The recent increase in gas prices has placed a tremendous amount of pressure on the Obama administration & the 2012 Obama Campaign. Peter Goodman of The Huffington Post reports that much of the price fluctuations are due to gas speculators, and not specific administration policy. Mr Goodman writes “But the supply-and-demand story of gas prices is largely a fairy tale. Academic experts, commodity specialists and members of Congress identify one thing that the president could do immediately to alleviate pain at the pump: He could unleash a serious-minded, subpoena-wielding probe aimed at frightening the Wall Street speculators who are responsible for most of the climb in gas prices.”
Speculating in gas prices has become a very popular investment option for many firms. Gas (or Oil) speculation involves an agreement to buy a set amount of oil at a certain price. The person agreeing to buy the oil is betting that the price will rise, while the person selling the oil is betting that the actual price in the future will be lower than what they paid for it. These artificial prices have contributed to the volatility in prices paid at the pump for the last 5 to 6 years.
On March 9th, Obama orders the Oil and Gas Price Fraud Working Group to look into the rising prices. The goal of this group is to determine the factors that have caused the recent increases of the price per gallon Americans pay at the pump. Much of what his group is looking into is the effects of excessive speculation on both the short-term and long-term prices of crude oil and gas prices. Prior to March 9th, the task force was relatively dormant over the past 10 months.
Justice Department representative stated, “With the recent increase of gasoline prices, the working group is monitoring the situation, and if we find any evidence of criminal behavior or other misconduct, we will respond immediately.” According to The Boston Herald, financial speculators represent the vast majority of purchasers of oil futures contracts – around 65%. This is much higher than the historical average of these contracts.
The increased cost of oil and gas negatively impacts the US economy in a variety of ways. Not only are individuals forced to allocate more income to purchasing gas, but increased transportation costs also raise the prices of everyday goods. Most goods transported in the US are shipped by truck, and trucking companies pass along the higher costs of operation to manufacturers who then pass the costs on to consumers. Trucking jobs for owner operators also have pressure on them due to the rising gas prices by making harder to make ends meet.
In addition to the economy feeling the pressure the 2012 Obama Campaign is feeling the pressure from gas prices going up. Republicans are pushing new initiatives in Congress while Obama still trying to promote his “all-of-the-above” energy plan. According to USA Today President Obama ripped into Republicans mocking their “three-point plans for $2 gas” saying, “Why not $2.40? Why not $2.10?” It’s apparent the campaign trails are heating up and taking on the economy and rising gas prices all in one package.
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