Recent attention has focused on the role oil speculators play in pushing prices up despite the apparent fact that there is plenty of of crude oil available on the world market. Nader.org tells us:
Last week the price of crude oil reached about $130 a barrel after spiking to $140 briefly. The immediate cause? Guesses by oil man T. Boone Pickens and Goldman Sachs that the price could go to $150 and $200 a barrel respectively in the near future. They were referring to what can be called the hoopla pricing party on the New York Mercantile Exchange. (NYMEX)
This is a classic bubble, prices are driven up by increased demand fueled by the expectation that prices will continue to go up. Bloomberg reports that the Senate is about to get involved:
Democrats and Republicans should work together in the U.S. Congress to attack oil and gas speculators as part of a strategy that includes increased production to bring down energy prices, North Dakota Senator Byron Dorgan said.
``We ought to get at this,'' Democrat Dorgan, a member of the Senate's energy committee, said on ``Fox News Sunday'' today. ``There's an orgy of speculation going on in the futures markets, an unbelievable amount of speculation by hedge funds, investment banks and others, that are driving up prices.''
Legislation designed to limit speculation in oil markets was introduced last week by Senators Dianne Feinstein, a Democrat from California, and Ted Stevens, a Republican from Alaska. The bill would require the Commodity Futures Trading Commission to review trading practices of institutional investors and impose limits on how much those investors can hold in a given market.
If this is in fact a bubble, we should expect to see a crash at some point. Hopefully before Labor Day. I still think, warts and all, $4 gas will have long term benefits by spurring renewable technologies.
