Speculation explains more about oil prices than anything else

Kevin G. Hall and Robert A. Rankin | McClatchy Newspapers

last updated: May 13, 2011 08:12:21 PM

WASHINGTON — Feel like you're being robbed every time you fill the gas tank? Not sure who to blame? Try Wall Street.

That's not the conventional explanation, but it's the one the facts point to. Usually analysts say today's high prices stem simply from "supply and demand." They mean demand for oil and gas is rising and supplies aren't keeping up, so people bid up their price. But global and U.S. supplies are plentiful and demand is stable, so that's not it.

Then the analysts say it's because the market's afraid Middle East turmoil will interrupt oil supplies, so nervous buyers are bidding up prices to ensure they lock in a contract for oil now, just in case it's scarce later. There's probably some truth to that, but after five months of turmoil, there's been no significant impact on Middle East oil supplies, even as prices have see-sawed, so that's not credible either.