On Wall Street, at least, "it's all about the oil."

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One day after Memorial Day 2008, San Diego gas prices continued to surge into new record territory.

UCAN's Gas Project shows a current average price of $4.124 a gallon for regular unleaded, and $5.12 a gallon for Diesel.  In the last week, regular has surged 13.6¢, while diesel has jumped 26¢. Gasoline costs 75¢ more today than it did on May 27th last year, while diesel costs $2 per gallon more today than it did one year ago on this date (See Today's Gasoline Statistics below).

In the meantime, oil analysts across the globe are shaking their heads at last Friday's closing price on the merc of $132 a barrel for oil. Investors have blamed high oil prices on increased demand for oil from China. But on May 22, analyst Michael Masters testified before the Senate Committee on Homeland Security and Governmental Affairs that huge institututional investors have helped drive the price of oil and other commodoties to artificially high levels.

According to Masters, the increased demand for oil from China in the last five years has increased by 920 million barrels. Meanwhile, what Masters calls "index speculators" have artificially increased the demand for oil by 848 million barrels (source:  The Oil Spot News ). 

In other words, almost half of the increases behind the price hikes can be blamed, not on China, but on huge institutional investors. According to the Peninsula newspaper of Qatar, institutional investors such as the California Public Employees’ Retirement System have pumped $450 million in index funds that are heavily dependent on oil. The problem is that the result is a perverse market where Commodity investors buy more when the price goes up, while consumers buy less when the price goes up.

According to Masters' Senate Testimony, the question to ask is "Are Institutional Investors contributing to food and energy price inflation?”  Masters says the answer is an "unequivocal YES” because unlike the Arab Oil Embargo of 1973, there is no shortage of fuel or oil and demand is down,

This disconnect between real-word economics, where demand for oil is actually dropping, and the unreal world of Wall Street, has helped create artificially high oil prices.

Some time ago, UCAN coined the term "Gouge-onomics" to describe a noncompetitive nature of the California oil industry and the Enron-created electricity crisis of 2000. In a gouge-onomy, the player that delivers the least amount of product to the customer at the highest price wins. And in this case, the winning is done at your expense.

Today's Gasoline Statistics:

Regular Unleaded, Today, 5-27-08 = $4.124, Diesel = $5.12

Regular Unleaded, Last Tuesday, 5-19-08 = $3.988, Diesel = $4.86

This day last year, 5-27-07 Regular = $3.37, Diesel = $3.05