Oil Traders Draw Congress’ Ire

When it comes to high energy prices, OPEC is quickly losing its status as Public Enemy No. 1. Alongside Big Oil, where profits are fattening as gas prices rise, a new bogeyman has emerged: the oil speculator. With the stock market in retreat so far this year and the dollar crumbling, these investors have flooded the commodities markets in hopes of cashing in on rising prices [BusinessWeek.com, 1/17/07]. High oil prices are creating a ripple effect of inflation that’s angering consumers; gasoline prices topped yet another new record on May 14, an average of $3.76 per gallon.

“We are witnessing a substantial influx of speculative money into energy markets,” Senator Jeff Bingaman [D-N.M.] said May 12 on the Senate floor. “It is bidding up the price of oil beyond any reasonable level. Every consumer can see it at the pump. But we do not have any serious effort to regulate that speculation, or even to notice it.”

Tighter Regulation on Onions Now Bingaman and other members of Congress say they’re ready to shed regulatory light on the international oil market. On May 7, Senate Majority Leader Harry Reid [D-Nev.], Bingaman, and others unveiled the Consumer-First Energy Act, which they say addresses the oil price spike at its root. The proposal would mandate higher cash collateral for energy-futures trading and call for greater oversight of overseas trading. The bill, which contains four other provisions, could come to a vote by Memorial Day.

Would U.S. legislation to curb oil futures accomplish its goal? With so little information not only on oil trading but also on global oil supply and demand itself [BusinessWeek, 5/14/08], it’s impossible to say exactly what impact the legislation could have. But considering the vast size and scope of the global oil market, it’s unlikely the bill would significantly rein in prices. Still, debate about the bill and Congressional investigations on speculation may offer more data on a market that is both poorly understood and immensely important to the global economy.

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