Economy

Bailed Out Banks May Be Driving Up Oil Prices

CREDIT:

oilToday, McClatchy took a look at current oil prices, and came to the conclusion that its “not because supplies are tight or demand is high” that prices are rising, but rather that “Wall Street speculators — some of them recipients of billions of dollars in taxpayers’ bailout money — may be to blame“:

Big Wall Street banks such as Goldman Sachs & Co., Morgan Stanley and others are able to sidestep the regulations that limit investments in commodities such as oil, and they’re investing on behalf of pension funds, endowments, hedge funds and other big institutional investors, in part as a hedge against rising inflation.

According to McClatchy, “critics say this speculative flow of money into commodities markets is a self-fulfilling prophecy that’s distorting the usual process by which buyers and sellers set prices and is driving up the prices of oil, gasoline, grains and other essentials.” Both Goldman Sachs and Morgan Stanley have received $10 billion in TARP money.

UPDATE

Ryan Avent writes that “the threat posed by expensive oil hasn’t disappeared. Quite the contrary; it stands ready to derail a fledgling economic recovery.”

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