As Americans watch their wallets empty as quickly as gas prices climb, we all search for answers. Some experts say the seemingly endless rise in gas prices is being driven largely by oil speculation, the practice of buying and trading oil futures -- in an attempt to predict the cost of oil at a later date. Should you blame speculation for your pain at the pump?
Commodity Futures Exchange
Many believe that speculators, particularly index funds and other large institutional investors in our markets are responsible for the high price of crude oil. However, data analysis conducted by our Research Department confirms that the percentage of open interest in NYMEX Crude Oil futures held by non-commercial participants relative to commercial participants actually decreased over the last year even at the same time that prices were increasing. In addition, non-commercials are relatively balanced between long (buy) and short (sell) open positions for NYMEX crude oil futures. Thus, non-commercial participants are not providing disproportionate pressure on the long (buy) side of the crude oil futures market. Instead, non-commercials are relatively balanced between buy and sell open positions for NYMEX crude futures. In addition, “hedge funds” identified in analysis conducted by NYMEX staff only accounted for approximately 5% of the total volume in the NYMEX Light Sweet Crude Oil contract in 2007. Therefore, we have seen various representation made relative to participation by speculators in our markets that directly contradicts our data.
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