Oil Prices Rising, and More Hurt Coming

Oil barrels

People like me always look to cast the blame on speculators for rising oil prices. After all, the supply in the U.S. is not really a problem, and so it’s not market forces that are driving the rather amazing hikes we’ve seen recently.

Oil is trading at its highest price in 2-1/2 years, and the volatile situation in the Middle East—with the fear that disruptions in Libya will spread to the big producers in Saudi Arabia and Iran—is of course what’s bringing gas prices to nearly $4.00 a gallon in California and an average of $3.52 across the U.S.

But it’s the speculators who drive much of the action. Hedge funds and the big financial players are looking for prices to keep rising, so more speculative money buys more options.

The speculative fervor is so remarkable that the big trading firms now have nearly twice as many long contracts open as they did in 2008, when oil spiked to $147 in the summer, a development that either foreshadowed or caused the global economic meltdown, depending on how you look at it.

As has happened numerous times before, the government chooses to play hands-off, and so continuously rising oil and gasoline prices may well affect whatever small-bore recovery the economy is showing.

Oil pricesThat would be very bad news, not just for drivers, but for everyone. Again repeating recent history, U.S. drivers grumble but pay the price, ignoring the real problem of our dependence on foreign oil and our (former) cozying up to madmen like Qaddafi. Remember how we used to hate OPEC? Now they seem to be our friends.

The driving public has shown much more interest in fuel-efficient cars in recent weeks. And some would say it’s about time. Others say not to make a buying decision based only on shifting gas prices. It’s interesting that those making that argument generally represent the oil and gas interests and certain allies of the auto industry.

GM and Ford, to their credit, have been pushing hard for smaller, more fuel-efficient cars of late. With speculation rampant and oil prices slated to keep rising, it looks as if they may have made a good bet. Now all they have to do is convince an inattentive public.

Are you fearful of higher gas prices coming? Would that cause you to consider a smaller, more fuel-efficient car?

—jgoods

Find Used Cars in Your Area at CarGurus

4 Comments

  1. I believe you asked the wrong question for this situation. Small cars will not solve the basic issue, they will only mitigate some of the pain. Both you and reader Chessum identify the causes but the question you should have asked is “why does this administration espouse policies that seek to raise prices on energy of all kinds when our economy is so fragile”??

    These policies will punish all but the wealthiest citizens and create uncertainty for our future. Where will the jobs come from?? The billionaires already own 80% of all wealth in this country and have effectively created this wealth by shipping our jobs overseas and creating their wealth from foreign profits. Soon they will discover that when they own all the wealth, there will be nobody left who can afford to buy their products. But then it will be too late.

  2. Oh stop whining you still have cheap fuel we are paying $2 plus a litre and rising. Wall st is pushing this not Libiya time to stomp hard on the assholes in hedge funds.

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