Oil's Well That Ends Well

Oil consumption per capita is down about 10% in the US.  Oil prices, meanwhile, have steadily risen.  Who's behind it?  Our old friends on Wall Street, of course.

Experts attribute much of the recent rise in prices to flows of speculative money into oil markets. These bets are fueled by investor expectations that the U.S. and global economies are poised to return to growth and thus spark increased use of oil. Strong growth in China supports the narrative of rising oil consumption and tightening supplies.

"The thinking goes that rising stock (market) prices implies expanding business activity, implies growing energy demand, implies rising oil prices. I think you can make that case, but it's awfully weak," said Michael Fitzpatrick, vice president-energy for MF Global, a financial firm that brokers the sale of contracts for future delivery of oil.

While there are signs of U.S. economic recovery, such as a slight uptick in consumption and strong manufacturing data, there are plenty of ho-hum signs too, including dismal construction spending and continued high unemployment.

"I just don't think if you look across the entire spectrum of the macro-economy that it creates a picture of a growing body of incontrovertible evidence that there is a strong, sustainable recovery. I just don't see it," Fitzpatrick said. "I think it should be closer to the range we were seeing in late summer and early fall, $67 to $72" a barrel.

On the last day of July, oil traded at $67.50 a barrel and gasoline sold at a nationwide average of $2.52 a gallon for regular unleaded. On Thursday, oil prices settled at $84.87 on the New York Mercantile Exchange, and regular unleaded gasoline averaged $2.80 a gallon and more than $3 on the West Coast, according to the AAA.

"It's the story we've been talking about . . . . It's really about oil being an attractive investment for investors right now," said Troy Green, a AAA spokesman. "You've seen quite a bit of money flooding into the oil markets because of that."

What's different about today's price run-up from two or three years ago is that oil is now in ample supply.

After oil crashed in 2008, it sure didn't take long for the speculators to get right back into the game again, didn't it?   You think Obama will do anything about high gas prices?  Can he?  The GOP certainly won't let him.  After all, anything that might benefit Obama politically will be blocked.  Republicans have made that clear.

If banks have all this money to invest in driving oil up, why are they still pretending to be poor?