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San Francisco, CA –Today CALPIRG, a statewide consumer advocacy organization released a new report entitled “How Speculation is Driving Up Gasoline Prices Today” authored by Robert Pollin and James Heintz with University of Massachusetts, Amherst and Americans for Financial Reform (AFR), a coalition of more than 250 national and state organizations working together for strong financial reform.
The report found that short term market speculation has played a greater role in distorting the true price of gas at the pump, more than changes in global markets. “This report confirms what is obvious, price hikes at the pump are not simply a result of supply and demand,” said Jon Fox, Consumer Advocate with CALPIRG. “Rampant speculation on oil prices is driving up the cost of gas at the pump and it needs to stop,” he added.
The report found that without the influence of large-scale speculative oil trading in the commodities futures market, the national average price of gasoline at the pump in May would have been $3.13 rather than $3.96. This means that U.S. consumers paid on average an 83-cent premium per gallon in May for their gasoline purchases due to speculation in the futures market for oil. The report found that this premium translated into over $1 billion for the broader U.S. economy in May alone.
“The American public is now paying what can be fairly called a ‘Wall Street Premium’,” said John Eller of Alliance of Californians for Community Empowerment (ACCE). “Everyone needs gas, it’s a necessity these days and the negative impact of Wall Street’s short-term speculation needs to be addressed immediately.” he added.
The study found that the average U.S. car owner paid a Wall Street premium of about $41 at the pump in May alone. For a two-car family that meant about $82 in May – which would translate into an annual cost of nearly a $1,000. “Over time, the cost of Wall Street speculation really adds up. American families are spending nearly a thousand dollars a year to feed the profit margin of commodity traders. We could significantly cut gas prices right now – at no cost to the government or taxpayers – if regulators simply used their existing authority to limit Wall Street speculation in the oil markets” Jon Fox added.
The report noted that provisions of Dodd-Frank Wall St. Reform & Consumer Protections Act (2010) grant the federal government authority to impose meaningful control of speculation on the commodities futures market. In particular, the Dodd Frank Act instructs the Commodity Futures Trading Commission (CFTC) to institute limits on holdings of futures contracts by traders in order to “diminish, eliminate, or prevent excessive speculation.”
The California Public Interest Research Group (CALPIRG) is a result-oriented public interest group that protects consumers, encourages a fair sustainable economy, and fosters responsive democratic governance.
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