House Panel Hears Speculators Are Key in Oil Prices
ARI SHAPIRO, host:
It's MORNING EDITION from NPR News. I'm Ari Shapiro.
RENEE MONTAGNE, host:
And I'm Renee Montagne. There's an ongoing debate over what role speculators are playing in the run-up of oil prices. On Capitol Hill, the Joint Economic Committee holds a hearing this morning. Yesterday, a House panel heard testimony that speculators are a major factor in surging prices. NPR's Brian Naylor reports.
BRIAN NAYLOR: The day-long hearing of the House Energy Subcommittee on Oversight and Investigations heard from regulators, market chiefs and analysts - everyone but the speculators themselves. The consensus was that traders of what's termed paper barrels of oil, as opposed to the real thing, have a lot to answer for. Michael Masters of Masters Capital Management said it wasn't quite accurate to call the current energy price run-up a bubble.
Mr. MICHAEL MASTERS (Masters Capital Management): What we're talking about here with speculation, the right terminology really isn't a bubble. It's really more like a tumor, and it grows and grows and grows, and in this case, it's hurtful as it expands. So the time to act is before it gets any worse.
NAYLOR: Congressional Democrats appear poised to act. Subcommittee chairman, Michigan Democrat Bart Stupak, has sponsored what he has dubbed the Prevent Unfair Manipulation of Prices, or PUMP Act. It would require greater disclosure of energy trades and stricter regulations aimed at curbing excessive speculation.
Fadel Gheit, an oil analyst with Oppenheimer and Company, says such speculation is a major factor that has led to oil costing twice as much as it should.
Mr. FADEL GHEIT (Oil Analyst, Oppenheimer and Company): So it should be around between 45 and $60. So, you know, meeting with the head of most of the oil companies that we cover, only a year ago they were amazed at the sustainability of $60 oil.
NAYLOR: Gheit says the world hasn't changed that much since then to justify the much-higher prices, but there are skeptics, such as Texas Republican Joe Barton. He told the subcommittee they're pointing fingers in the wrong direction.
Representative JOE BARTON (Republican, Texas): Let me say at the very beginning the speculators are not the cause of high energy prices. We have high energy prices because there's less than a one or two-percent margin of supply over demand in world markets today.
NAYLOR: The Bush administration has also raised doubts, saying it's inadequate supplies and growing demand by India and China that have led to the price run-up. But recently, the Commodity Futures Trading Commission has begun an investigation into oil speculation, and a separate task force promises to report to Congress in the fall on the issue.
Michigan Democrat John Dingell indicated he didn't need to wait for a task force to report on the obvious.
Representative JOHN DINGELL (Democrat, Michigan): So we got here a situation where you got an elephant, which is the speculation, and you got the oil which is moving, which is a flea on the back of that elephant. The flea wants to go somewhere, but he can only go on the elephant. And the elephant can go anywhere he wants, but the flea's got to go along.
NAYLOR: Dingell says it's time for Congress to intervene with the elephant and the flea. Among the many possibilities lawmakers are considering are new requirements that speculators put in more money when they make a trade, and even barring speculators from trading oil altogether. Brian Naylor, NPR News, the Capitol.