Pollin and Heintz examine the factors contributing to the recent run up in gas prices for consumers. They find that to a significant extent, this is the result of the economy moving out of a deep recession, into a recovery, which has increased the demand for gasoline. But a major additional factor is the rapid growth in large-scale speculative trading around oil prices through the oil commodities futures market. They estimate that, without the influence of large-scale speculative trading on oil in the commodities futures market, the average price of gasoline at the pump in May 2011 would have been $3.13 rather than $3.96. This means that the average U.S. consumer paid a 83-cent-per-gallon premium in May for their gasoline purchases due to the huge rise in the speculative futures market for oil.
Fortunately, provisions of the Dodd-Frank Financial Reform Law grant the federal government the authority to impose meaningful control of this speculation on the commodities futures market. But the Commodity Futures Trading Commission needs to exercise this authority provided by Dodd-Frank in ways that protect ordinary people and small businesses from speculation.
