Once again, speculators are blamed for high oil prices

Remember last year when we were paying upwards of $4 per gallon for gasoline? There was a lot of talk of why this was happening, with supply and demand receiving the blame for the high per-barrel prices for oil. At the time, I was skeptical and many financial analysts felt this way as well, as oil inventories were rising on a consistent basis.

One of the groups citing basic supply and demand as the cause of high oil and gas prices was the Commodity Futures Trading Commission (CFTC), but this group now appears to be changing its tune. Bart Chilton, one of the group's four commissioners, told The Wall Street Journal that that this analysis came from "deeply flawed data."

In August, the CFTC will release its latest review, and it should shine the spotlight on speculators as the cause of the high oil prices. The CFTC began public hearings Tuesday to decide whether it should limit speculative investments in commodities.

However, CFTC's CEO Craig Donohue expressed concern over regulating these markets, as "inappropriate regulation . . . will cause market participants to move to dark pools and other unregulated markets causing irrevocable harm to the entire U.S. economy." These "dark pools" are private markets that allow large market-changing orders, but could they really harm the economy? That is yet to be determined.

Of course, there could be political reasons that the CFTC is shifting its focus. Gary Gensler is the new chairman for the CFTC, and he was appointed by President Barack Obama to replace Bush-appointed chair Walter Lukken. At the time of the original CFTC report, Lukken found that there was no "direct evidence that speculation was driving up prices." But it seems that many don't want to believe this, and Lukken is not commenting. The new CFTC chair is expected to bring in new rules that will limit the amount of investments in commodities by large institutions that use these plays purely for financial gain.

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