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Here is a rather detailed condensation of an article I saw yesterday. A critical issue is that in recent years a means of easily buying very large ETFs for commodities has skewed the market so that NON end users now hold these futures at a ratio of 4 to 1. Unless some action is taken to restrict non users from hogging the futures, we will all pay through the nose for oil, wheat, rice, and the animals that eat these things.

Your Pain, Their Gain: How High Gas Prices Impoverish The Many While Enriching The Few, by Dan Froomkin

“The last of the Big Five oil companies announced first-quarter earnings Friday, so the totals are in. Between the five of them, ExxonMobil, BP, Shell, Chevron, and ConocoPhillips made $34 billion in profits in the first three months of 2011 — up 42 percent from a year ago. That’s about $110 for every man, woman, and child in the United States — in just three months. Exxon alone cleared a cool $10.7 billion profit from January through March, up 69 percent from 2010. That’s $82,175 a minute.

Why the staggering increase in earnings? Precisely because you’re paying $4 a gallon for gas.Gas prices shoot up when oil prices shoot up, and when oil prices shoot up for reasons that have nothing to do with how much it costs to bring it out of the ground, it’s a windfall for the folks who produce it.The average cost to produce a barrel of oil, including exploration, development, extraction and taxes, is about $30, according to a U.S. Energy Information Administration survey. The going rate to buy one is about $113.

Why is the price so high? Part of it is increased demand and geopolitical worries. But no less an authority on the matter than Goldman Sachs acknowledged earlier this month that speculation is at least partially responsible, driving oil prices up faster and higher than supply and demand could possibly explain. That means the people who are betting on oil prices are actually making the price of oil go up. And while the pain is widely felt — consider all the Wal-Mart shoppers who are agonizing over how to make it to the end of the month — the benefits are not being widely shared. By and large, the oil companies’ profits are not finding their way back into the communities from which they came; are not being used to create more jobs; and are not being invested in new equipment and exploration.

Some of that money is going back out the door in the form of larger dividends to stockholders. But in the case of two of the big five in particular — Exxon and ConocoPhillips — more than half of their total profits are being used to buy back their own stock.

Companies that buy back their stock can either retire it or simply keep it themselves, under the control of the board of directors, to reissue later or award as bonuses.

Dividends, by contrast, are not nearly as good a deal for company executives. For one thing, they are taxed as income. An increase in the stock price is not taxed as income; it’s not taxed at all until the stock is sold — and only then at the capital gains tax rate, which is limited to 15 percent. (Fifteen percent would be a lot for the median American family, which pays less than 5 percent of its income in federal taxes. But it’s a huge break to those paying income tax at the highest marginal rate of 35 percent.) “Buying back shares benefits existing shareholders, no one else. And more than anyone else, it benefits existing management,” says Henry Banta, an energy industry analyst and partner in the Washington D.C. law firm of Lobel, Novins & Lamont. “They’re basically enriching themselves,” says Daniel J. Weiss, a senior fellow at the Center for American Progress. “With this windfall, they enrich the board of directors, senior managers, and shareholders.”

“ As of 2007, the percentage of households that owned $5,000 or more of stock was 35 percent; only 22 percent owned $25,000 or more. Who’s got the rest? The wealthiest 1 percent of households has 38 percent, Wolff found; the wealthiest 5 percent has 69 percent; the wealthiest 10 percent has 81 percent. The bottom 60 percent of households owns 2.5 percent of the total stock. Not so very much.

There’s another thing the big oil companies are doing with their profits: they’re hoarding them. If precedent holds, as soon as oil prices started shooting up again, a lot of that money started going into the bank for safekeeping — and adding yet more to the $1 trillion or so in corporate cash lying fallow and slowing the recovery. And as it happens, a not insubstantial chunk of last quarter’s profits were a direct gift — from the taxpayers. Somewhere between $4 billion and $9 billion of the industry’s annual profits comes from federal subsidies.

President Barack Obama has proposed repealing $4 billion a year in subsidies; the American Petroleum Institute says the proposal would actually cost the industry about $90 billion over the next decade. Response to Obama’s proposal was lackluster at first, from both sides of the aisle. But Democrats, afraid of being thrown out of the White House by an angry, gas-impoverished voting public, are suddenly seeing the fight to repeal those subsidies as a winning political issue.

Although the repeal would neither increase nor decrease the price of gas, it would take a bite out of Big Oil. And pushing for the repeal will almost inevitably highlight the modern Republican Party’s nearly lockstep allegiance to the thriving oil and gas interests — something that, in a period of high gas prices and even higher profits, couldn’t be good for them. But yet another thing the industry does with all its cash is buy influence in Washington. (For instance, Exxon, during the same quarter it made nearly $11 billion, spent just a tiny fraction of that on lobbying. But that was still a whopping $3 million.”