High gas prices turn oil traders into bad guys
Monday, 23 June 2008
WASHINGTON , June 22 (AP): As gas prices soar past $4 a gallon, speculators who buy and sell futures contracts in the oil market have emerged as the latest villains behind rising energy costs.
"There is clearly a supply and demand problem in the oil markets," said Michael Greenberger, a law professor at the University of Maryland and an expert on the oil futures markets. "But there is also clearly a speculation premium. We're paying a tax that is being collected by speculators."
Greenberger estimates that premium could be as high as 25 per cent per barrel of oil, which hit $135.42 near week's end.
Public Citizen, a consumer advocacy group, estimates at least 70 cents of the current gallon price of gasoline is due "to pure speculation."
Since Congress eased regulations on energy futures markets in 2000, "they have become more volatile and prices have skyrocketed," said Tyson Slocum, an energy expert with Public Citizen.
Meanwhile, consumers recently were told they should get used to paying at least $4 a gallon for gas through next year, with oil prices expected to stay well above $100 a barrel.
Prices should hover around $126 a barrel in 2009, about $4 higher than this year, Guy Caruso, head of the Energy Department's Energy Information Administration, told lawmakers June 11.
Even as Caruso testified, oil inventories fell and the July delivery price for light, sweet crude oil jumped to nearly $136 a barrel on the New York Mercantile Exchange.
The week before, the price of crude oil jumped almost 9 per cent in a single day to $138.54 a barrel. Oil prices have risen 44 per cent so far this year, undercutting economic growth already dampened by the housing crisis.
The commodities exchanges that handle trading in oil futures have been on the defensive for some time and say they're being vilified unfairly for a problem caused by basic economic forces. Rising demand for oil from China and India, they argue, is outstripping supply by 1 million barrels a day.
Volatility in Nigeria and other major oil producers is adding an "instability premium" as well.
"There is clearly a supply and demand problem in the oil markets," said Michael Greenberger, a law professor at the University of Maryland and an expert on the oil futures markets. "But there is also clearly a speculation premium. We're paying a tax that is being collected by speculators."
Greenberger estimates that premium could be as high as 25 per cent per barrel of oil, which hit $135.42 near week's end.
Public Citizen, a consumer advocacy group, estimates at least 70 cents of the current gallon price of gasoline is due "to pure speculation."
Since Congress eased regulations on energy futures markets in 2000, "they have become more volatile and prices have skyrocketed," said Tyson Slocum, an energy expert with Public Citizen.
Meanwhile, consumers recently were told they should get used to paying at least $4 a gallon for gas through next year, with oil prices expected to stay well above $100 a barrel.
Prices should hover around $126 a barrel in 2009, about $4 higher than this year, Guy Caruso, head of the Energy Department's Energy Information Administration, told lawmakers June 11.
Even as Caruso testified, oil inventories fell and the July delivery price for light, sweet crude oil jumped to nearly $136 a barrel on the New York Mercantile Exchange.
The week before, the price of crude oil jumped almost 9 per cent in a single day to $138.54 a barrel. Oil prices have risen 44 per cent so far this year, undercutting economic growth already dampened by the housing crisis.
The commodities exchanges that handle trading in oil futures have been on the defensive for some time and say they're being vilified unfairly for a problem caused by basic economic forces. Rising demand for oil from China and India, they argue, is outstripping supply by 1 million barrels a day.
Volatility in Nigeria and other major oil producers is adding an "instability premium" as well.