Back in July, we told you there is a good chance that speculators buying futures in oil have something to do with the high cost of oil. Well, in case you were waiting for some sort of confirmation on that, we’ve pretty much got it. A new study reports that oil speculators own 50 percent of U.S. oil futures, compared to only 20 percent in 2002. And guess what the authors of the study do? They “present new evidence that speculative trading is playing an increasingly important role in the oil market.” AKA they drive up prices. But there’s more! They also discovered an increasingly strong correlation between oil and the dollar. So what does that mean?

Given this new strong correlation, the authors note, the threat to the U.S. economic health and national security is that the dollar risks getting caught in a vicious cycle where continually rising oil prices feed the U.S. trade deficit, leading to increased U.S. indebtedness and thereby an even weaker dollar, which further drives oil prices higher.

This is not so good. There are more implications to that–China owns our debt, so they hate it when the dollar weakens and it devalues what we owe them. And if there’s something we don’t particularly want, it’s ratcheted up conflict with China. The authors of the study state that new policy needs to be implemented, and tighter control of the oil market on the part of the government. We’ll see. But the moral of the story is, gas costs a billion dollars, and there isn’t a damn thing you can do about it. Start walking.

photo credit: ezioman’s flickr photostream/Creative Commons