Friday, July 1, 2011

UMASS STUDY: Wall Street Speculators Drove Up Gas Prices

According to a University of Massachusetts study by Robert Pollin and James Heintz, excessive speculation in crude oil futures on the part of financial traders added 83 cents to the cost of a gallon of gasoline in May.

The finding of the UMass Political Economy Research Institute showed that the influx of billions of dollars chasing oil futures led the average price of a gallon of gasoline nationwide to rise to $3.96 in May. Pollin said if normal market forces, traced over decades, were in play, a gallon of gas would have cost $3.13 in May.

The study, "How Wall Street Speculation Is Driving up Gasoline Prices Today," traced the rapid rise and fall of commodities in recent months to the lack of regulation of financial markets.

The findings have led to a renewed call from advocates for robust rules that limit the actions of speculators, traders and investors under the Dodd-Frank Wall Street Reform and Consumer Protection Act passed a year ago. The full impact of the law has been blunted because the federal rule-making body responsible for implementing it has not yet adopted the necessary rules. Although they were given a year under the law to adopt the rules, they claim they need another six months to complete their work.

The study also refuted claims that uprisings across the Middle East caused oil production to wane, leading to higher gas prices at the pump. Pollin and Heintz found that total global crude oil production averaged 87.6 million barrels per day between September and December and 87.9 million barrels per day during the period of January through March, in the midst of the uprisings.