For the options-and-futures-combined report, spreading measures to the extent to which each non-commercial trader holds equal combined-long and combined-short positions." (CFTC, as cited in Krapels, 2007) Krapels states that there are areas where dismissal of causation should not be the projectory in keeping them consistent with normal economic analysis which include: (1) perfect storm episodes because there is a likelihood of time periods when the physical energy market condition and the trading strategies of financial market participants are aligned so well that the result is 'herding' or 'bubbles' or their opposite, crashes; and (2) Variations on the market power syndrome in which it is possible that the positions of some market participants - index funds as one example - are so large as to constitute witting or unwitting market power. A large-scale infusion or retreat from any of the various positions very large index funds might have price effects." (Krapels, 2007) Average Annual Oil Prices

Source: Krapels (2007)

Krapels states that it is the responsibility of governments "...the same ones that have surrendered some of their controls to the market - to ensure that adequate flows of information exist to feed the markets to which they have entrusted their fates. Governments must insist that those who sell critical commodities and associated financial services - whether it be Saudi Arabia or ICE or NYMEX - disclose enough information to ensure that know abuses..." such as insider trading and problems that are preventable do not undermine critically the efficacy of the markets. At the end of the day, markets exist because governments allow them to." (Krapels, 2007) the United States Senate, Permanent Subcommittee on Investigations Committee on Homeland Security and Governmental Affairs report entitled: "Excessive Speculation in the Natural Gas Market" report sates that following the issuing of the 2006 Subcommittee report "the natural gas market entered a period of extreme price volatility punctuated by the collapse in September 2006 of Amaranth Advisors LLC, one of the largest hedge funds in the natural gas market. From the last week in August until the middle of September 2006, Amaranth's natural gas positions lost over $2 billion in value, precipitating the liquidation of the entire portfolio of the $8 billion fund." (Levin and Coleman, 2007) the Subcommittee's investigation of the natural gas prices behavior in the early 2006 market in which million of natural gas transactions were analyzed from trading records of the NYMEX and ICE, Amaranth and other's two principal exchanges for energy commodities along with interviews conducted among natural gas market participants. Findings of the Subcommittee include the fact that trading in the U.S. natural gas financial markets was dominated by Amaranth which "bought and sold thousands of natural gas contracts on a daily basis, and tens of thousands of contracts on certain days." (Levin and Coleman, 2007) the work of Caruso (2007) entitled: EIA Short-Term Energy and Winter Fuels Outlook" states that "U.S. average fuel expenditures are expected to be higher for all fuels this winter." (2007) Additionally Caruso states the following for the 'Short-Term Energy and Winter Fuels Outlook' for Winter 2007-08: (1) Winter 2007-08 is predicted to be 4% colder than the previous winter however; predictions are still 2% warmer than the 30-year average; (2) Natural gas prices are expected to be higher than last winter; (3) Natural gas heating bills are projected to be higher for all regions this winter; (4) Crude oil prices, having recently exceeded $80 per barrel, are projected to decline slowly over the forecast; (5) Multiple and hard-to-predict uncertainties drive the oil market forecast; (6) Retail gasoline prices are projected to be higher in 2008; (7) Retail heating oil prices are projected to be higher in 2008; (8) U.S. winter heating oil expenditures projected to increase for all regions; (9) Residential propane prices are expected to average about 23 cents per gallon higher than last winter; (10) Propane inventories are low; (11) Propane expenditures are projected to increase in all regions; and (12) Winter electricity expenditure increases are expected to be smaller than other fuels. (Caruso, 2007) the work of Dahl (2007) entitled: "What Goes Down Must Come Up" states that "Movements in crude oil markets explain almost all of the changes in gasoline prices over the period from 1999 to 2006." Additionally related is that historical analysis shows that 97% of the variation in the pre-tax price of gasoline between 1918 and 2006 can be explained by changes in crude oil prices. A one percent increase in U.S. income results in a 0.3% increase in gasoline demand within one year's time. Oil refinement has grown more complex in the period from 1990 to 2006 with an increase in various...

Dahl states that the refinery sector is "cyclical, with profits varying wit capacity utilization. The magnitude of refiner profits is often exaggerated. From 1977 to 2005, the rate of return on investment in U.S. gasoline refining averaged less than 7%." (2007) the Energy Information Administration report "Performance Profiles of Major Energy Producers 2006" states that net income for major energy producers is stated at $131 billion for 2006 with return on stockholder's equity at 27.0% and cash flow from operations increased by 10%. Capital expenditures are stated to have increased 42% when comparing 2005 to 2006 expenditures of capital. The work of Ramin (2007) entitled: "Petrodollars, Asset Prices, and the Global Financial System" states five key conclusions, which are stated to have emerged from a study focusing on the global economy and the impact of petrodollars. Those five conclusions are as follows: (1) Oil exporter governments are poised to remain the predominant sources of global savings even with the decline in oil prices from their record highs; (2) the vast majority, or more than 80% of the oil savings flow to governments and central banks in oil-exporting countries; (3) Data on asset purchases capture less than half of petrodollar savings; Sovereign investment funds, which captured more than one-quarter or oil exporter savings during the past four years, provide a significant bid for risk assets, particularly in emerging markets; (5) the most profound impact in the rise of petrodollar savings is on the stability of the BWII system given the greater focus of oil exporters on financial return, in contrast to the non-financial objectives of Asian central banks that have maintained the existing regime." Toloui (2007) relates an enormous shift in the global distribution of savings has been witnessed over the last half of the decade as "progressively larger volumes of capital have flowed from emerging market countries to the developed world." (Toloui, 2007)
V. SUMMARY and CONCLUSION

It is clear that stockholders and investors have the power to create great instability and volatility in the oil market through speculative practices of investment that create concern on the part of other investors and may result in volatility and the dumping of stock at precise times in order to make a profit in the area of oil investments. Oil prices at the present are not unprecedented and there are expectations that while oil prices will go down, in the meantime the status quo will remain. Lowering production rates, speculative investing, global weather and climatic changes all work toward impacting the stability of prices of oil and increasing volatility. While supply has the capacity to meet oil demand, simultaneously the quantity of supplies have been limited in an action that has ultimately been driving up the prices of oil and most particularly in the United States. Insofar as future predictions, oil prices are expected to rise even higher in 2008 with increased demand for oil and limited supply, although it is understood that this limitation of supply will be due to choice on the part of oil producers and not due to a true limit of supply of oil.

Bibliography

Johnson, Toni (2007) Oil Market Volatility. 10 Dec 2007 Council on Foreign Relations. Online available at http://www.cfr.org/publication/15017/

Krapels, Edward N. (2007) Financial Energy Markets and the Bubble in Energy Prices: Does the Increase in Energy Trading by Index and Hedge Funds Affect Energy Prices? Testimony Before a Joint Heating of the U.S. Senate Permanent Subcommittee on Investigations of the Committee on Homeland Security and the Governmental Affairs and the Subcommittee on Energy of the Committee on Energy and Natural Resources. 11 Dec. 2007 Online available at http://hsgac.senate.gov/_files/STMTKRAPELASEdward.pdf

Caruso, Guy F. (2007) EIA Short=-Term Energy and Winter Fuels Outlook. Energy Information Administration. DOE/NASEO 2007/08 Winter Fuels Outlook Conference 9 Oct 2007. Washington D.C. Online available at http://www.eia.doe.gov/pub/oil_gas/petroleum/presentations/2007/winterfuels2007/winterfuels2007_files/frame.html

Levin, Carl and Coleman, Norm (2007) Excessive Speculation in the Natural Gas Market. United States Senate Permanent Subcommittee on Investigations- Committee on Homeland Security and Governmental Affairs. June-July Hearings 2007. Online available at http://hsgac.senate.gov/_files/062507Report.pdf

Dahl, Carol (2007) What Goes Down Must Come Up: A Review of the Factors Behind Increasing Gasoline Prices, 1999-2006. April 2007. Online available…