Make us your home page
Instagram

Speculators behind latest surge in gas prices

Gas prices are soaring on the West Coast, as evidenced above at a station in San Francisco, but they’ve also jumped in Florida. The trend threatens to put a damper on holiday shopping and impede economic growth.

Associated Press

Gas prices are soaring on the West Coast, as evidenced above at a station in San Francisco, but they’ve also jumped in Florida. The trend threatens to put a damper on holiday shopping and impede economic growth.

WASHINGTON — Despite weak demand in the United States and Europe, oil prices climbed this week to nearly $90 a barrel, and gasoline prices have passed $3 a gallon on the West Coast and parts of the Northeast, with Florida not far behind.

Why? If demand is down and supplies are plentiful — and they are — why would prices be going up?

Because Wall Street speculators are driving up oil and gasoline prices again, just in time to dampen holiday cheer.

"It's all about investor optimism, and that's been the story about 2010. … That's the primary reason why we're seeing oil prices at $90 (a barrel) and gasoline making an uncharacteristic climb in December toward $3 a gallon," said Troy Green, a national spokesman for the AAA Motor Club.

AAA's Fuel Gauge Report shows the nationwide average for a gallon of regular unleaded gasoline stood Wednesday at $2.968. That's up 11 cents a gallon from a month ago and 33 cents a gallon from a year ago. In Florida, the average price of a gallon of regular unleaded Thursday was $2.992, up from $2.834 a month ago. In the bay area, the price was $2.94 on Thursday, up from $2.775 a month ago.

It's even worse on the West Coast, where average prices this week exceeded $3.15 a gallon, according to Energy Department data.

If oil prices keep climbing beyond $100 per barrel, as Goldman Sachs projects for 2011, higher fuel prices may blunt efforts by the Obama administration and the Federal Reserve to stimulate the weak economy.

"I think we're at that point. With (nearly) 10 percent unemployment, it's a much more impoverished consumer that can't afford it. It's almost a bludgeoning instrument in terms of what it will do to consumer sentiment," said John Kilduff, a veteran energy analyst and partner in the hedge fund Again Capital. "What might have been a very bright shopping season could get the wind taken out of its sails by these high prices."

Rising prices could erase the stimulus coming from the 2-percentage-point reduction in payroll taxes proposed this week by President Barack Obama and Republican congressional leaders. This would hit the working poor particularly hard.

"The money they get from government tax relief, they'll have to go pay in higher prices for food and energy," said Michael Masters, head of Masters Capital Management and a frequent witness before Congress about financial speculation in oil contracts.

The U.S. Energy Information Administration, the statistical arm of the Energy Department, said Wednesday that there is, in fact, increasing demand for oil compared with last year's low demand amid the recession.

But supplies are abundant, it said in its weekly report, This Week in Petroleum — especially when compared with a few years ago.

Speculators behind latest surge in gas prices 12/09/10 [Last modified: Monday, November 7, 2011 1:39pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, MarketWatch.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. New Graham-Cassidy health care plan stumbles under opposition from governors

    Nation

    WASHINGTON — The suddenly resurgent Republican effort to undo the Affordable Care Act was dealt a blow on Tuesday when a bipartisan group of governors came out against a proposal gaining steam in the Senate.

    Sen. Lindsey Graham, R-S.C., joined by, from left, Sen. Roy Blunt, R-Mo., Majority Whip John Cornyn, R-Texas, Sen. John Barrasso, R-Wyo., Sen. Bill Cassidy, R-La., Senate Majority Leader Mitch McConnell, R-Ky., and Sen. John Thune, R-S.D., speaks to reporters as he pushes a last-ditch effort to uproot former President Barack Obama's health care law, at the Capitol in Washington, Tuesday, Sept. 19, 2017. To win, 50 of the 52 GOP senators must back it -- a margin they failed to reach when the chamber rejected the effort in July. [/J. Scott Applewhite | Associated Press]
  2. Early estimates peg Hurricane Irma damage at as much as $65B

    Banking

    The damage totals from Hurricane Irma are still being tallied, but early numbers are in: As of Tuesday, the storm is estimated to have caused between $42.5 billion and $65 billion of damage. That's according to a Tuesday release by Irvine, Calif.-based analytics company CoreLogic.

    Hurricane Irma is estimated to have caused up to $65 billion in damage, said analytics company CoreLogic. Pictured is 
Hermilo Munoz Castillo as wades down a flooded street to check on his home in southern Collier County, Fla. after Hurricane Irma passed. | [LOREN ELLIOTT | Times]
  3. Port Tampa Bay makes public/private commitment for $60 million expansion project

    Business

    TAMPA — Port Tampa Bay approved a public-private partnership agreement with four other entities to divvy up who will pay for a $60 million widening and extension of the Big Bend Channel.

    Port Tampa Bay approved a participation agreement with the U.S. Army Corps of Engineers, Florida Department of Transportation, Tampa Electric Company and Mosaic Company at the port's monthly board meeting on  Tuesday. Port Tampa Bay President & CEO Paul Anderson signs the agreement as Ram Kancharla; Port Tampa Bay's vice president of planning & development, Brandon Burch; project manager at United States Army Corps of Engineers, Lois Moore; of Alcalde and Fay and Charles Klug; Port Tampa Bay principal counsel, and Tim Murphy; deputy district engineer of the Army Corps., looks on. [Company handout]
  4. One of St. Petersburg's newest condo projects is sold out

    Real Estate

    ST. PETERSBURG — Reflecting the continued demand for condos in downtown St. Petersburg, The Salvador, completed earlier this year at 199 Dali Blvd., has sold out. Records show that a 2-bedroom, 2-bath unit sold Friday for $620,000 in an all-cash deal. Two other units — a 3-bedroom, 2-bath penthouse and a …

     Reflecting the continued demand for condos in downtown St. Petersburg, The Salvador, completed earlier this year at 199 Dali Blvd., has sold out. 
[Rendering courtesy of aalliiggnn LLC]
  5. Reload your SunPass account. Roadway tolls return Thursday.

    State Roundup

    TALLAHASSEE — Florida residents will no longer get a free pass traversing most stretches of the Florida Turnpike or certain local expressways across the state.

    With a push by the Florida Turpike to encourage more drivers traveling the Veterans and Suncoast Parkway to buy a Sunpass, motorists will begin to see more lanes converted to handle Sunpass. [Tampa Bay Times]