If you have been wondering why energy prices are surging upward for no apparent reason, you are not alone. Something is not adding up, and it's important for you to understand what's happening in the market.

What's Going On?

Crude prices have been rising, and you are seeing that increase reflected in your costs for gasoline, heating oil, propane, diesel, etc. But crude prices should not be rising. Here's why:

1. Supply is strong. Crude oil inventories are above their 5 year average. Strong supply should result in lower oil prices.
2. Demand is weak. Demand is only up 1% since last year, and the economy is still struggling. Weak demand should result in lower oil prices.
3. The U.S. dollar, while still weak, has strengthened against other currencies. A stronger dollar should result in lower oil prices.

So, given the above reasons, why are oil prices higher? It's because of the market.

It is estimated that as much as 20 times
more crude oil is traded every day than
is actually consumed worldwide.

Huge banks and hedge funds can make giant profits by driving up the price of oil and increasing price swings. This excessive speculation exploits loopholes in the way that crude oil trades are regulated.

Last year, our industry helped pass new legislation that would make it harder for excessive speculation to occur, but regulations enforcing the new law are still being fought over. Wall Street is doing everything possible to water them down. With your help, we are working hard to prevent that from happening.

Here's how you can help:

1. Write to your senators and congressmen. Urge them to keep the energy speculation loophole closed. Visit usa.gov/Contact/Elected.shtml to find your federal representatives.
2. Contact the Commodity Futures Trading Commission (CFTC) and urge them to do the same. Visit cftc.gov or call them at 202 418-5000.

Over time of course we need to increase domestic production, improve conservation, and strengthen the U.S. dollar. But the problem of speculation is something we can address right now.