6-23-08 by dugan
Today’s Congressional hearing on oil speculation sounded like an admission that the Emperor wasn’t wearing any clothes. Big guns in the financial industry told Congress that simply regulating out-of-control energy markets could drop the price of oil by up to half. That it’s primarily out of control energy trading, with too much money pouring in, that has doubled the price of crude oil in a year and brought us $4 and up gasoline. Another great reason to send your online letter to Congress, with the price of you last fill-up and a demand to get markets under control.
But back to the hearing: Four top analysts said it wasn’t "supply and demand" or "market conditions," or the weak dollar or oilfield strikes in Nigeria that drove up the price of oil. Here’s a sampling from MarketWatch
The price of
retail gasoline could fall by half, to around $2 a gallon, within 30
days of passage of a law to limit speculation in energy-futures
markets, four energy analysts told Congress on Monday.
Testifying to the House Energy and Commerce Committee, Michael Masters
of Masters Capital Management said that the price of oil would quickly
drop closer to its marginal cost of around $65 to $75 a barrel, about
half the current $135.Fadel Gheit of
Oppenheimer & Co., Edward Krapels of Energy Security Analysis and
Roger Diwan of PFC Energy Consultants agreed with Masters’ assessment
at a hearing on proposed legislation to limit speculation in futures
markets.Krapels said that it
wouldn’t even take 30 days to drive prices lower, as fund managers
quickly liquidated their positions in futures markets."Record oil
prices are inflated by speculation and not justified by market
fundamentals," according to Gheit. "Based on supply and demand
fundamentals, crude-oil prices should not be above $60 per barrel."