Originally Posted by dustman_stx
The people making the most money from the oil never touch it- that's why fuel is so high. If only the people producing, refining, transporting and retailing the fuel were making money from it, you'd see MUCH lower prices, IMHO.
X2 Dustman: Speculators buy and sell fuel as a commodity multiple times before it even gets to the refinery. Why?? Because they can since deregulation made it possible.
By betting on the price outcome with only a single futures contract, a speculator has little or no effect on a market. It's simply a bet. But a speculator with the capital to purchase a sizeable number of futures derivatives at one price can actually sway the market. As energy researcher F. William Engdahl put it, "[s]peculators trade on rumor, not fact" [source: Engdahl]. A speculator purchasing vast futures at higher than the current market price can cause oil producers to horde their commodity in the hopes they'll be able to sell it later on at the future price. This drives prices up in reality -- both future and present prices -- due to the decreased amount of oil currently available on the market.
Investment firms that can influence the oil futures market stand to make a lot; oil companies that both produce the commodity and drive prices up of their product up through oil futures derivatives stand to make even more. Investigations into the unregulated oil futures exchanges turned up major financial institutions like Goldman Sachs and Citigroup. But it also revealed energy producers like Vitol, a Swiss company that owned 11 percent of the oil futures contracts on the New York Mercantile Exchange alone [source: Washington Post].
As a result of speculation among these and other major players, an estimated 60 percent of the price of oil per barrel was added; a $100 barrel of oil, in reality, should cost $40 [source: Engdahl]. And despite having an agency created to prevent just such speculative price inflation, Commodity Futures Trading Commission (CFTC), by the time oil prices skyrocketed, the government had made a paper tiger out of the CFTC.
A report issued in September 2008 to the Senate, pointed to correlations between the influx of money in oil futures markets and the rising cost of oil. The price of oil doubled, tripled and eventually quadrupled in step with the increase from $13 billion to $260 billion in the futures market from 2003 to 2008 [source: U.S. Senate]. In response to calls for better regulation of oil futures, Congress introduced the Consumer-First Energy Act in May 2008. The bill would have extended CFTC oversight to foreign markets, but the act died on the Senate floor the following June. Once again the oil company lobbyists earned their millions and our politicians caved to the all mighty dollar. Ultimately we all paid and are still paying for it.
It's no longer capitalism. This is market manipulation by the corporate elites at the expense of the consumer.