WASHINGTON — Like locusts ravaging fertile crops, gasoline prices are soaring again and eating away at the purchasing power of ordinary Americans. And again, financial speculators appear to be a big part of the story.
The national average pump price hit $3.74 for a gallon of unleaded gasoline Tuesday, up a sharp 44 cents per gallon from just a month ago, according to the AAA’s Fuel Gauge Report.
“It’s the 33rd day in a row that we’ve seen (an) increase" in gasoline prices, said Nancy White, a spokeswoman for AAA.
More than a passing pain, rising gasoline prices act like a tax on consumers, harming the economy by whittling away at the amount of money the consumer can spend on other things. Gasoline expenditures as a percentage of U.S. household income hit three-decade highs in 2012, and the recent spike suggests 2013 might not be much better.
The rising gasoline prices come even though the United States now produces more than half the oil it consumes. In fact, the nearly 800,000-barrel-per-day increase in U.S. production output from 2011 to 2012 reflected the largest one-year jump since oil drilling began in 1859.
Enter financial speculation. Commercial end-users of oil, such as airlines and trucking companies, that once dominated 70 percent of the market for future deliveries of oil now represent just 30 percent. Noncommercial financial speculators now dominate 70 percent of the market. The trading is dominated by Wall Street banks, hedge funds and other financial institutions that have no intention of taking delivery of the oil needed to make gasoline.
“It’s speculators who are moving markets," said Bart Chilton, a commissioner at the Commodity Futures Trading Commission.