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
With hundreds of commercial participants and instantaneous price dissemination, any “speculative” price would be expected to be met with an equally strong “commercial” reaction. If markets move in a direction inconsistent with actual market factors, a vast number of participants, including energy producers, wholesalers, retailers, and government agencies, have comparable access to information. These participants will respond to ensure that prices rapidly return to where the industry consensus believes they should be. By the nature of their role, speculative traders seek to participate in price trends that are already underway, but because they lack the capacity to make or take delivery, they will never be in a position to hold a market position through the delivery process. They create virtually no impact on daily settlement prices, the primary benchmark used by the marketplace, and therefore are not the cause of the rise in oil prices.
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