How Wall Street Is Raising the Price of Gas
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ABC News’ Mark Greenblatt Reports:
Every time you fill up your car with gas, your dollar ends up in the hands of a wide range of interests from around the world. Some of your money goes to oil companies, some of what you pay goes to refineries, and more still gets divided up by the gas stations you stop at.
What may surprise you, however, is what one of Wall Street’s top regulators has to say about who else you’re paying: speculators on Wall Street.
Bart Chilton, a commissioner at the Commodity Futures Trading Commission, the federal agency that regulates commodity futures and option trading in the United States, said it’s time to look at home — in addition to overseas — when searching for the reasons why gas prices are on the rise.
“I’m fired up,” Chilton said. “I’m concerned and we have to look after consumers.”
According to Chilton, much of the problem is actually “made in the USA,” created by Wall Street traders who gamble on oil prices.
“There aren’t markets without speculation,” Chilton told ABC News. “It’s the excessive speculation we are concerned about.”
Chilton, who has served as commissioner since 2007, said far too few players control far too much of the market, allowing them to push the price of gas higher and higher. Chilton and the CFTC are attempting to implement caps on the total positions speculators can take when trading in the oil futures markets.
Chilton obtained an energy research report from Goldman Sachs spelling out how much the Wall Street firm estimated speculators had pushed up the real price of oil sold to make gas, due to large bets in the markets.
Using the numbers from in the Goldman Sachs report, combined with current information from the CFTC, Chilton calculated how much speculation is driving up the price at the pump for the average consumer.
He shared calculations with ABC News for the first time.
By Chilton’s calculation, if you drive a car like a Honda Civic, you’re paying $7.30 more than you should every time you fill up — to Wall Street speculators. If your car is a Ford Explorer you’re paying an extra $10.41.
For a Ford F150, he says owners pay an additional $14.56 per fill up -or more than $750 a year.
For their part, industry groups representing Wall Street say there is no evidence their trading activities actually push up the price of oil.
Chilton isn’t doesn’t buy that argument. He and the CFTC are currently attempting to implement new rules that would put limits on speculation. In response, Wall Street is suing the CFTC attempting to get an injunction, which would allow everything to remain status quo.
“They don’t want these limits,” he said. “They want unbridled ability to speculate in these markets and that’s not good for consumers. It’s not good for markets. It’s not good for the economy.”
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You guys sure make your liberal bias clear! Four years ago you blamed President Bush for the gas reaching $1.80 /gallon. Now you have your democrat friend in office and you blame it on wall street. Wake up as to why people are no longer wanting to watch liberal propaganda. It so obvious you are in the tank for Obama! shame on you for calling yourself a news station!
Posted by: Frank nizick | February 23, 2012, 8:36 pm 8:36 pm
The only way a speculator can raise the price of gas is if someone else is willing to pay the price he’s asking. No buyers, no price increase. BTW, the government makes more on every gallon of gas than ANY oil company or speculator. Obama ignore upward pressure on gas prices because he and his energy secretary actually WANT, and have publicly stated their desire thayprices increase because it makes it cheaper for Obama to prop up his green energy friends (with your money of course). He deserves much of the blame for failing to support domestic production and co.tinually demonozing energy producers. The talking points of this article come striaght from the administration, all to deflect.attention away com his abject failure to protect American consumers.
Posted by: dave c | February 23, 2012, 8:42 pm 8:42 pm
Filthy stinking GREED !
Back up to $4.00 dollars again…….. Americans allow themselves to be puppets played by the uber wealthy puppeteers, and there is only a handful of them.
Being a nation of what ? 770 million people? What do you suppose the daily profits are?
Let alone what the daily damages are done to the our nation because the money isn`t spread in a balance, everything goes into the gas tank and none goes into retail or manufacturing , what again is the purpose of overseas slave labor?
By the way, don`t forget to talk on your Chinese made Apple Iphone while you are filling up at the pump ! You know ? STATIC ELECTRICAL DISCHARGE ?
Posted by: NewUnion | February 23, 2012, 8:45 pm 8:45 pm
Why do you think the oil price so quickly respond to the news in the middle east? The demand in China suddenly surges in a day or so?? Partly because of the speculators who are pocketing the differences, of course.
Posted by: Rocky | February 23, 2012, 8:53 pm 8:53 pm
Great idea to put limits on speculation for gas and oil prices. After reading this article I am angry that $10 of filling up my car’s gas tank goes to Wall Street speculators, week after week. This is simply unbridled greed taking advantage of us all.
Posted by: Librarian53 | February 23, 2012, 9:00 pm 9:00 pm
I watched your President give his Rah Rah speech today about looking for alternative fuel sources , so the world does’t reply on Countries like Iran for oil. “You know, we (U.S.) supply 2% of oil and require 30%. WHAT A JOKE! Your Country and mine (Canada) is ruled by big corporations such as gas, oil and traders and never will these guys allow any headway into any serious replacement of fuels. They are making too much money. The sad part is this Corporate greed that WE have allowed is ruining our Countries and our way of life. Time for a hard look at where we have ended up….
Posted by: Lawcat | February 23, 2012, 9:15 pm 9:15 pm
In 2004 when Bush deregulated the market and allowed the banks into gas and oil speculation trade oil was around $34 in four years it rose to $131 dollars. Every time someone deregulates an industry Wall Street makes out and the rest of the public gets taken to the cleaners. If oil costs about $3 a gallon the federal government gets .55. Oil companies get a cut of the $1.65 for the crude then charge you again another .65 to refine it. The gas station owner only gets about .12.
Posted by: David A | February 23, 2012, 9:40 pm 9:40 pm
Thank you ABCNews for setting the record straight. We need a trading tax to stop these wild gyrations in the stock market. Remember the day when the DOW plunged several hundred points in one afternoon?
This was caused by automated trades done by software that specializes in speculative trades. We need a trading tax to prevent such massive trades by speculators. I hope you are able to reign these gamblers in.
Oh- you need a better editor. Your article has 2 language errors.
Posted by: Pat G | February 23, 2012, 10:00 pm 10:00 pm
CHEVY VOLT, currently at 180+MPG… ONE HUNDRED EIGHTY MILES PER GALLON!!!!!!!!!!
Posted by: William | February 23, 2012, 10:25 pm 10:25 pm
YOU HAVE GOT TO BE KIDDING, BLAME EVERYONE . THE LEADER OF THIS COUNTRY. YES, I AM DISCUSSED WITH OBAMA BLAMING EVERYONE BUT HIMSELF. THIS OIL AND GAS PROBLEM IS OBAMA’S FAULT, BECAUSE THERE IS NO LEADERSHIP IN THE WHITE HOUSE. I SAY STEP UP TO THE PLATE AN BE A LEADER NOT A WIMP. THE PIPELINE IS PRIME EXAMPLE WHERE THE LEADERSHIP IS. HE SAYS HE IS FOR JOBS, BUT HE IS NOT REALLY!!!! THIS PROVES IT. THERE IS ALOT OF THINGS LIKE THIS THAT HE IS DOING OR NOT DOING!!!! O’YA BLAME GEORGE BUSH FOR GAS PRICES HE DOES THIS A LOT!!! WHEN HE DOES THIS, HE REMINDS ME OF A SPOILED LITTLE KID. OH YA WE WON’T START ON THE TAX PAYERS BANKBUPTED SOLYNDRA SOLAR COMPANY. I FOUND ANOTHER SOLAR PLANT HERE IN MICHIGAN THAT CLOSED UP, BECAUSE NOBODY CAN AFORD THEM.
Posted by: merlin | February 23, 2012, 10:37 pm 10:37 pm
The oil companies will definitely benefit and they will get richer with this rise in prices as well as the subsidies that the GOP refuses to end. Republicans will just insist on bigger handout to Big Oil. President Obama has increased the number of oil drilling rigs in the U.S. and has hit a record – having quadrupled them in number over the past three years. With oil and gas drilling rigs, the U.S. now has more rigs at work than the rest of the world combined. The President has also taken huge steps to reduce our dependence on oil. Big Oil made a record $237 billion in profits last year. The five largest oil companies, ExxonMobil, ConocoPhillips, BP, Chevron and Shell racked up this staggering figure. What drives up the cost are from myriad factors, including speculation and instability in the Middle East.
Posted by: Vicki | February 23, 2012, 11:40 pm 11:40 pm
Do any of you realize that the government get 95% of oil revenues? the oil corporations only get 5% and that before its taxed. The presidential moratorium is what’s raising the gas prices in this country. I have seen it first hand in the city I had to move from cause the economy plummeted just days after it was signed. I would love to have an alternative fuel source, but its just not feasible at this time. The costs outweigh the profits by a considerable sum. Look at Solindra. 500+ billion of american taxpayer dollars wasted. If there is an alternative fuel that people actually use and can trust, not to mention make money on, please show it to me, because Obama has no clue what it is either.
Posted by: Thomas | February 23, 2012, 11:58 pm 11:58 pm
Bart Chilton is a moron. Instead of going off about speculators, why doesn’t he tell us why the CFTC allowed MF Global to steal funds from their customers’ accounts? Why was nothing done in the day’s before the bankruptcy when MF Global failed to provide regulators with documents to reconcile the end of day segregated funds balance 2 days after they were asked for them? Shouldn’t that have been a red flag, Bart, or are you hiding something? Furthermore, why did the CFTC allow the bankruptcy of a futures commission merchant to be handled as a SIPA bankruptcy when 98% of the accounts weren’t even covered by SIPC? And lastly, why was the holding company allowed to continue operating after declaring bankruptcy, enabling $2 billion worth of securities to be sold at a 5% discount to JPMorgan, Goldman Sachs, and George Soros? It’s been almost 4 months since this happened, and until Bart Chilton and his worthless buddies at the CFTC can provide the customers with a better answer as to where their money is, he should keep his mouth shut. Telling them that the money may have “vaporized” is not an acceptable answer, but it is definitely something you say when you’re trying to cover up the theft of customer funds. The customers had their funds stolen twice in this ordeal, once by MF Global and once again by the regulators who made customers subordinated creditors to the likes of JPMorgan and allowed assets to leave the custody of the Trustee for a huge discount!
And of course, there’s no basis for his argument. Speculators and oil companies are always blamed by politicians. After all, they have campaigns to worry about and do not want to shoulder any of the blame themselves (why would you listen to them anyway? They know nothing about markets or economics. These bums haven’t been able to balance a budget since 1960, which is the last year the National Debt decreased on a year over year basis). The futures market is a zero sum game. There’s two sides to every contract, a long and a short. When the price goes up, the longs make money off of the shorts, and when the price goes down, the shorts make money off the longs. At the end of the day, one speculator’s loss is another’s gain. Furthermore, everyone always assumes that when oil prices go up, the speculators are driving it up. If they were truly distorting the market to the extent Bart Chilton says they are, it would be revealed when the front-month contract neared expiration, since any speculator who was long would have to sell in order to close his position. The divergence in the front month price relative to the rest of the contracts would be clear, especially to the extent their positions are rolled over into the next month.
As to why prices are rising, when you consider that the G6 central banks (lead by our very own Federal Reserve) have printed $7 trillion since 2008 ($2 trillion in the last 3 months alone), and that these idiotic bankers are determined to continue printing their currencies into oblivion, why is everyone so surprised oil and gas prices are rising? It’s really not that hard to grasp. When you debauch the currency, prices must rise to compensate for its diminished purchasing power. In effect, it isn’t so much that prices are rising, but that the currencies are falling. Blame the central planners over at the Fed for stealing your purchasing power in order to fund the reckless spending in Washington.
Posted by: BP | February 24, 2012, 12:38 am 12:38 am
“Do any of you realize that the government get 95% of oil revenues?” Aha haha ha ha.
Posted by: ethelbert | February 24, 2012, 2:07 am 2:07 am
American’s should not only write in to their reps and tell them when it came down to voting, they will all be looking for new jobs, we as Americans should to comute with friends and try to help each other as best we can. Since we are all in this together. Also, let Isreal take out Iran and America should not get in their way!
Posted by: Thomas | February 24, 2012, 2:31 am 2:31 am
dave c: You fail to realize that the purchase of gasoline – at nearly any price – is essentially involuntary. Speculation on the price of a vital commodity causes prices to rise slowly as the market adjusts to expectations based upon average speculative pricing. If futures were to fall, the price of oil would fall (with a delayed-onset) and the price of gas would fall (with even more of a delay). A full 20-30% of the current price of gas is due to speculative trading in addition to trading without receipt of product (buying and selling just for profit – being a middle man…). Critical energy resources should be off-limits to such activity anyway, the market being restricted with one extra rule: if you are buying stock in oil: you must take physical delivery of the inventory in question. That means: 1) the supply MUST exist 2) you must WANT to use the product itself (not just the stock 3) supply & demand will be properly linked.
Posted by: looncraz | February 24, 2012, 4:04 am 4:04 am
CHEVY VOLT, currently at 180+MPG… ONE HUNDRED EIGHTY MILES PER GALLON!!!!!!!!!!
POSTED BY: WILLIAM | FEBRUARY 23, 2012, 10:25 PM 10:25 PM
Hurrah, cost $40000 subsidized by the american taxpayers with another $10000, no wonder GM is making money.
Posted by: Lizzie | February 24, 2012, 2:36 pm 2:36 pm
$10,000 is a proposal for next year, this year we are allowed to keep only $7500.
This is a tax credit, it means I will not owe as much tax. IOW, it allows me to keep more of my money, and for that I thank President Bush.
I am well over the 250+ MPG that my Volt displays on it’s dash. Less than 2 gallons total since June 2011, for about 5000 miles…
Posted by: VoltOwner | February 24, 2012, 4:41 pm 4:41 pm
Who wins when gas prices go up??? Is ABC that clueless! Al Gore, George Soros and President Obama will be the big winners! Obama said that it was necessary to increase energy prices by at least 90% before he would be able to promote his Green agenda that is backed by Al Gore and George Soros!
Posted by: BIG JIMMY | February 24, 2012, 5:24 pm 5:24 pm
What about the FRAUD and CORRUPTION current members of the Goldman Sachs crime syndicate are committing RIGHT NOW! Illegally driving up gas prices, and when it come out in front of CONgress, Goldman Sachs yells, “That’s a breach of confidentiality” … And It just GOES away! THAT VERY AGREEMENT IS FRAUD! Americans should be beating the doors of Goldman Sachs AND CONgress, AND the White House down until ALL of the corruption and fraud is STOPPED! If it DOESN’T stop, then throw them in prison or right out of the country! If someone puts a card reader in the gas pump, and steals your credit card information, they go to jail for FRAUD, if Goldman Sachs does it, they get a taxpayer BAILOUT! GOLDMAN SACHS is an anti- American terrorist organization! No wonder protests are getting violent! THIS IS WHY!
Posted by: Doug | February 24, 2012, 7:26 pm 7:26 pm
How quickly people forget, gas hit $4/gallon under Bush too – This has nothing to do with Presidents, but with the market, unless you count limited tools like Government regulation…you know, that “bad thing” that republicans demanded an end to for the last 30 years….and that they got.
Posted by: JackLM | February 26, 2012, 1:49 pm 1:49 pm
When the cftc rations futures with position limits will you buy your allocation?
i will because there’s nothing like rationing to make the price shoot up
Posted by: dave | February 26, 2012, 5:29 pm 5:29 pm
Bush’s Fault
Posted by: Brad Davis | February 27, 2012, 2:19 pm 2:19 pm
“You guys sure make your liberal bias clear! Four years ago you blamed President Bush for the gas reaching $1.80 /gallon. ” Frnak Nizick,
Sorry Frank, but that price that Bush was blamed for was what it is today, $3.80/gallon. The time has come to criminalize speculation in precious commodities such as oil, grain, and produce. It has also become time to require that all oil that comes out of the ground in the US, or the Gulf by oil companies based here, be sold in the United States.
Posted by: Mike S | February 27, 2012, 9:36 pm 9:36 pm
He’s worried about speculation causing an increase in gasoline prices….what about the speculation that’s going on in silver market? One large commercial speculator is more than 25% short the entire COMEX silver market…..hmmmm sounds like speculation to me.
Posted by: Keith | February 28, 2012, 10:31 am 10:31 am
I would think it unconstitutional to put limits and controls on speculators. This is a giant catch 22 situation, where those of us buying gas, also rely on the profits of our retirement plans,which are likely invested in the oil industry. Additionally, the fools who are pushing for oil exploration in the Dakatas, think the oil companys are looking for ways to reduce the price of gasoline. If you believe that something Obama or a GOP president is going to be able to do anything to get you back to $2 a gallon gasoline, please don’t vote. You are not smart enough.
Posted by: 1tourist | February 28, 2012, 11:11 am 11:11 am
To all the people here who are saying ( there is not speculation/not buyer,no sellers) must be thee oil companies or oil traders. Your day will come with all the OVER speculation you have put into this market. You have run up the price of oil because you can #1, and since 2006 when it crashed the last time you have slowly built the price back up because you trade oil futures like some traders trade dollars!! There is no reason for this price since for over 4 years there has been a total destruction of use, thanks to the horrible REAL economy!!
Posted by: bsmi021 | February 29, 2012, 8:53 am 8:53 am
Why is Wall Street speculating? Because it’s profitable! The reason it’s profitable is because people don’t seem to reduce consumption proportionally when gas goes from 3 to 4 to 5 dollars. To get cheaper prices, reduce demand. If they start losing money, speculators will find something else to bet on.
Posted by: Josh | February 29, 2012, 2:34 pm 2:34 pm
This speculation problem is really easy to fix.
Change the law of the land so that anyone placing a bid on a product must receive delivery of said product at their place of business with 72 hours.
Of course the current crop of manipulators doesn’t have storage tanks and safety measures in place, but they’ve stolen enough money from the general public that they should be able to buy an Environmental Protection Agency permit to build one in the next 48 hours and be ready to go.
Posted by: Lauren | March 1, 2012, 3:14 pm 3:14 pm
Apparently the days when supply and demand determining market prices are apparently long gone with oil. Sure the demand is rising globally but not enough to drive up the price of gas more than $.60 over the past month. The banks are gambling the price will go up and they’re going to hold the futures until it does. And if it doesn’t and they “take profits” they price will crash…. Again. Good for consumers, not for the market. Ideally the price would stay stable. Unfortunately excessive speculation is allowed and even though there is no disruption in the supply the price is driven up. There’s probably no real solution to the problem. We can’t “drill baby drill” because we’re exporting the oil anyway. Regulation can work but that hurts the market too. Maybe force people that buy oil to actually take delivery of it? That seems to be a logical solution. Then those banks betting on the prices spikes won’t be buying tons of oil. They can’t store that in their huge lobbies built on raping customers and consumers alike.
Posted by: Dan | March 10, 2012, 12:07 pm 12:07 pm
Why is the data on just who is bidding up the price of crude oil futures kept secret from the people? These are not national secrets, the American people deserve to see this information. If the government will not do anything about speculators driving up gas prices……maybe the American people can if they know who to blame.
Posted by: Zany | March 16, 2012, 4:36 pm 4:36 pm
My comment is a question as a gas consumer and ordinary elderly American. Can any one provide a full disclosure of how much profit is being made on the dollar amount increase,by Wall Street,or the Corporate Giants whose profiting from the increase? Is that too much to ask? The Public should know since it’s mainly the money spend by the masses of ordinary citizens.
Posted by: Louis | March 17, 2012, 10:50 am 10:50 am