NEW YORK - Outside Chicago every morning, Manoj Patel reports to work at an investor club he set up with friends. CBS News senior business correspondent Anthony Mason reports Patel gave up a job in information technology - now he trades oil.
"High risk, high reward," he said.
Every day, Patel buys and sells crude oil in 1,000-barrel contracts. "I have no use of a single barrel of crude oil. I just trade it from a trading perspective."
About two-thirds of all the oil traded is being bought and sold not by oil companies, but by small investors like Patel, and giant ones like banks and hedge funds. The state pension funds of California and Texas each have $1 billion or more invested in oil.
Michael Greenberger, former director of the Commodity Futures Trading Commission said, "It is accelerating the price of all oil products - crude oil, heating oil, gasoline - for no good reason."
Here's how the market works: a barrel of pumped crude is sold to a customer who wants to lock in a price for future delivery. That so-called "future's contract" can be bought and sold many times before the delivery date - often by investors trying to make a profit. The more investors rush in, the more volatile the price can become.
"Speculators are racing into these energy and oil markets at a blistering pace," said Bart Chilton, a commissioner on the Commodity Futures Trading Commission. "There's more than enough oil right now."
But investors say they're being made the scapegoat for higher prices. :
"Speculators, in aggregate, tend to respond to prices, rather than drive prices," said Michael Cosgrove, managing director, GFI.
Some speculation is healthy for markets. But Chilton says speculators now are taking oil on a roller-coaster ride. "They have an impact that increases the volatility in these markets. And that's not a good thing for consumers or businesses."
The Commodity Futures Trading Company is considering regulations to curb excessive speculation in oil - which more than ever before - has become a money game.