Oil Market Manipulation or Supply and Demand

If there is a short supply of a product high demand for it will increase the selling price. This is a basic economics law. A speculator will buy large quantities of a product perhaps enhancing the perception of a shortage driving the price even higher. The speculators goal is to sell the product for a profit. There is nothing illegal or wrong about this activity however our current government leading all the way up to the President believe speculators artificially manipulate oil markets for private gain and hurt the average person. Government reform intends to prevent price volatility and speculation by limiting electronic or overseas markets trading and ensuring traders can cover margin calls which means they must have funds to cover the trades. These are reasonable steps to ensure fairness in our free market economy. However, others believe speculators have nothing to do with the increase in gas prices. They cite supply and demand. The world market for oil is approximately 90 million barrels of oil per day. During 1990’s excess daily capacity of about 4 million barrels a day was the norm. By the middle of this decade the excess capacity had been cut in half mostly because China’s demand more than doubled over this same period.  It’s more likely tightening supplies and higher demand has and will continue to drive prices upward.

-Endure

Sources:

IEA Annual Statistical Supplement

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