There is more evidence today that rising gas prices are having a big impact on consumers.
Wal-mart CEO Mike Duke said shoppers at the low-cost retailer are "running out of money" faster than they did a year ago likely do to rising fuel costs, reports CNNMoney.
The national average for a gallon of gas is pushing $4 -- levels not seen since crude oil spiked to $147 back in 2008. West Texas Intermediate (WTI) hit $113.70 a barrel during trading yesterday and closed at a new 31-month high after Federal Reserve Chairman Ben Bernanke's first-ever press conference where he said the Fed will continue to keep interest rates low. (See: Bernanke Speaks! Fed Chair Defends QE2, Says Inflation Not His Fault)
Bernanke also confronted surging oil and gas prices. Critics have blamed the Fed's loose monetary policy for driving up oil prices — and commodity prices all around -- but Bernanke basically laid that blame on the uprisings across the Middle East and North Africa.
"On the supply side, as everybody knows who watches television, we have seen disruptions in the Middle East and North Africa, Libya and other places that have constrained supply," he said. "That supply is not made up and that has in turn driven up gas prices significantly."
Daniel Weiss, senior fellow and director of climate strategy for the left-leaning Center for American Progress, is of a slightly different opinion.
"Chairman Bernanke had it mostly right," he tells Aaron in the accompanying interview. "But the reason why prices are going up due to instability in the Middle East is that speculators are playing on the fears of oil end users that there is going to be a future supply disruption, and therefore they are able to bid up the price of oil to make a quick buck."
Contrary to Bernanke's claim about limited oil supplies, Weiss says "there is no fundamental reason that oil prices have gone up by a third in the last two months" due to supply because Saudi Arabia "more than made up" for any supply shortages. Additionally, U.S. oil reserves are the "highest they have been in five years."
Earlier this month, Goldman Sachs released a note to clients that put a number on the impact speculators were having on the price of crude oil. The report indicated that, at the time, the speculation premium was $27 per barrel of crude oil, which hit $113.46 during early trading that same day.
In a new article titled, Oil Roulette: Rising Oil Prices Harm American Families but Enrich Serial Speculators, Weiss lays out how the Commodity Futures Trading Commission (CFTC) and other federal agencies can reduce the impact on speculators. His recommendations include the following:
- Investigate Speculative Fraud
- Raise Margins on Speculative Oil Contracts
- Heighten Margin Requirements for Speculators
- Establish "position limits" to Reduce Potential for Abuse
- Appoint a CFTC commissioner Who Advocates Strong Speculator Limits
- Charge a Fee For Speculator Trades
One catch to these recommendations is that Republicans in Congress have been trying to limit funding for the CFTC. In February, almost all House Republicans voted in favor of a budget proposal for fiscal 2011 that would have cut the agency's funding by a third. The budget bill was overturned, but there is still movement afoot to cut appropriations for the CFTC.
Weiss compares this stripping of funds to "taking cops off the beat in the middle of a crime wave."
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For more on this topic, see: Gas Prices Up Due to LEGAL Speculation; Not Manipulation, Says Consumer Advocate