Do speculators drive gas prices up?

INDIANAPOLIS (WISH) - Who is to blame for the current high price at the pump? Plenty of people, including service station owners, say speculators are forcing the price higher and higher.

What speculators do is actually simple. They buy a product today, hoping the price will be higher tomorrow. If it is, they sell the product and make a profit. But, an Indianapolis broker says don't blame speculators for the current cost of your gasoline.

"Crude oil was at $77. It ran up to $114,” says Lannie Cohen, President of Indianapolis based Capitol Commodity Services as sits at his desk at the company he founded more than 25 years ago.

The price of a barrel of crude has jumped more than $35 dollars in the last eight months. Cohen says simply don't blame speculators. "No, it is supply and demand. It's all about supply and demand," Cohen said.

Cohen said speculators in oil are no different than people who invest in stocks.

Here's how it works: For $6,000 anyone can buy one contract for a thousand barrels of crude oil at the current price. As he explained the process, the price was $112 dollars a barrel.

"When you buy a contract of crude, if you buy it for $112, and it goes to $113, you make a thousand dollars," he says. And with prices steadily increasing over the past eight months, plenty of people are making money.

Investors do lose money if oil prices fall. So Cohen says it's not the buying and selling of oil contracts that forces prices up, it's the hard cold fact that ultimately there is a limited supply of oil.

"We don't really have lots of oil. Because when you go out into the future, it's the big question on whether we'll be able to get the oil," he says.

Cohen also believes the decline in the value of the dollar, because the U.S. government and other nations print so much money, increases the value of more finite resources like oil. That he says, then pushes the price up. And he doesn't see it getting any better in the long run. "Unfortunately I'd say get used to it. Because it's going to get worse."

Cohen says while there may be a pull back in price in the short term, there's no changing the fact that demand for oil keeps going up world wide and there is ultimately only so much oil to go around. He says he believes that the investigation into speculators and the price of oil will come to the same conclusion, that the price of oil is based simply on supply and demand.