Consumer spending is the main driver of the U.S. economy, and gasoline spending is responsible for less than half of all U.S. oil product consumption, CFA said. In the current weak economic environment, the consequences of rising oil prices are very serious.
"When speculators, oil companies and OPEC rob consumers of that much spending power, the inevitable result is a dramatic reduction of economic activity and employment," said CFA Director of Research Mark Cooper.
Speculation has been an integral part of the oil market for some time, but it alone may not be to blame for the recent volatility and price spikes. The report says market deregulation has a lot to do with it.
The oil market was deregulated in December of 2000, creating opportunities for excessive speculation and a massive increase in the market's size, the report states. Prior to this change in policy, speculation didn't have a heavy impact on oil prices, nor was it so widespread.
"This report provides a timely reminder that it was weak regulation that landed us in our current economic mess," CFA Director of Investor Protection Barb Roper said, "and it will take a strong policy response to restore the economy to health."
The CFA said deregulation added about $30 per barrel to the cost of oil in 2011, draining more than $200 billion -- 1% of gross domestic product and 2% of consumer spending -- from the economy.
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A 2% reduction in consumer spending on goods and services translates into the loss of hundreds of thousands of jobs, according to the CFA.
In 2011 oil prices traded in a range between about $80 and $100 a barrel.
Without speculation, the price of crude oil would instead fall somewhere between $60 and $75 per barrel, according to the CFA
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