Speculators caused last summer’s high oil prices

The Wall Street Journal is reporting the Commodity Futures Trading Commission will say speculators played a major role in the skyrocketing oil prices that roiled the American economy last year. Between January 1 and July 1, crude oil futures in New York jumped 52 percent to a record $147.27 before nose-diving 77 percent to a low of $32.40 a barrel on Dec. 19.

The huge jump in oil prices drove the national average cost of a gallon of regular unleaded to over $4.00 last summer and gutted demand for the light trucks that were the life’s blood of the Detroit automakers. Chrysler, which depended on light trucks for 75 percent of its sales, took a serious hit that was one of the contributing factors in its eventual bankruptcy.

Based on an interview with Commissioner Bart Chilton, the report due out next month will reverse earlier findings that blamed supply and demand for the rapid rise in oil prices. According to Chilton, the earlier analysis was based on “deeply flawed data.”

Citing Chilton, the WSJ says the new report contains more thorough analysis of investors and reveals cases in which single traders held massive market positions. The previous report was issued when Henry Paulson was Secretary of the Treasury. Paulson was the former CEO of Goldman Sachs which has made large sums of money from an exemption from trading limits.

The previous CFTC report gathered information from swaps dealers about derivative contracts sold off exchanges. Chilton dissented from the earlier finding saying the data collected was incomplete.

The commission will start to hold public hearings today to determine whether limits need to be set on speculative investments in oil, gold, corn and other commodities in an attempt to rein in broad price swings that create problem for producers and consumers. Goldman Sachs will be one of the companies arguing against new rules and limits.

 Like on Facebook