Speculators are pushing up already high gasoline prices even higher by driving up crude futures, and the government could fight back by dipping into the country's Strategic Petroleum Reserve, says Dan Weiss, director of climate strategy at the Center for American Progress.
Demand for fuel is down but speculative trading is keeping crude prices high thanks to fear that tensions with Iran may escalate into military action.
"Speculators are driving up the price, taking advantage of fears about a supply disruption in the Persian Gulf which have not materialized yet," Weiss tells CNBC.
"Speculators are buying two thirds of futures contracts and end-users only one third, when it’s usually the reverse," Weiss says, adding "in the U.S., demand is down, and price increases are not demand driven."
Prices at the pump are averaging $3.74 a gallon nationwide and continue climbing, according to AAA data.
The Obama administration should consider tapping the Strategic Reserve to ease prices.
"We’ve spoken about bursting the speculative bubble by having the President putting some reserve oil on the market. Every time that’s been done, it’s led to a decrease in oil and gas prices," Weiss says.
Other experts agree that speculation based on fears of an Iranian conflict are driving prices up and not spikes in demand or supply strains.
Supply is actually higher thanks to Libyan crude coming back onto the market as well as decision to change the direction of a Canadian pipeline to bring more oil into the U.S.
"Unlike last year, where we lost very high-quality Libyan oil and we did not have access because of the Seaway pipeline to Canadian oil, the supply situation was much more dire in real time. This year it's all on speculation or perception of potential loss of Iranian oil," commodities research analyst and trader Stephen Schork tells Moneynews.
"That could only mean a fear of conflict with Iran."
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