Speculators Driving up the Price of Oil

Hearing on Capitol Hill Details a Marked Increase in Oil Speculation.

(CBS)  CBS News producer Laura Strickler wrote this story for CBSNews.com.

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As gas prices skyrocket, the question is now, “Why?” Fingers are pointing more away from the fundamentals of supply and demand and more towards the role of energy speculators and the lack of government oversight.

Today on Capitol Hill, key players in the energy field will be questioned by lawmakers in an effort to find the culprit to the fuel crisis. It’s all part of an increasing clamor in Congress to pin the blame for pain at the pump on someone, something or some institution.

New data released by the Chairman John Dingell, D-Mich., of the House Energy and Commerce Committee details for the first time how speculators now dominate the energy futures market.

In 2000, the New York Mercantile Exchange was dominated by those who wanted to purchase oil for use in the future like airlines and trucking companies. These so called “physical hedgers” controlled 63 percent of the market. But by April, 2008 the trend completely reversed. “Physical hedgers” ran 29 percent of the oil futures on NYMEX and the rest - 71 percent - were in the hands of speculators.

Dingell likens the commodities markets to a “casino for unscrupulous speculators who profit at the expense of the American people.”

“This raises troubling concerns about whether the oil future prices have become delinked from underlying supply and demand fundamentals,” he said.

While NYMEX is regulated by the Commodities Futures Trading Commission, its competitor, the InterContinental Exchange is not. ICE executives argue they are sufficiently regulated by the British and don’t need additional oversight. ICE contends they are a foreign exchange and the CFTC agrees.

Rep. Bart Stupak the chairman of the House Energy and Commerce Oversight and Investigations Subcommittee disagrees and says the lack of regulatory oversight is contributing to the energy crisis.

“The Commodity Futures Trading Commission and the Department of Energy may be the only people in the world who currently believe that speculation in energy markets is not a driving force in the recent run up in oil prices,” he said.

Dingell also released data today that shows 64 percent of ICE West Texas crude oil futures are traded from US terminals.

The data also shows that ICE’s share of business on US terminals is increasing. In the last quarter of 2007, 69 percent of ICE’s West Texas futures were run from US terminals.

Yet despite their growing market share in the United States, ICE says it is only subject to British regulations.

When Dingell’s committee requested an ICE representative to appear at today’s hearing, they were told the exchange would send someone from England. Sir Robert Reid is expected to testify today that his exchange is British and therefore exempt from American oversight.

[sbenard]

This is the paragon of irresponsible reporting. This article is pure propaganda. If I didn''t know better, I might have thought the article was written by Hugo Chavez or Fidel Castro.

The very headline implies to be a FACT something that is really only the OPINION of one congressman. Don''t be gullible enough to be deceived by it!

But the author states it as if it were an established fact when it is really just that Congressman''s (and apparently, the author of the article''s) claim. It''s is an opinion, and has no basis in fact, not do the data support the claim. The entire article is written such that it misleads readers to erroneously assume that speculation is the cause of high oil prices. It''s not!

There are numerous causes for high oil prices, SOME of which are attributable to politicians in Washington of BOTH political parties. This is the real reason Congressman Dingell seeks to blame speculators. It is a great way for him, with a bully pulpit to point the finger of blame everywhere but himself. He knows very well that he and his cohorts are largely responsible for the high cost of oil. But he, like most politicians, is more interested in obtaining and retaining POWER, than in taking responsibility for the crisis and creating a long-term solution to it.

[meghtz]

Look at the bigger pitcher. There are a group of investment companies that promise a return for there investors. There tool the futures market. The CFTC has been given the authority to protect the American people. The CFTC failed to respond to an increase in the speculative bubble. Commissioner Lukken failed to act and continues to move at snails pace. The congress needs to replace him or we will replace them in the voting booth. NO MORE EXCUSES

[triplet-man]

So... let''s BUST ''em ! Regulate thier "foreign" trade through our British allies and Crash the oil commodoties and the LOSERS will be the ones holding the expensive contracts - that don''t intend to take delivery of that oil - therefore they will have to sell it for a HUGE loss! Haa haaa haaa haa!

[triplet-man]

Price per barrel of oil 80% mark up from the out of the ground to speculation to transporting fees. Amazing isn''t it? Speculation is nothing more than manipulation. Over 65% of the futures contract holders don''t intend to take delivery of the the oil - they intend to sell it (in the future) and make piles of money from it Selling it to the TRUE recievers who will take delivery. That will be passed directly to the consumer. They make money by forcing the prices up When they didn''t even get it out of the ground NOR will they process it.

[camerseni]

Let it sit until the music loads it takes long to load and ya need to go everywhere to get message.
who knows It could work. I hope
camerseni com

[camerseni]

This something I am trying to get the prices down. This is a pretty scary thing when you can''t afford food or gas

camerseni dot com

[mjvw2]

"Speculators Driving up the Price of Oil"

Can''t get anything by CBS.

[bradster999]

Although oil appears to be a good hedge against inflation, the low dollar and a low oil supply, nothing could be farther from the truth. Our oil supply is becoming less of an issue because inflation is causing a surplus of gas. The main thing driving inflation is high oil prices and as inflation goes higher investors buy more oil driving inflation higher again. Some experts predict this will trigger the worldwide recession. This will result in lower gas consumption and it will free up more gas supplies.. I am no expert but even I can see the writing on the wall. Investors are going to loose their shirts on oil. We may be looking at another ENRON. Hedge funds will topple leaving old age pensioners with nothing. The government won''t be able to bail them out this time because the cost would be far to great. The CFTC and FSA will be too slow to react to the cracks forming in commodities trading so the govenment will finally step in. By that time it will probably be too late. www.nbtv.ca