The Price – how is it determined?

Asia Times Online reports that approximately 60% of the price of oil per barrel is determined by

“…unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York Nymex futures exchanges and uncontrolled inter-bank or over-the-counter trading to avoid scrutiny”.

This report goes on to explain how oil futures are purchased using a system that creates a leverage that helps drive prices continually higher.

Also, constant talk of our oil supply depleting (often referred to as “peak oil”) causes the price to continue to rise. Despite current big oil producers such as Saudi Arabia and Brazil making plans to extract more oil and recent reports by the American Geological Survey showing an estimated 3.65 billion barrels of oil in the Bakken there is still talk of the world’s oil supply being diminished.

What can we do?

It is apparent that the world still has an oil supply, big business is determining the price of oil and we are still purchasing gas for daily consumption. Out of necessity or desire we can make a decision to purchase less gas. We can make a statement with our purchasing power. Until we, as a community, decide to stop (or greatly reduce) buying gas at these prices, the prices will continue to rise.

Again we return to the pursuit of alternative energy. As a community we must continue this pursuit. As products and services grow, business opportunities grow too and we will see “money talk”. When we start spending our time and resources on things other than gas and oil the government will jump on board too. We can begin today, avoiding the gas pump!

Photo Credit: gimlack on Flickr