I actually see this entire phenomenon as more of a "strategy" against the success of renewables than as a market result of changes tied to speculation.

Given that the Oil Boyz "maintain" (fix) prices much in the same way that Drug Cartels do - the idea that the market fluctuates (as it would in a real market) due to "externalities" like Wall Street Speculation is not a very solid sell to me, especially given the history of the Global Extraction Industries that we have all come to know and love.
 
 
+2 # reiverpacific 2014-12-30 20:10
Quoting kevenwood:
I'm torn over low gas prices. On one hand, I am glad to be paying less at the pump (even with our hybrid car) and less to the oil industry and speculators. I am also glad for the potential boost for our economy. However, I am concerned over alternative sources of energy and renewables, as they will be hurt by this since they are typically more expensive, thus becoming less attractive. Anyone see this differently?

In spite of the short-sighted, as in the length of their noses, average American consumer-driven somnambulist's love affair with their gas-guzzlers will catch up with us all, and what are now "alternative" energy sources and related technologies, will surely be overwhelmed by a tsunami of sustainable, clean power, into the realm of everyday energy production as advances are made and their prices fall.
The motives of the (US) public are anything but altruistic but even they will make the shift as it smacks them in their checkbooks that their monthly bills will drop if they follow the lead of more informed and progressive neighbors.
Several countries are already leading the way -Germany provided 74% of all its energy by Solar for one full day this fall and Scotland has more and more large towns and cities entirely powered by wind or tide technology.
Be of good cheer -if a nuclear catastrophe doesn't get us first, (sadly, increasingly likely) it will come.
Quite a race for survival -but with too many looneys at too many helms!
 
 
+5 # The Voice of Reason 2014-12-30 20:53
The only reason why alternative fuels are so expensive is because the Oil Criminals say so. Is it mere coincidence that the only way we can go to AFs is when oil is so expensive that no one can afford it? Why would we want a fuel that we can't afford? It is plain bull crap.
 
 
+3 # tclose 2014-12-30 22:07
Quoting kevenwood:
I'm torn over low gas prices. On one hand, I am glad to be paying less at the pump (even with our hybrid car) and less to the oil industry and speculators. I am also glad for the potential boost for our economy. However, I am concerned over alternative sources of energy and renewables, as they will be hurt by this since they are typically more expensive, thus becoming less attractive.


Agree this is a problem. The way around it is to implement an increase in the tax on gas to maintain the incentive for reduced gas consumption and transition to alternative energy. The tax increase could be on a sliding scale to take into account actual gas prices encountered in the future. And the funds raised could be used to invest in alternative fuel technology as well as in rebuilding our roads and bridges.

Consumers still will be paying considerably less than they did in the recent past with this approach. So this would be an acceptable compromise of amount of price reduction vs environmental responsibility.

Now if we had a Democratic Congress this might actually be possible.
 
 
+3 # Malcolm 2014-12-31 11:18
This can certainly work-for the last 12 or so years, oregon has required electric and natural gas companies to "donate" 3% of their revenue to Energy Trust of Oregon, who uses this money to subsidize renewables, thus stimulating sales and development.

Not only has this worked quite well, but between ETO and state and federal tax credits, I was able to purchase a 3000 Watt photovoltaic system (TURNKEY!) for only $2200!

I think a similar system would work for transportation, as you suggest.
 
 
0 # The Voice of Reason 2015-01-03 00:19
Increase the gas tax? Don't they have enough of our money already that they don't work for and don't deserve and don't help us. but let's give them more. Yea, that oughta do it. Brilliant idea.

How about we design a vehicle that doesn't waste fuel. We send space craft out of the solar system on the same tank of fuel but we can't design a car here on earth. Oh well, let's just keep paying the Oil Criminals and the Crooked Politicians they own. What could possibly go wrong?
 
 
+1 # cymricmorty 2015-01-04 00:13
Quoting The Voice of Reason:

How about we design a vehicle that doesn't waste fuel. We send space craft out of the solar system on the same tank of fuel but we can't design a car here on earth.


There are hybrid cars that use precious little gasoline, and then there's the Tesla, which is prevented from selling directly to the public by ridiculous state laws.
 
 
+21 # soularddave 2014-12-30 13:12
Consumers fuel the economy and benefit from it functioning to our advantage. Lower fuel prices are good in themselves, but the bonus resides in lower prices for all goods and services.

We were being fleeced and sucked dry by speculators.

Speculators SUCK!
 
 
+14 # pres 2014-12-30 13:17
The price drop is simply needed to inflict the most pain on Russia, Venezuela, etc economies. The losses to Wall St gamblers (aka investors) are covered by the US taxpayers! US Corporations must control the world at most any cost.
 
 
-15 # lnason@umassd.edu 2014-12-30 13:42
Speculators help by driving prices upward when shortages are predicted: higher prices encourage people to spend less on the scarce resource that the speculators invested in and thereby conserve the resource. This is simple market economics and should not be a surprise to anyone. This is the way markets are supposed to work.

Now that it is clear that we are not facing a shortage of oil, speculators have lost money as prices have plunged. This is also the way markets are supposed to work.

The most significant lesson from the current price plunge however is the inherent instability of cartels -- even when governments fail to curtail them.

When oil exporters were few, OPEC was able to limit supplies of oil and keep them high enough so that all exporters could make money and so that the Saudis (who produce oil at about $5 a barrel) could make huge amounts of money for relatively low production.

Now that the US, Russia, ISIS, China, Mexico, Canada, Norway, Brazil, etc. (with many more countries finding oil reserves) have entered the fray (or expanded production), the cartel has fallen apart and the Saudis (who have the cheapest production costs in the world), are willing to supply virtually unlimited amounts of oil to the detriment of their former pals.

Lee Nason
New Bedford, Massachusetts
 
 
+26 # A_Har 2014-12-30 15:26
Quoting lnason@umassd.edu:
Speculators help by....


Let's get real here. Speculators don't "help" anyone but THEM$ELVE$. And all the markets are rigged....*Ever ything is rigged*.

http://www.rollingstone.com/politics/news/everything-is-rigged-the-biggest-financial-scandal-yet-20130425
 
 
+12 # economagic 2014-12-30 22:01
Ms. Nason, I salute your mastery of the art of telling a story using selected facts to support your credulous conclusion.
 
 
+23 # Nominae 2014-12-30 13:53
Dear Mr. Gibson -

From your article above: "So what exactly does a speculator do?"

In addition to your own apt description, a speculator drives up prices that affect people on the level of pure life-and-death survival all over the world - simply for the sake of making a profit on other people's money that may or may not ever materialize - or, as you have quite accurately put it - Gamble.

I have friends of very modest means who are native to the Philippines. When Wall Street speculators artificially drive up the world price for rice, some of these Filipino villagers and their children will literally die of starvation without outside help.

What do speculators do ? They mug, rob, steal and inadvertently kill for the sake of *potential* profit.

I am amused that you describe Speculators as doing a "job". If that is an accurate application of the word, then muggers, burglars, people who commit involuntary manslaughter, cartel members, and criminals of every other stripe and description can also be said to have "jobs".

I am not challenging your use of the word "job" as it is applied to speculators, because, after all, this barefaced crime is *not* technically illegal - but the fact that it is *not* on the books as a crime says more about the inanity and insanity of our "Justice" System than it does about the true nature and function of "What speculators do."
 
 
+15 # Radscal 2014-12-30 14:11
The Stock, Futures and Commodities Markets are failed experiments in capitalism. They are unnecessary, and harmful blood-suckers and should be eliminated.

If a business needs capital, it can borrow it.

Investors are almost always motivated strictly by profits. They care not for the business or product, employees, customers or the communities and societies affected by them. If their investments aren't "performing" or if another investment promises to "perform" better, they sell and reinvest elsewhere.

A business can be providing wanted goods and services, providing jobs and paying taxes, while making a nice profit, but if investors smell blood elsewhere, they can (and do) sell out and kill that business.

On the other hand, a bank that provides loans is VERY interested in the long-term health of the business so the loans will be paid back. Even if the business hits hard times, the lender will want to work with the business, perhaps refinancing loans or even providing more capital. They want the business to survive and thrive.

We should have publicly-owned banks, managed by people elected by their constituencies, who are therefore motivated to act in ways most beneficial to the people.

Then, phase out all Stock, Futures and Commodities trading.
 
 
+12 # jwb110 2014-12-30 16:30
So if there is glut in the market why the rush push for the Keystone pipeline to process Canadian oil in Houston TX. Seems counter intuitive to me.
Stopping the pipeline is doing the oil industry a favor.
 
 
+1 # ronnewmexico 2015-01-02 17:55
The pipeline is for the exportation of product out of the US.
 
 
+7 # MidwesTom 2014-12-30 18:11
I have not seen the numbers for 2014, but in both 2012 and 2013, roughly 80% of crude oil futures contracts were held by the Wall Street firms, not energy companies. Before oil began trading in the public markets it was a stable commodity.
 
 
+10 # economagic 2014-12-30 22:03
Tom, that is called "financializati on," and it is much deeper and broader even than you suspect. A good introduction to the topic is Robert Kuttner's 1996 book, "Everything For Sale."
 
 
0 # ronnewmexico 2015-01-02 17:59
no…. not really... check the price variance on a barrel of oil since about 1970 or so…

We only call it variance when it is from low to up.
 
 
-8 # BKnowswhitt2 2014-12-31 22:59
The price of a barrel of oil is down because of shale and other production practices in the USA ... when oil goes down per barrel it becomes non profit worthy for those entities since it costs more to produce the energy source vs. active oil well production .. same with alternatives .. money drives the market as well as profit .. no profit .. no one enters the market .. simple economics .. go Obama for aiding both oil production at home and the production in USA to become independant .. we need to keep clean technologies in the fore .. but this is the first signs that a glut of production from shale and fracking and natural gas is good and will bust neoliths like Putin right out of the 20th century ...
 
 
+1 # ronnewmexico 2015-01-02 17:49
Internal production of oil has nothing to do with its price as it is a globally traded commidity with slight variance as for transportation and local taxation.

Being energy independent as well meant a lot in the 1942 world. The US has no chance of any embargo to supply in any conceivable war. So nowadays source of supply means in defense terms not a whole lot as well.
A disruption of any supply globally will increase price everywhere. We are just that close from supply to useage in percentage…any disruptiion anywhere effects price increase. It mattes not where it is produced. We are in fact exporting the largest supply of gasoline and other products ever and with the impending change of the oil export restriction law….will Raw oil as well.

Still we will import from canada as it is simply easier and cheaper to do so.
This internal supply thing…a bit of a joke in todays oil world.
 
 
+4 # Corvette-Bob 2015-01-01 14:03
Money rules the world. They play the tune and we dance to the tune as best as we can. Greed is good for the few and who cares about the 99%.
 
 
-6 # BKnowswhitt2 2015-01-01 22:20
Maybe you should drive something more modern than an old Covette! Live in the past you miss the opportunities in the future .. Happy Holidays my friend!
 
 
+1 # ronnewmexico 2015-01-02 17:38
What the heck???

"Five big energy traders, three of them from outside the United States, bought up actual crude oil for sale in Cushing, which is a major junction point for oil delivery, then turned right around and “shorted” it in sales to other investors between January and April of that year. "

Shorting in trading terms is the selling of a thing for less. So why would they short their own inventory?
It could happen by accident... if they intended to buy the thing low and it went lower still…but certainly they would not intentionally "short" their own inventory. They could buy financial instruments to protect from a downturn in prices but that would not in itself aid or allay a lowering in prices.

Yeah I know fifty or so red marks…..but really I have no interest in the oil companies endeavors as well as you do..it is just the article makes no sense..

Stockpiling as is occuring right now in oil and nat gas.. protects from price swings by providing product when product supply diminishes.
It will happen with the next crisis in Nigeria or Iran or Saudi Arabia….will we be better served if there are no stockpiles???

Internal ones such as our strategic oil preserve are in the intersts of war or gross supply disruption, not fluctuations of supply.

Continue now….kill the messenger.
 
 
+1 # ronnewmexico 2015-01-02 18:09
Hsve no fear me hardies…har har har…

As soon as the republican congress ensues concurrent with the price and availabiity of oil….the restriction on oil export(now prohibited if found in the US) …..remove that prohibitane found in federal law…the price will stablize and gradually ebb higher,,,,

Do you really think big oil has no influcence on the Saudie's??
Do you really think our government will not work to the oil industries interests??

How else would you expect they could remove the oil export prohibitance..o ther than by providing this circumstance….? ?
They were not happy with just product(product s are allowed for export)_. they needed to export raw oil as well. There is simply more profit in that.

Someone at least one has to tell you the truth of this thing,, and it is little to do with speculation.
 

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