The real gasoline price investigation that's needed.

Capitalism and the heart of our economic system is based on two principles -- free markets and the laws of supply and demand.

What the current spike in gas prices has exposed, and I do mean exposed, is that the oil industry, which is clearly involved in unwritten and unspoken price collusion, does not price its product based on the laws of supply and demand but on another little talked about economic tool. Blackmail.

Unlike any other product in the United States, unlike sinus remedies, orange juice, diapers, laundry detergent, or any other product you can think of, oil and gasoline is unique in that without it the United States would virtually shut down. To call the U.S. dependent on oil is a gross understatement.

If the price of orange juice went through the roof, people would find alternatives until the prices came down. Or as with any other product, if consumers decided prices were too high, many would just stop buying. But there are no such choices with oil and gasoline. So oil companies, as long as they are careful and not too obvious about it, can manipulate the price of gasoline and other petroleum products based on what they can get away with. Not what the market can bear, but what people will bear.

The current  artificial spike in gasoline prices has exposed all this.

The oil companies want you to believe that Libya has something to do with the spike in prices when it has nothing to do with it. Libya doesn't produce enough oil to make the slightest difference in the U.S. and the Saudi's could increase oil production tomorrow that could cover the shortfall without blinking an eye. As far as oil and gasoline reserves and supplies in the US are concerned, they are at record levels so supply and demand is having no impact on gasoline prices.

So what is it? Simple. Oil speculators have driven the price of a barrel of crude up and down during the Libyan revolt. But speculation is just that -- speculation. What the actual price of oil will be for, lets say June or July delivery, is yet to be determined. But oil companies use the speculating on a daily basis as an excuse to increase their prices when the oil being speculated on is months and months away from being refined into gasoline that ends up at the pump. No one today is paying $4 a gallon for gasoline at the pump because oil companies paid $108 a barrel for the crude.

And what if the price falls for June or July delivery? What if the price is $99 a barrel? The speculators lose money but the oil companies that raised their prices today based on the speculation that never came to be, get to keep their profits -- an increase in profits based on oil costing $108 a barrel when in the end it actually cost the oil companies $99. This is why oil companies like Exxon are now reporting record profits.

What to do about it is simple: Have congressional hearings where the CEO's of the major oil companies are asked to do one thing -- produce documentation and the relevant executives to testify under oath as to how they arrive at their pricing. Put it out there for everyone to see. All the memos and decision making.

Forget Obama and his Justice Department investigation. its nothing but a show pony that will preserve the status quo. The oil companies are doing nothing illegal at the moment with the way they price. But that is the point. Maybe their pricing based on speculation should be made illegal by congress.

Given the dependency the country has on oil and gasoline, the way oil companies adjust their prices based on day to day speculation and not what they actually paid for a barrel of crude is not free market economics, its not supply and demand, it's blackmail. Its what they think they can get away with. It's doing it because they can. And the fact that all of them raise their prices at the same time for the same hollow reason also exposes what is illegal -- price fixing. The problem with that is proving it.

At the very least, a congressional hearing into how oil companies arrive at their pricing could very well be a public relations nightmare for them once it's shown that it raises prices using speculation as the excuse, and it might  force them to change the way they do business. Before congress does it for them.