NCPA - National Center for Policy Analysis

WHAT IS DRIVING GAS PRICES?

May 8, 2006

Recently, federal regulators and a top market official told lawmakers that they have found no evidence of market manipulation behind the recent run-up in energy prices, despite increased surveillance, says Ben Geman, of Greenwire.

  • Walter Lukken of the U.S. Commodity Futures Trading Commission claims that evidence indicates that the futures markets for crude oil, unleaded gasoline and other energy products have been properly performing their risk management and price discovery roles.
  • Crude oil and gasoline futures have also been accurately reflecting the underlying fundamentals of these markets.
  • Moreover, the commission has a dozen energy investigations ongoing, in which they are supposedly studying these issues.

However, with oil prices over $70 per barrel and gasoline around $3 per gallon, lawmakers and other have expressed concern about the roles of market manipulation and the role of speculators in the future markets, says Geman.

Furthermore, there are three factors contributing to higher gasoline prices: high crude oil prices, the phase-out of gasoline additive MTBE and reduced refining capacity, and with the MTBE phase-out, there is a level of uncertainty growing in the transition process as the marketplace adjusts to the new supply situation leaving many consumer worried, says Geman.

Source: Ben Geman, "Oil and Gas: Manipulation isn't driving prices, experts tell lawmakers," Greenwire, April 27, 2006.

 

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