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According to the experts and observers of oil market, volatility of oil market is the major reason why prices on oil are so high. Despite this observation, they also add that the speculation done more than enough in the oil futures market by investors also drives oil prices high in the sky. It is believed that speculations trigger oil price by about whopping 40%. According to a study done in June 2011, higher oil price or any other raw material price fetches huge profits for banks. It also concluded that the price bubble is highly dangerous for a real economy. It is going to cause a major damage to the economy for sure, as the majority of American industries such as trucking industry depend on crude oil. Oil prices started increasing with great amount during 2008. Speculators controlled the oil futures market with the intention of just making quick money. Companies bought and sold more than 850 million barrels of oil without using a single drop of it for any purpose. After these facts about unnecessary speculations and their aftereffects on economy were revealed to the American government, it made the Dodd-Frank financial reform legislation to eliminate, prevent and eradicate that excessive speculation of oil prices by Jan. 17, 2011 but have not yet been successful to even enforce it till date. The speculators still are churning out huge amounts of money like brigands. The same Dodd-Frank bill included the information that every major American financial institution, central banks, corporations and rich individuals received $16 trillion in secret, as low-interest loans. They also opposed the audit provision. However, towards the end, American people came to know the truth about these events. In addition, the commodity regulators’ claim that there is not enough information and an action of not using the available data to end the speculation of prices on oil is very weak. The fact is that the commission has collected sufficient information during more than last three years. Another reason of high oil prices is lack of political support. The American government acts in favor of speculators. Its actions such as providing money for the $700 billion bailout are bold enough to convey the message. The government is not supportive enough to make the common man’s life easy by controlling the unbelievable hike in the prices on oil at even gas stations! The experts quote that now is the only right time to unveil the secrecy and the reality of the oil futures market. Every person has a right to how excessive speculations skyrocket the oil price and to what extent! Kyles Humphrey is an experienced journalist in oil related fields, who regularly writes articles related to oil prices & indexes and crude oil including tips on investment in oil. Please visit oil.com for more details.
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