Are Speculators Gouging Us at the Pump? | Jerry Taylor and Peter Van Doren | Cato Institute: Commentary

Are Speculators Gouging Us at the Pump? | Jerry Taylor and Peter Van Doren | Cato Institute: Commentary: "If this is going on we would expect to see some sort of inventory buildup. While crude inventories in the U.S. are increasing, they always increase at this time of year, and this year's increase is well within the normal range. More important, gasoline inventories are decreasing and decreasing much more rapidly than normal. Hence, there's no evidence that speculators are reducing the supply of crude or gasoline through increased storage."

"The loss of Libyan crude — about 2% of global supply — has reduced the amount of oil available in the market and gasoline prices track global crude oil prices.

Prices must necessarily rise to reduce global oil consumption because we can't consume what isn't there. How much do prices need to rise to reduce oil consumption by 2%? It takes a big increase in gasoline prices to get us to drive even a little less. Economists estimate that prices must rise anywhere from 10 to 20 times the percentage reduction in quantity to reduce demand enough to equal the lower supply. Thus for a 2% supply reduction, prices must rise between 20% and 40%. Average gasoline prices have risen 20% since early February, on the low end of what economists predict."