Should We Re-enact Glass-Steagall?

[The Rabbi]

Why Oil Prices Are So High

In 2013, oil prices started rising in January, earlier than ever. Iran kicked off the year by playing war games near the Straits of Hormuz. This was perceived as a potential threat to this strategic shipping lane. By February 8, oil reached $118.90/barrel. This sent gas prices to $3.85 by February 25. Since then, oil and gas prices have leveled off. Prices are expected to average $105 barrel for Brent crude oil in 2013.
This is lower than 2012's average of $112 per barrel. The EIA bravely forecasts the average price of oil will fall even more in 2014 to $99 per barrel. Why? U.S. pipeline capacity will be expanded, allowing greater supply. Demand will be only mildly supported by moderate economic growth in the U.S. The EIA forecasts growth to be at the low end of the healthy 2-3% growth rate. (Source: EIA, Short-Term Forecast)

Reasons for High Oil Prices in 2012:

Oil prices started rising much sooner in 2012 than they did in 2011. The price for WTI crude oil broke above $100 a barrel on February 13, 2012, two weeks earlier than in 2011. Rising oil prices drove gas prices above $3.50 a gallon that same week. Gas prices had already breached $3.50 a gallon on the East and West coasts in January.
By March, Brent Crude Oil (which is more expensive than WTI) peaked at $125 a barrel. It settled down to $95 a barrel in June, but rose $113.36 by August. Normally, oil prices drop in the fall and winter. However, commodities futures traders were bidding up oil prices to offset what the Fed's expansive monetary policy. They were betting the dollar would drop, which drives up oil prices. They were wrong about the dollar, but oil prices rose despite lower demand. (Source: Forbes, The Price of Oil Is the New Economic Spoiler, September 12, 2012)

People were concerned because gas and oil prices rose earlier than in the past. However, less and less of oil prices are due to supply and demand. More and more of it is based on the expectations of commodities markets.

Why Oil Prices Rose in 2011:

Crude oil prices reached a recent high of $113.93 on April 29, 2011. Prices had been increasing steadily since February 2009, when prices dropped to $39 a barrel. Prices hovered at a comfortable $70-$80 a barrel until late 2010. High oil prices translate to high gas prices. Petroleum is also an ingredient in fertilizer. This, combined with higher transportation costs, increases food prices. The forces driving high oil prices are similar to what happened when oil hit an all-time high in 2008.
The All-Time High Was $143.68 a Barrel:

Oil prices hit an all-time high of $143.68 a barrel in July 2008. This drove gas prices to $4.17 a gallon. Most news sources blamed this on surging demand from China and India, combined with decreasing supply from Nigeria and Iraq oil fields. However, even then this wasn't logical, since the economy was already in a recession. For more, see Gas Prices in 2008. (Source: BBC, Oil Price May Hit $200 a Barrel, May 7, 2008)
Supply and Demand Are Not Alone in Driving Up Oil Prices:

The price of oil is driven by much, much more than supply and demand. This was proven in 2008. Thanks to the recession, global demand in 2008 was actually down and global supply was up. Prices rose, nevertheless. Oil consumption decreased from 86.66 million barrels per day (bpd) in the fourth quarter 2007 to 85.73 million bpd in the first quarter of 2008. At the same time, supply increased from 85.49 to 86.17 million bpd.

According to the laws of supply and demand, prices should have decreased. Instead, they increased almost 25% in that time - from $87.79 to $110.21 a barrel. (Source: EIA. See Google Spreadsheet)

Commodities Trading Drove Up Oil Prices:

Why? Although the EIA pinned part of the blame on volatility in Venezuela and Nigeria, it warned of an influx of investment money into commodities markets. Investors were stampeding out of the falling real estate and stock markets. Instead, they diverted their funds to oil futures. This sudden surge drove up oil prices, creating a speculative bubble. (Source: EIA Short-Term Energy Outlook)
This bubble soon spread to other commodities. Investor funds swamped wheat, gold and other related futures markets. This speculation drove up food prices dramatically around the world. The result? Food riots in less-developed countries by people facing starvation. (Source: BBC News,Commodity Boom Continues to Roll, January 16, 2008; CNN, Riots, Instability Spread as Food Prices Skyrocket, February 18, 2008)

This explains why oil prices are lower today than they were in 2008, despite a healthier global economy and greater worldwide demand for oil. Today, there are many more outlets for investment funds. In 2008, the global markets were so risky and uncertain, investors turned from stocks, bonds and even housing to the U.S. dollar, gold and oil. In 2012, despite uncertainty around the eurozone crisis, investors had many more options. The stock market rose, the bond market was less risky, and even housing improved. Although the global market is still in slow growth mode in 2013, it is stabilizing, and that means oil prices shouldn't break the peak hit in 2008.

High oil prices are also driven by a decline in the dollar. Most oil contracts around the world are traded in dollars. As a result, oil-exporting countries usually peg their currency to the dollar. When the dollar declines, so do their oil revenues, but their costs go up. Therefore, OPEC must raise the price of oil to maintain its profit margins and keep costs of imported goods constant. (Source: USA Today,Oil Briefly Spurts Near $104 per Barrel, March 3, 2008)

However, OPEC doesn't want oil prices too high, or alternative fuel sources start to look good. OPEC has said its target price for oil is between $70-$80 a barrel. In 2008, Saudi Arabia announced it would increase supply. This was one reason prices started to drop. (See High Oil Prices Caused by Wall Street, Not OPEC) (Article updated March 11, 2013)

More and more of it is based on the expectations of commodities markets.

Expectations of future supply?

You're shitting me.

No shit again. So they speculate the price, trade the hell out of it, and prices go up WITHOUT A DAMN THING HAPPENING.

Which is why before 2000 they couldn't do this shit. They could be limited on the number of trades so they couldn't JACK UP THE PRICES.

So oil prices didnt go up prior to 2002?

Damn, s0n. You're one stupid git. I'm sorry others are making more than you make working 3rd shift at Hardees but that's how it is.
You go on iggy with your friends.

 

[eagle1462010]

Historical Crude Oil prices, 1861 to Present

This is a chart showing the historical price per barrel of oil since 1861

I've already done this on this thread before, aka showing a link. The prices spiked only after the Iranian Hostage Crisis, and steadily SPIKED again after 2002. Again, this being during a time that CONSUMPTION WENT DOWN.

Which I posted proof of earlier. Demand went down after 2004 because the PRICES WERE GOING UP UP AND AWAY. Yet the PRICES STILL ROSE TO RECORD LEVELS.

I've asked these DOLTS TIME AND TIME AGAIN TO EXPLAIN WHY THIS HAPPENED, and they haven't answered anything on it. Because they know the Damn answer.

I WILL NOT BACK DOWN ON THIS SUBJECT. I'm no Dang LIB, and believe in Capitalism. However, you have to DRAW A LINE IN THE SAND SOMEWHERE. You don't allow the Speculators to FUCK OVER YOUR NATION FOR GREED. Which is exactly what the hell they did.

They say I don't know anything after posting article after article on the subject. They haven't posted JACK SQUAT. The Markets are now a CASINO FROM HELL, and Margin LOANS are now APPROACHING THEIR 2008 LEVELS IN LOANS.

If the Feds pull the QE's or give an interest rate adjustment, then the Stocks will tank again, and HERE WE GO AGAIN.

Vital Commodities such as oil, were regulated before 2000. PERIOD. After 2000, the TRADERS SEEING BLOOD IN THE WATER traded the hell out of Futures driving up the Price of Oil, while ACTUAL DEMAND WAS GOING DOWN. PERIOD.

Rabbi, can take a long walk off a short bridge.

Market Traders would sell their own Fing kids to make a Buck. And they are selling the Future of our Economy to make a Buck.

All of them, who HELPED NEARLY GIVE US A GREAT DEPRESSSION, should be Fing Tarred and Feathered.

But they are TOO BIG TO FAIL NOW. We should have LET THEM GO UNDER AND NOT BAILED OUT ANY. Even though the Bail Outs were a JOKE ANYWAY. Or should I put up the SCOTUS verdict on that subject? 9 TRILLION IN near 0% loans from the Federal Reserve. The Big 5 didn't need a dang Bail Out at all, as they just hit the enter button at the Federal Reserve anyway.

Finally, when you screw over the people of our country to make a BUCK YOU ARE A FING SCUMBAG.

But that is just my opinion. The real question is what's going to happen with the current BULL MARKET when REALITY HITS.

 

[Toddsterpatriot]

Historical Crude Oil prices, 1861 to Present

This is a chart showing the historical price per barrel of oil since 1861

I've already done this on this thread before, aka showing a link. The prices spiked only after the Iranian Hostage Crisis, and steadily SPIKED again after 2002. Again, this being during a time that CONSUMPTION WENT DOWN.

Which I posted proof of earlier. Demand went down after 2004 because the PRICES WERE GOING UP UP AND AWAY. Yet the PRICES STILL ROSE TO RECORD LEVELS.

I've asked these DOLTS TIME AND TIME AGAIN TO EXPLAIN WHY THIS HAPPENED, and they haven't answered anything on it. Because they know the Damn answer.

I WILL NOT BACK DOWN ON THIS SUBJECT. I'm no Dang LIB, and believe in Capitalism. However, you have to DRAW A LINE IN THE SAND SOMEWHERE. You don't allow the Speculators to FUCK OVER YOUR NATION FOR GREED. Which is exactly what the hell they did.

They say I don't know anything after posting article after article on the subject. They haven't posted JACK SQUAT. The Markets are now a CASINO FROM HELL, and Margin LOANS are now APPROACHING THEIR 2008 LEVELS IN LOANS.

If the Feds pull the QE's or give an interest rate adjustment, then the Stocks will tank again, and HERE WE GO AGAIN.

Vital Commodities such as oil, were regulated before 2000. PERIOD. After 2000, the TRADERS SEEING BLOOD IN THE WATER traded the hell out of Futures driving up the Price of Oil, while ACTUAL DEMAND WAS GOING DOWN. PERIOD.

Rabbi, can take a long walk off a short bridge.

Market Traders would sell their own Fing kids to make a Buck. And they are selling the Future of our Economy to make a Buck.

All of them, who HELPED NEARLY GIVE US A GREAT DEPRESSSION, should be Fing Tarred and Feathered.

But they are TOO BIG TO FAIL NOW. We should have LET THEM GO UNDER AND NOT BAILED OUT ANY. Even though the Bail Outs were a JOKE ANYWAY. Or should I put up the SCOTUS verdict on that subject? 9 TRILLION IN near 0% loans from the Federal Reserve. The Big 5 didn't need a dang Bail Out at all, as they just hit the enter button at the Federal Reserve anyway.

Finally, when you screw over the people of our country to make a BUCK YOU ARE A FING SCUMBAG.

But that is just my opinion. The real question is what's going to happen with the current BULL MARKET when REALITY HITS.

The prices spiked only after the Iranian Hostage Crisis, and steadily SPIKED again after 2002. Again, this being during a time that CONSUMPTION WENT DOWN.

Show world consumption went down.

 

[eagle1462010]

Jesus man, I showed evidence of that earlier.

 

[eagle1462010]

Why has US Oil Consumption Steadily Fallen since 2004?

 

[eagle1462010]

Explain the spike at 147 a barrel.
While consumption didn't spike.
While Supply was available.

 

[Toddsterpatriot]

Why has US Oil Consumption Steadily Fallen since 2004?

Show world consumption went down.

 

[eagle1462010]

CFTC Charges Oil Traders in 2008 Speculation Scheme | FDL News Desk

The Commodity Futures Trading Commission charged one trading house and two individuals for illegally manipulating oil prices during the price spike of 2008, when oil reached $147 a barrel, by creating the appearance of a shortage to drive up the benchmark for crude. While the action covers oil trading in 2008, the connection to today, where speculation is seen as a primary cause for higher gas prices, is unmistakable.

The CFTC complaint alleges that the traders carried out the scheme in January and March 2008.

By mid-January they had accumulated 4.6m barrels of physical oil, or two-thirds of oil available for delivery against the February WTI futures contract. In March they bought 6.3m barrels, equal to 84 per cent of oil available for delivery against the April contact.

The regulator alleged that Parnon Energy, a US oil trader, together with its Swiss and UK affiliates Arcadia Energy (Suisse) and Arcadia Petroleum, made more than $50m from the scheme in January and March 2008 [...]

The buying created the impression of a shortage and pushed up the price of WTI futures on the New York Mercantile Exchange. Ahead of their move in the physical market, the traders allegedly bought large amounts of futures and other financial instruments that would profit from a price rise.

“They wanted to lull market participants into believing that supply would remain tight,” the CFTC said. “They knew that as long as the market believed that supply was tight and getting even tighter, there would be upward pressure on the prices of WTI for February delivery relative to March delivery, which was their goal.”

The employees at Arcadia/Parnon, James T. Dyer and Nicholas J. Wildgoose, were former BP traders, notes Brad Johnson of Think Progress. The CFTC has emails where the traders describe their scheme to make a “shitload of money” and then dump the trades on the market in an “inevitable puking.” There’s more from the New York Times. The penalties could rise to as much as $150 million, on top of recouping the $50 million in profits from the scheme.

Sen. Maria Cantwell, who has doggedly chased this issue for years, said in a statement that
“This is exactly what we expect the CFTC to be doing… Consumers have felt the impact of manipulation we’ve seen in the electricity, natural gas and oil markets. I expect the CFTC to be aggressive in policing these markets and standing up for consumers who are getting gouged at the pump.”

This is exactly the kind of case that Attorney General Eric Holder is looking into as part of a working group the President asked him to convene, focused on fraud in the oil and gas markets. Yet despite this action by the CFTC, and despite the fact that rampant speculation exists in the market today, the House GOP budget would cut funding for the CFTC by 15%.

comments

1. I checked the charts on World consumption and they slightly rose.
2. Supply was more than sufficient during this time.
3. Here's an article, with Holder in it pfffft, going after companies who manipulated prices by holding oil contracts.

BTW you know that oil trading on Brent Oil has recently set records on Trading haven't you? The most contracts ever traded on oil Futures in History. Amazing isn't it...................

I'm looking world wide for the reason why..................Did a major oil player or OPEC just reduce production or something.................Well................... Yet the markets are trading it like hell.........

Hope they all lose their ass on it.

 

[eagle1462010]

Speculation explains more about oil prices than anything else | McClatchy

WASHINGTON — Feel like you're being robbed every time you fill the gas tank? Not sure who to blame? Try Wall Street.

That's not the conventional explanation, but it's the one the facts point to. Usually analysts say today's high prices stem simply from "supply and demand." They mean demand for oil and gas is rising and supplies aren't keeping up, so people bid up their price. But global and U.S. supplies are plentiful and demand is stable, so that's not it.

Then the analysts say it's because the market's afraid Middle East turmoil will interrupt oil supplies, so nervous buyers are bidding up prices to ensure they lock in a contract for oil now, just in case it's scarce later. There's probably some truth to that, but after five months of turmoil, there's been no significant impact on Middle East oil supplies, even as prices have see-sawed, so that's not credible either.

Here's what's credible: Some 70 percent of contracts for future oil delivery are now bought by financial speculators — largely big investment banks and hedge funds — who never take control of the oil. They just flip the contract for a quick profit.

Only about 30 percent of oil contracts are bought by a purchaser that actually intends to use the oil, such as an airline. That's according to the Commodity Futures Trading Commission, which regulates trade in those contracts.

"I'm convinced ... that speculators are actively manipulating (prices)," said Michael Greenberger, a University of Maryland law professor who in the 1990s headed the CFTC's trading division.

"It's harder and harder for any reasonable observer to dismiss the role of excessive speculation in this market," said Michael Masters, a professional Wall Street investor who knows how this game works. He's testified before Congress repeatedly that speculators are pushing prices up well beyond what supply and demand would warrant.

They both point to a $15 weekly swing in oil prices in early May and $5 a barrel moves on oil prices in a single day — with no obvious change to supply or demand.

Exxon Mobil Chief Executive Rex Tillerson noted Thursday in testimony before the Senate Finance Committee that this year's oil prices don't make any economic sense, though that's not quite how he put it. He said that current fundamentals and production costs would dictate oil in the range of $60 to $70 a barrel. That's at least $43 cheaper than this year's highs of $113 a barrel reached on April 29 and May 2.

But Tillerson declined to opine about the role of speculators, saying only that the price of oil "will be wherever it will be."

Hundreds of billions of dollars are being made through this speculation — both in the regulated futures market and on the larger unregulated over-the-counter swaps market, where private bets about the movement of oil prices take place. It's producing lots of new billionaires on Wall Street and driving oil company profits through the roof.

And it's punishing everyone who drives.

"The sheer volume of new capital coming from hedge funds, financial traders and other long-term passive investors — interests that mostly buy oil futures to turn a quick profit — is creating artificial demand and driving up the price for consumers," said Sen. Maria Cantwell, D-Wash., in a statement accompanying a letter she and 16 other U.S. senators issued Thursday. They, like Greenberger and Masters, urge the CFTC to impose rules limiting speculators' ability to do this.

Masters and Greenberger advocate a return to limits that prevailed for much of the past century. Those limits effectively reined in speculation to about 30 percent of the oil market.

"We need some speculation. We need enough to provide grease for the wheels of the hedgers, but not so much that they drive price formation," Masters said.

A McClatchy review of two decades of data compiled by the CFTC documents the boom in speculative trading amid rising prices. In the 1990s, the ratio of speculative trades to trades made by commercial users of oil was tilted heavily toward users of crude. But from 1991 forward, the big financial players such as Goldman Sachs and J.P. Morgan Chase won exemptions that freed them from limits on how much they could speculate in futures markets.

They became classified as commercial traders, as if they were an airline hedging price risks in jet fuel. The big banks needed to invest in futures contracts to hedge bets they made in the unregulated swaps market. And the government, in the tenth year of Reagan Republicanism, was happy to reduce regulations on markets. Oil "swaps" increased from $13 billion in the 1990s to more than $313 billion in July 2008 at oil's peak price, Greenberger said .

In mid-2006, CFTC data began distinguishing Wall Street's trades from industrial users, calling the strictly financial ones "non-commercial." Suddenly, the record shows that speculative trades raced past commercial trades.

Prior to the 1990s, speculators made up about 30 percent of the futures market. In the latest reporting period, the ratio on May 3 stood at 68 percent speculators to 32 percent users of oil. Meanwhile, the volume of total reported trades has grown five-fold since 1995, underscoring the impact of speculation on futures markets.

"It tells me that there are more speculative positions than there has ever been in history, particularly in the energy sector, I don't mean only crude oil," said Bart Chilton, a CFTC commissioner who thinks excessive speculation is at least part of the cause of soaring oil prices. "In all of the energy sector, we've seen a 64 percent increase in speculative positions since the (oil price) high of 2008."

While those numbers are stark, the numbers on supply and demand make it clear that the high prices aren't coming from there. There is no shortage of oil stocks by historical standards. There's an estimated 3 million to 4 million barrels per day (bpd) of excess oil production capacity in the world today. That's much more than when supplies were tight in 2008.

U.S. oil production, too, continues to grow. It rose from 4.95 million bpd in 2008 to 5.36 million bpd in 2009, followed by 5.5 million bpd last year — even with the BP disaster in the Gulf of Mexico. The Energy Information Administration forecasts U.S. production to hold at that level this year and rise again next year, to 5.54 million bpd.

U.S. crude oil stocks on April 29, the date oil peaked this year above $113 a barrel, stood at 1.768 billion barrels, according to the EIA. That's about 700,000 barrels more than in July 2008, when oil prices hit all-time highs.

And that's plenty to meet U.S. needs, because consumption isn't growing.

The U.S. consumed 20.68 million barrels per day in 2007. Then came the financial crisis, and consumption dipped to 19.5 million bpd in 2008. Last year the number was 19.5 million bpd. This year's projection is 19.28 million bpd.

So if supplies are plentiful and consumer demand isn't rising, why are prices?

Could it be that refineries aren't able to produce enough gasoline? No. Refiners are running their plants at below cruising speed, and they've got lots of room to produce more if consumers need it. The latest data from EIA on the rate at which refineries are utilized showed a rate of 79.8 percent in February. That's 20 percent below full-blown production, and it hasn't been that low since 1986. If demand for gasoline were soaring, these plants would be cranking at a higher rate.

The American Petroleum Institute, the oil industry lobby, disputes this last example, noting that gasoline production continues at near record levels despite the low refinery utilization rates.

"The amount they're squeezing out of the barrel (of oil) has gone up significantly," said John Felmy, the group's chief economist.

Asked if excessive speculation is to blame for high prices, Felmy said no. He said growing economies such as China and India are gobbling up oil and that global energy data shows the price is "pretty consistent with fundamentals," and that "it really tells the tale of a tight market."

That's not what the Paris-based International Energy Agency said Thursday. It forecast flat global oil demand this year. It dialed back its projection for growth in consumption to 1.3 million bpd, less than half last year's growth of 2.8 million bpd.

The report said, "Our own estimates for global oil demand show a marked slowdown, with preliminary March data suggesting near zero annual growth for the first time since summer 2009."

All that leads a growing number of analysts to one conclusion: This year's high prices for oil and gasoline, and their plunges of late, are driven largely by financial speculators making trillions by trading in oil futures while ordinary consumers feel burned.

While the evidence of speculation is increasingly obvious, the facts haven't yet been acknowledged enough to force corrective regulatory action.

"The history of this is there is always something going on in an opaque fashion that you only find out about after an investigation has been launched," Greenberger noted.

President Barack Obama last month ordered the creation of an interagency task force led by Attorney General Eric Holder to determine if price gouging or market manipulation is occurring. But he stopped short of ordering a full-blown investigation with additional government resources.

"My view is that the Justice Department should be actively organizing and driving an investigation that will strain the resources of some of these agencies," said Greenberger, himself a former Justice official. "Just playing 'footsy' with this investigation is a tragic waste of resources."

Justice Department spokeswoman Alisa Finelli insisted that by bringing together state and federal authorities, the task force "enhances our ability to take a comprehensive approach in monitoring and sharing information about the oil and gas markets to determine whether or not there is evidence of illegal activity. "

Meanwhile, 17 U.S. senators, led by Cantwell, say the CFTC should act now.

"American consumers are getting gouged at the pump while speculation on Wall Street runs rampant. Today the CFTC must ... crack down on excessive speculation and provide relief to American consumers," she said.

Read more here: Speculation explains more about oil prices than anything else | McClatchy

 

[The Rabbi]

Why has US Oil Consumption Steadily Fallen since 2004?

Show world consumption went down.

He's a broken record, unable to respond to your question because it falls outside his pre-arranged script.

 

[eagle1462010]

lol

pre arranged script.

If you think we went to 147 a barrel because of world market conditions in 2008 you are FOOLS.

Let's just throw a watermelon off the Empire State Building and Bet on it all the way down Jacking up it's CPI all the way down, when it's worth nothing after it hits. Someone's gonna get stuck with the Worthless Watermelon when it hits the pavement.

Someone is gonna lose, and hey they paid their Margins all the way down. Now they got to pay for being stuck with the watermelon, but no ones buying. Tough luck Leahman Brothers..................

 

[Toddsterpatriot]

Speculation explains more about oil prices than anything else | McClatchy

WASHINGTON — Feel like you're being robbed every time you fill the gas tank? Not sure who to blame? Try Wall Street.

That's not the conventional explanation, but it's the one the facts point to. Usually analysts say today's high prices stem simply from "supply and demand." They mean demand for oil and gas is rising and supplies aren't keeping up, so people bid up their price. But global and U.S. supplies are plentiful and demand is stable, so that's not it.

Then the analysts say it's because the market's afraid Middle East turmoil will interrupt oil supplies, so nervous buyers are bidding up prices to ensure they lock in a contract for oil now, just in case it's scarce later. There's probably some truth to that, but after five months of turmoil, there's been no significant impact on Middle East oil supplies, even as prices have see-sawed, so that's not credible either.

Here's what's credible: Some 70 percent of contracts for future oil delivery are now bought by financial speculators — largely big investment banks and hedge funds — who never take control of the oil. They just flip the contract for a quick profit.

Only about 30 percent of oil contracts are bought by a purchaser that actually intends to use the oil, such as an airline. That's according to the Commodity Futures Trading Commission, which regulates trade in those contracts.

"I'm convinced ... that speculators are actively manipulating (prices)," said Michael Greenberger, a University of Maryland law professor who in the 1990s headed the CFTC's trading division.

"It's harder and harder for any reasonable observer to dismiss the role of excessive speculation in this market," said Michael Masters, a professional Wall Street investor who knows how this game works. He's testified before Congress repeatedly that speculators are pushing prices up well beyond what supply and demand would warrant.

They both point to a $15 weekly swing in oil prices in early May and $5 a barrel moves on oil prices in a single day — with no obvious change to supply or demand.

Exxon Mobil Chief Executive Rex Tillerson noted Thursday in testimony before the Senate Finance Committee that this year's oil prices don't make any economic sense, though that's not quite how he put it. He said that current fundamentals and production costs would dictate oil in the range of $60 to $70 a barrel. That's at least $43 cheaper than this year's highs of $113 a barrel reached on April 29 and May 2.

But Tillerson declined to opine about the role of speculators, saying only that the price of oil "will be wherever it will be."

Hundreds of billions of dollars are being made through this speculation — both in the regulated futures market and on the larger unregulated over-the-counter swaps market, where private bets about the movement of oil prices take place. It's producing lots of new billionaires on Wall Street and driving oil company profits through the roof.

And it's punishing everyone who drives.

"The sheer volume of new capital coming from hedge funds, financial traders and other long-term passive investors — interests that mostly buy oil futures to turn a quick profit — is creating artificial demand and driving up the price for consumers," said Sen. Maria Cantwell, D-Wash., in a statement accompanying a letter she and 16 other U.S. senators issued Thursday. They, like Greenberger and Masters, urge the CFTC to impose rules limiting speculators' ability to do this.

Masters and Greenberger advocate a return to limits that prevailed for much of the past century. Those limits effectively reined in speculation to about 30 percent of the oil market.

"We need some speculation. We need enough to provide grease for the wheels of the hedgers, but not so much that they drive price formation," Masters said.

A McClatchy review of two decades of data compiled by the CFTC documents the boom in speculative trading amid rising prices. In the 1990s, the ratio of speculative trades to trades made by commercial users of oil was tilted heavily toward users of crude. But from 1991 forward, the big financial players such as Goldman Sachs and J.P. Morgan Chase won exemptions that freed them from limits on how much they could speculate in futures markets.

They became classified as commercial traders, as if they were an airline hedging price risks in jet fuel. The big banks needed to invest in futures contracts to hedge bets they made in the unregulated swaps market. And the government, in the tenth year of Reagan Republicanism, was happy to reduce regulations on markets. Oil "swaps" increased from $13 billion in the 1990s to more than $313 billion in July 2008 at oil's peak price, Greenberger said .

In mid-2006, CFTC data began distinguishing Wall Street's trades from industrial users, calling the strictly financial ones "non-commercial." Suddenly, the record shows that speculative trades raced past commercial trades.

Prior to the 1990s, speculators made up about 30 percent of the futures market. In the latest reporting period, the ratio on May 3 stood at 68 percent speculators to 32 percent users of oil. Meanwhile, the volume of total reported trades has grown five-fold since 1995, underscoring the impact of speculation on futures markets.

"It tells me that there are more speculative positions than there has ever been in history, particularly in the energy sector, I don't mean only crude oil," said Bart Chilton, a CFTC commissioner who thinks excessive speculation is at least part of the cause of soaring oil prices. "In all of the energy sector, we've seen a 64 percent increase in speculative positions since the (oil price) high of 2008."

While those numbers are stark, the numbers on supply and demand make it clear that the high prices aren't coming from there. There is no shortage of oil stocks by historical standards. There's an estimated 3 million to 4 million barrels per day (bpd) of excess oil production capacity in the world today. That's much more than when supplies were tight in 2008.

U.S. oil production, too, continues to grow. It rose from 4.95 million bpd in 2008 to 5.36 million bpd in 2009, followed by 5.5 million bpd last year — even with the BP disaster in the Gulf of Mexico. The Energy Information Administration forecasts U.S. production to hold at that level this year and rise again next year, to 5.54 million bpd.

U.S. crude oil stocks on April 29, the date oil peaked this year above $113 a barrel, stood at 1.768 billion barrels, according to the EIA. That's about 700,000 barrels more than in July 2008, when oil prices hit all-time highs.

And that's plenty to meet U.S. needs, because consumption isn't growing.

The U.S. consumed 20.68 million barrels per day in 2007. Then came the financial crisis, and consumption dipped to 19.5 million bpd in 2008. Last year the number was 19.5 million bpd. This year's projection is 19.28 million bpd.

So if supplies are plentiful and consumer demand isn't rising, why are prices?

Could it be that refineries aren't able to produce enough gasoline? No. Refiners are running their plants at below cruising speed, and they've got lots of room to produce more if consumers need it. The latest data from EIA on the rate at which refineries are utilized showed a rate of 79.8 percent in February. That's 20 percent below full-blown production, and it hasn't been that low since 1986. If demand for gasoline were soaring, these plants would be cranking at a higher rate.

The American Petroleum Institute, the oil industry lobby, disputes this last example, noting that gasoline production continues at near record levels despite the low refinery utilization rates.

"The amount they're squeezing out of the barrel (of oil) has gone up significantly," said John Felmy, the group's chief economist.

Asked if excessive speculation is to blame for high prices, Felmy said no. He said growing economies such as China and India are gobbling up oil and that global energy data shows the price is "pretty consistent with fundamentals," and that "it really tells the tale of a tight market."

That's not what the Paris-based International Energy Agency said Thursday. It forecast flat global oil demand this year. It dialed back its projection for growth in consumption to 1.3 million bpd, less than half last year's growth of 2.8 million bpd.

The report said, "Our own estimates for global oil demand show a marked slowdown, with preliminary March data suggesting near zero annual growth for the first time since summer 2009."

All that leads a growing number of analysts to one conclusion: This year's high prices for oil and gasoline, and their plunges of late, are driven largely by financial speculators making trillions by trading in oil futures while ordinary consumers feel burned.

While the evidence of speculation is increasingly obvious, the facts haven't yet been acknowledged enough to force corrective regulatory action.

"The history of this is there is always something going on in an opaque fashion that you only find out about after an investigation has been launched," Greenberger noted.

President Barack Obama last month ordered the creation of an interagency task force led by Attorney General Eric Holder to determine if price gouging or market manipulation is occurring. But he stopped short of ordering a full-blown investigation with additional government resources.

"My view is that the Justice Department should be actively organizing and driving an investigation that will strain the resources of some of these agencies," said Greenberger, himself a former Justice official. "Just playing 'footsy' with this investigation is a tragic waste of resources."

Justice Department spokeswoman Alisa Finelli insisted that by bringing together state and federal authorities, the task force "enhances our ability to take a comprehensive approach in monitoring and sharing information about the oil and gas markets to determine whether or not there is evidence of illegal activity. "

Meanwhile, 17 U.S. senators, led by Cantwell, say the CFTC should act now.

"American consumers are getting gouged at the pump while speculation on Wall Street runs rampant. Today the CFTC must ... crack down on excessive speculation and provide relief to American consumers," she said.

Read more here: Speculation explains more about oil prices than anything else | McClatchy

Here's what's credible: Some 70 percent of contracts for future oil delivery are now bought by financial speculators — largely big investment banks and hedge funds — who never take control of the oil. They just flip the contract for a quick profit.

You understand that speculators both buy and sell oil contracts, right? Probably not.
You understand some speculators think oil will rise, some think it will fall, right? Probably not.

Then the analysts say it's because the market's afraid Middle East turmoil will interrupt oil supplies, so nervous buyers are bidding up prices to ensure they lock in a contract for oil now, just in case it's scarce later. There's probably some truth to that

Thanks for playing.