Worries Boost Gasoline Prices and Stir Up US Politics

World oil prices have risen sharply over the past six months, annoying consumers and hampering economic growth.  In the United States, rising gasoline prices have become a political issue in the presidential campaign. U.S. experts suggest many ways to ease prices, from tapping emergency reserves, to placing more limits on market speculation.

U.S. gasoline prices are rising to a level that angers many motorists.

American Petroleum Institute chief economist John Felmy blames rising gasoline prices on rising demand for oil by major emerging nations.  

"There is no question that the developing countries use more oil than the developed countries now, and all the forecasts are for that to grow," said Felmy.

Changing fuel prices prompt big energy users such as airlines to purchase contracts that give them the right to buy fuel at a certain price at a certain date, making future costs more certain. But other investors buy and sell these futures contracts in search of profits, with no intention of taking delivery of the oil.  

Critics like Mark Cooper of the Consumer Federation of America call these investors speculators and say when they pour money into a market, they hurt consumers by boosting demand.    

"Speculation has driven up the price of oil very substantially from $70 to over $100," said Cooper.

Cooper says better tax laws would calm markets by rewarding longer-term investments, while better regulation could limit the number of contracts a speculator could hold, and limit when they could make deals.

But other experts say tensions with Iran over its suspected nuclear weapons program are raising prices because economic sanctions or military conflict could cut exports from this major oil producer.

Mohsin Khan of the Peterson Institute for International Economics says fear of fuel shortages plays more of a role than speculation in current prices.

He says Washington could ease prices by offering to tap the U.S. Strategic Petroleum Reserve to make up for supply shortages in the event of conflict with Iran.

"I actually believe that if the United States did announce that they were going to start releasing some [oil] from their stocks,  in the event Iranian oil was taken off the market, I believe prices would come down," said Khan.

Gasoline prices in some parts of the United States have gone over $4 a gallon, which is around  $1.05 a liter.  While that is below the price in many other nations, the rising cost adds up to a political issue.  That is because the average American family uses about 3,000 liters a year, and many voters want action from elected officials.  But economists say oil prices are set in the world market, and Washington can do little to change them in the short term.

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Comment Sorting
by: William
April 03, 2012 10:49 AM
And don't forget APRIL 15TH is tax deadline day, Half pay half don't and some get free money back from the half that pay, What a country it makes me wonder what it would be like if things were more fair.

by: William
April 02, 2012 9:01 AM
Lets hang the speculators and take oil off the comodity markets then you would see gas prices go down, And if you are a hard working joe and you personally know a speculator it would be a benefit to the nation to snuff that jerk out, Oops the ayatollah farted raise those prices.

by: NVO
March 30, 2012 6:05 AM
Where are the Rothschilds and the Rockefellers during all of this. The two corrupt families that do NOT want to be exposed???

by: Rob Swift
March 30, 2012 12:48 AM
The oil will destroy them.

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