Want to Know Why Gas Prices Will Be Astronomical This Summer?

Did you catch Too Big to Fail last weekend on HBO?

For a financial drama, it was riveting to watch, but it also painted a grim picture of the sway held by fallible entities like Goldman Sachs and Morgan Stanley. Two of the firms, for instance, who may have helped drive gas prices for this summer way up by predicting the circumstance of high crude oil prices last week.

Above any other factor, oil market speculation is the one most responsible for what you pay per gallon at the pump each time you fill up your tank. Prices dropped to a recession record low in late 2008, but have since essentially doubled, sending ripples of unease through every other market. USA Today has an interesting look into the factors behind the painfully high prices, and a close-up look at what factors drive gas prices into the wallet-obliterating stratosphere.

Commenting on the effects of last week’s statement by Goldman and Merrill Lynch, Mark Keck of Keck Energy said:

“There won’t be another drop in the price of gasoline this weekend, and it’s due to Goldman Sachs and Morgan Stanley… What a crazy system we have,” he said. “People resist paying an extra 5 cents per gallon in gas tax to fix the highways, but we allow speculators to raise the price of gasoline by 50 cents a gallon.”

Former oil trader Stephen Schork writes a commodities trading newsletter, and he adds:

“The best way to predict the market is to create it.

“Goldman was giving a signal that the dumb money could come back into the oil market, and it worked,” Schork said.

The cries echo those made nearly two years ago by Matt Taibbi, an investigative journalist for Rolling Stone and vociferous critic of the financial industry. Taibbi spins a believable tale of horror about how Goldman continually plays the American public in an everlasting shell game called “speculation,” and sagely predicts energy futures would be the next great scam perpetrated by the “giant vampire squid relentlessly jamming its blood funnel into anything that smells like money.”

A buzz has started in Washington about the effects of speculation on the oil market, but chances are we won’t see change in policy surrounding gas prices for a while yet. Do you feel the effects of skyrocketing gas prices in your daily life? Where has it affected you?

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