Following in lockstep with the rest of the media, Jason Soifer's story today reports the projection of $4/gal gasoline by the AAA, blaming it on worries about Europe and Iran, but leaving out crucial facts.
The references to international concerns hint at what's really driving prices: speculation. Kevin Hall of McClatchy provides the details. Where speculation (meaning anyone in the market who's not planning to take delivery of what they buy) has traditionally been a roughly 30% component in fuel prices, right now it's running at over 60%, distorting the normal annual price cycle.
The Dodd-Frank reform bill has charged the Commodity Futures Trading Commission with instituting new rules to reduce the market gambling that costs everyone so much, but thanks to Republican intransigence they can't take effect for another year.
Meanwhile real demand for fuel in this country is consistently falling, and in a sane world that would mean steadily lower prices. But, taking a cue from the price-manipulation experts of OPEC, the US refiners are instead exporting fuel at record rates. The US is now a net exporter of gasoline and other refined products, demonstrating exactly what Big Oil would do with the additional resources they want in Alaska and the Keystone XL pipeline. The number of working American oil rigs has actually quadrupled under the Obama administration and domestic production is at an eight-year high, but that won't stop the Republican attack machine from blaming the President for higher prices.
To make sense at all, any story on commodity prices should include the proportion of speculative effect and rates of real demand. This is just standard practice in journalism.
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