Gasbuddy.com, the website that logs gas prices across the U.S., has a big blue banner ad at the top of its pages that says “Where’s your gasoline dollar go? Click here to find out.” Clicking on the ad takes you to a page, GasPricesExplained.org, that says “Why are Gas Prices Rising?” GasPricesExplained.org points to unrest in the middle east and north Africa, declines in surplus production, weather events and exchange rates, to name a few reasons why gas prices are skyrocketing, but it doesn’t directly address the sizeable contribution speculation makes to inflated gas prices. A section titled “Where Does My Money Go?” claims that “Most of what Americans pay at the pump for gasoline is the cost of the crude oil used to make it, which is why global demand and geopolitical factors are so important.” But the site fails to mention that sky-high gas prices are also funding huge pay hikes for energy industry CEOs. Exxon Mobil’s Chief Executive, Rex Tillerson, for example, got a 21 percent raise in pay in 2011. He now makes about $35 million in total compensation. Tillerson is expected to get an additional 8 percent raise in 2012. John Watson, Chair and CEO of Chevron, saw his pay increase a whopping 51 percent, just since just 2010.
Sixty four percent of all contracts written for bulk oil purchases in the U.S. are made by companies that will never take delivery of even one drop of oil. They are made by speculators positioning themselves to make money off the scare over recent events involving Iran. Recently and American warship was targeted with gunfire in the Strait of Hormuz. Initial reports attributed the attack to Iran, but it turned out to have been made by smugglers — a correction that was buried in the media. Iran also announced it would stop selling oil to Britain and France, but those countries had already stopped buying oil from Iran anyway — a fact less reported than Iran’s announcement. Decades ago, financial speculators made up only about 30 percent of oil trading markets and refiners and end-users made up about 70 percent. Today those numbers are reversed; now only about 36 percent of all oil contracts are made by producers and end users, while increasing demand for oil in the U.S. is a myth. Demand for oil and gas in the U.S. is down while production of American oil has increased so much that the U.S. has actually started exporting oil to Europe, Asia and Latin America. In fact, now America’s major supplier of oil is Canada, not the middle east. So high gas prices now simply cannot be explained by any shortage or increase in demand, since neither exist. But they can be explained by speculators and their effect on the market, and we are all paying a heavy price for their activity.