• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Speculators Driving Up Oil Prices

Posted on: Tuesday, 24 June 2008, 06:00 CDT

Speculation on Wall Street is putting the squeeze on small fuel dealers and their customers who are struggling to cover home heating oil bills, a Connecticut industry official told a congressional committee Monday.

Gene Guilford, executive director of the Independent Connecticut Petroleum Association, testified before the U.S. House of Representatives' Committee on Energy & Commerce subcommittee for Oversight & Investigations. The panel is investigating whether investor manipulation is occurring in energy markets and thereby inflating prices consumers pay for home heating oil, gasoline or airfare.

Futures contracts for energy sources such as oil are traded on the New York Mercantile Exchange, which is regulated by the federal Commodity Futures Trading Commission and the Federal Energy Regulatory Commission. But large energy traders, those with at least $10 million in net worth, are exempt from rules that prevent price distortion.

Monday's hearing occurred one day after officials in Saudi Arabia said they would increase oil production by 200,000 barrels per day in July, bringing the country's output to 9.7 million barrels daily. Yet, crude oil prices rose $1.38 to settle at $136.74 a barrel Monday amid reports of militant attacks at Royal Dutch Shell PLC and Chevron Corp. oil fields in Nigeria.

"Consumers are watching food prices skyrocket, while grocery store shelves remain stocked," Guilford said. "The sticker shock experienced by home heating customers on receipt of their oil or gas bill begs the question of their utility company or dealer: Are you running low on supply?

"The answer of course is: 'No.' No, we are not running out of energy,orfood,"Guilfordsaid,pointing to trading activity on June 6 as an example of the influence exerted in the market by speculators. On that day, more than 1 billion barrels of crude oil, or 53 times daily U.S. consumption, were traded, as well as 99 million barrels of heating oil or half of the total U.S. consumption in a year.

"Is excessive speculation a reality? The events of June 6th have shattered all doubt," he said.

U.S. Rep. John Dingell, D-Mich., chairman of the Energy & Commerce Committee, has introduced a bill that would empower the secretary of energy to gather information from regulatory agencies and commissions that would identify all factors affecting oil prices.

"It is time for the government to intervene," Dingell said. "There is a cause and it must be ferreted out."

U.S. Rep. Joe Barton, R-Texas, a ranking member of the committee, said speculators are not the cause for high energy prices. The culprit, rather, is a global supply that exceeds demand by only a razor-thin margin of less than 2 percent, he said.

"As long as we keep supply constant and the demand goes up, we create an opportunity for speculators to come in," Barton said.

Source: New Haven Register

More News in this Category