Once again the citizens of Maui face the prospect of a gallon of gasoline nearing the $5 mark. Those same citizens also bear the brunt of an energy surcharge that pushes their electric prices to among the highest in the nation.
Why is this happening again?
As we wrote about this time last year, this is not capitalism in action. It is a result of letting our markets become the biggest craps table in the world. If you are a speculator, you can place bets on what oil prices will be - you can bet the prices will go up, you can bet they will go down.
And none of it has anything to do with the basic laws of supply and demand. Those bets will determine what the public pays tomorrow at the gas pump.
A story on the Daily Ticker Thursday related these points:
* At a Senate hearing last June, Rex Tillerson, the CEO of ExxonMobil, said speculation was driving up the price of a barrel of oil by as much as 40 percent.
* A study conducted by the nonpartisan consumer advocacy group Consumer Federation of America found that speculation caused the average American household to spend an additional $600 on gasoline expenditures in 2011. Moreover, the report concluded that excessive speculation (which the organization estimated added about $30 per barrel to the cost of oil in 2011) drained the U.S. economy of more than $200 billion in consumer spending in 2011.
The story also said speculators control more than 80 percent of the energy futures market - up from 30 percent a decade ago.
Seventy members of Congress asked the Commodity Futures Trading Commission to impose "position limits" on speculators. The CFTC was given that authority in 2011. Using those caps would "limit the amount of oil any one company can control on the oil futures market," said Vermont Sen. Bernie Sanders.
The story said the oil supply increased by 1.3 million barrels per day during the last three months of 2011, while demand increased by 0.7 million barrels per day. That should result in lower prices.
But not while large speculators control the market. It's time to impose those "position limits" and let supply and demand work again. It's our economy - not a craps table.
* Editorials reflect the opinion of the publisher.
