Ok, I have conversed with many via twitter that think speculators are the devil. While I agree, as a speculator, that they are a part of the problem, I disagree that they drive price. Instead, speculators only carry the momentum that is already pushed upon it by outside factors. I am excited to point out the latest example of speculators being neutral when it comes to price. Natural Gas is a commodity that is played just like oil. There are a hundred different ways to play this commodity, but the most important point is that it is at multi-year lows. Has demand gone down? No, but supply has gone up. Due to fracking (no comment on the legitimacy of this process here) they are finding it under every rock in the U.S. I exaggerate this on purpose. Because the notion that it is everywhere is speculation. Speculators are getting out of the trade because of an assumed over-supply. They are correct! This lowers the price to unheard of levels. It is almost a 1/3 the price is was in 2010. Where are the Senators now? Why aren’t they out congratulating us?.. Hypocrites!
The major difference between Natural Gas and Gas at the pumps is that there are more factors for gas at the pump. When it comes to gas, we are far more subject to feuding countries that supply it, and profit lines of major refiners here in the U.S. Remember that it is Oil that is speculated, not the price of gas at the pump. Big oil companies are profiting huge on the difference between the price of oil per barrel and what they can get at the pump. Here is what I mean: Last April price of light sweet crude was $125 per barrel and oil companies were still able to make a good profit at $3.25 per gallon. Now that oil is only $103 per barrel, they are able to charge over $4.10 at the pumps. This isn’t speculation, but profit.