[ProfessorMurder]

June 24, 2008 · Industry analysts say if not for speculators, oil prices would
be half of what they are today. Congress is looking into what roles
speculators may have played in rising gas prices. The House Energy
Subcommittee on Oversight and Investigation heard from regulators, market
chiefs and analysts Monday

— but speculators were missing from the hearing.

June 23, 2008 · Crude oil prices rose again Monday, despite Saudi Arabia's
promise over the weekend to modestly increase oil production.

Costly crude oil has pushed gasoline prices over $4 per gallon in most parts of
the country. And that has politicians eager to show their concern.

There have been a lot of explanations offered for the doubling of crude oil
prices over the last year: a weak dollar, strong demand overseas, greedy oil
companies, a stubborn OPEC. The latest culprit singled out on Capitol Hill and
the campaign trail is oil speculators.


Both presidential candidates have called for more government oversight of oil
speculators. And Congress has been busy holding hearings on the subject.

The House Subcommittee on Oversight and Investigations reported Monday
that speculators are responsible for about 70 percent of the oil traded on the
New York Mercantile Exchange — up from less than 40 percent at the
beginning of the decade.

Unlike traditional players in the oil market, who buy and sell futures contracts
as a way to lock in prices, financial speculators have no use for the
oil itself. They're simply placing a bet that the price of oil, and in some
cases other commodities, will rise.

This speculative money "has nothing to do with the real world supply or
demand for crude oil," said Michael Masters, portfolio manager of Masters
Capital Management.

In other words, consumers might not be putting any more gasoline in their
tanks, but their pension funds are loading up on oil futures.
That growing demand from institutional investors is driving up the price.