Why are gas prices so high? These obscure traders are partly to blame
Gasoline prices at the pump have surged, reaching a US national average of $4.34 on 21 March, and remain more than 70% greater than at this time last year. At the same time, global supplies of oil have actually increased, including from Russia, even amid the war in Ukraine.
So if high prices are not being driven by scarcity, what’s going on?
Experts are warning that little-publicized energy traders, most of whom work for the world’s largest oil companies, banks and privately held trading houses, are partly to blame.
The amount of trades – and the profits associated with them – have been skyrocketing, reaching record highs in 2021 and 2022. This inadequately regulated activity is hitting Americans’ pockets and represents a “market emergency”, according to Michael Greenberger, a former US government trading regulator.
“My instinct tells me that a very careful analysis of this market would show that the price is not reflective of supply chain problems, that there’s just too much leeway for the big banks and the big producers to manipulate if no one is looking and watching what they’re doing,” says Greenberger, the former division director of the Commodity Futures Trading Commission (CFTC), the main regulator of US energy markets.
“Nobody with power is looking at what they’re doing,” he says. “There’s no cop on the beat.”
Veteran oil analyst Philip K Verleger haswarned that supply and demand “fundamentals have been rendered almost irrelevant” for oil prices, a key determinant of the price of gasoline at the pump.
He has pointed to a dramatic rise in speculation driven by AIs rapidly buying and selling massive energy bets based on minor or even nonexistent changes to real-world supplies. “Under these circumstances, a change in
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