Analysts and Oil producers agree that excessive paper trading going on the oil commodity futures is to blame for higher fuel costs. These speculators never actually trade the oil, they just sell their lots of futures at a much higher cost.

Some feel that oil prices could significantly fall in 30 days if the Government steps in and regulates.

Senator Bart Stupak (Democrat – Michigan) is spearheading the initiative to impose regulations on oil speculators, called the PUMP Act (acronym for
Prevent Unfair Price of Prices) his act calls for banning Hedge and Pension funds from buying oil futures, making the transactions more transparent and increasing the amount of money an investor has to put down to purchase these futures. Speculators and investors in oil futures are only required to put down 5% – 7% in order to buy them, whereas stock requires a 50% down to buy.

You can definitely see where this leaves a lot of room for abuse.

Not everyone is convinced Federal Regulation is the answer, either. Some fear that this could drive
prices up further by driving oil traders will take their activities overseas and continue to drive the price up.

What are your thoughts? Do you think that Government regulations can help bring down the price of gas?

They are a new breed of investors that speculate on oil futures, believed to be a large part of the reason that oil prices have been climbing over the past year.

Currently 71% of all oil futures are being held by entities that neither produce or consume the fuel being produced. In 2000, only 37% of oil futures were held by this type of speculator.

Needless to say, oil speculation is currently being scrutinized by the Government as fuel prices continue to skyrocket into the 4th of July holiday. Higher fuel prices are also being blamed as a factor
in rising food costs, as well as natural disasters in the Midwest.

The prices of fuel affect everyone and all of the companies in the stock market. We’ll keep you updated with news.