http://www.bloomberg.com/…

Speculators became the largest players in oil futures markets, nearly doubling their share in the past eight years as prices rose to records, in a “radical shift” for the market, according to a congressional committee.

In January 2000, speculators controlled 37 percent of contracts to buy West Texas Intermediate crude oil on the New York Mercantile Exchange, with the rest held by physical hedgers, including refiners and airlines that need to hedge against delivered fuel costs.

By this April, speculators controlled 71 percent of the contracts, according to data provided to the House Energy and Commerce Committee by the Commodity Futures Trading Commission.

“Energy speculation has become a growth industry and it is time for the government to intervene,” Representative John Dingell, the committee chairman, said at a subcommittee hearing today.

Isn’t it pretty damn obvious that interference by the government is why we have this supposed problem in the first place? Inflation of the currency, non-inflation based devaluations, higher demand, regulated supply, wars with oil producing nations, the threats of war with oil producing nations, artificially low interest rates, economic bubbles bursting. These push people to buy commodities. What better a commodity to buy but one almost guaranteed to be in high demand and shrinking supply?

Crude oil prices have doubled from last year, reaching a record $139.89 a barrel in trading on the New York Mercantile Exchange June 16. Congress has held several hearings on what is driving prices up, and President George W. Bush last week called for expanded drilling to respond to record prices. Crude oil for August delivery rose $1.38, or 1 percent, to settle at $136.74 a barrel at 2:57 p.m. today on Nymex.

Given how badly the dollar is doing it’s not really possible to adjust currently for that. Notice the increase in nominal price after we severed the last connection to the gold standard.

Lukken told reporters after the hearing that the 71 percent figure cited by the committee includes speculators and swap dealers, usually large banks that help facilitate trades.

Those swap dealers are not always working on behalf of speculators, Lukken said, adding that Morgan Stanley handles risk management on futures markets for United Air Lines Inc.

Dingell, a Michigan Democrat, said Congress should explore “a full range of options” to limit speculation, including raising margin requirements for financial speculators to 50 percent, preventing pension funds from investing in commodities and prohibiting investment banks from owning energy assets.

Intervention, which causes or exasperates the problem, leads to more intervention and more distortion and more problems. If these people actually wanted to “help” as they claim the only reasonable approach is leaving it alone and withdrawing intervention. They have been presented with the evidence yet choose the path which conflicts with their claims. I can only assume they are not concerned with the wellbeing of the US subjects.

http://news.yahoo.com/…

The House of Representatives overwhelmingly approved legislation on Tuesday allowing the Justice Department to sue OPEC members for limiting oil supplies and working together to set crude prices, but the White House threatened to veto the measure.The bill would subject OPEC oil producers, including Saudi Arabia, Iran and Venezuela, to the same antitrust laws that U.S. companies must follow.

The measure passed in a 324-84 vote, a big enough margin to override a presidential veto.

The legislation also creates a Justice Department task force to aggressively investigate gasoline price gouging and energy market manipulation.

“This bill guarantees that oil prices will reflect supply and demand economic rules, instead of wildly speculative and perhaps illegal activities,” said Democratic Rep. Steve Kagen of Wisconsin, who sponsored the legislation.

The lawmaker said Americans “are at the mercy” of OPEC for how much they pay for gasoline, which this week hit a record average of $3.79 a gallon.

The White House opposes the bill, saying that targeting OPEC investment in the United States as a source for damage awards “would likely spur retaliatory action against American interests in those countries and lead to a reduction in oil available to U.S. refiners.”

The administration said less oil going to refineries would limit available gasoline supplies and raise fuel prices.

Foreign investment in U.S. oil infrastructure has declined in the last decade. But the state-owned oil companies of several OPEC nations are owners of U.S. refineries, and those investments could be affected if the legislation becomes law, said Arlington, Virginia-based FBR Capital Markets Corp.

The bill also requires the Government Accountability Office to carryout a study on the effects of prior oil company mergers on energy prices.

The Senate would still have to approve the House measure.

The Senate previously approved similar legislation as part of a broad energy bill. However, the OPEC-suing provision was removed after White House opposition in order to get the underlying energy legislation signed into law.

Speculation is an essential knowledge source for the market. Just like any other source it’s important for the market to function optimally. The speculation is wild because some group of jackasses in Congress and the executive branch of the USA government are waging wars on people who did us no harm. Because they are screwing up the value of the currency and attempting to carve the path for future energy sources. No bill can guarantee prices. They will likely cause shortages like the late 1970’s. As Mises said when the government interferes and screws things up… they know nothing else but to continue to interfere and to screw up.

I’m not sure how the hell they can enforce anything like this, I’ve not read the bill yet, but this sounds to me to be a declaration or war or at least an aggressive act.

If the government wants prices to drop stop the intervention. Leave the market alone. Leave the people and governments of the oil producing nations alone. Leave domestic energy production alone. Let them build refineries, let them drill for new oil sources, let them build nuke plants. Then will the costs normalize.