Fundamentals of supply and demand, not speculative trading, explain the record rise in crude oil prices, a preliminary report by a government interagency group studying commodity markets says.
"Current oil prices and the increase in oil prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors," the report found. Although trading activity has increased during that time period, "preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices."
The Senate voted unanimously Tuesday to move forward with debate on legislation to curb speculation in energy markets as lawmakers seek to respond to record oil prices. Crude oil futures reached a closing high of $145.29 a barrel July 3 on the New York Mercantile Exchange, but have eased since then. They fell $3.09 on Tuesday to $127.95 a barrel.
The task force consists of staff from the departments of Agriculture, Energy and the Treasury, the Board of Governors of the Federal Reserve System, the Federal Trade Commission and the Securities and Exchange Commission.
"This staff report reflects the collective knowledge of some of our government's best economists," Jeffrey Harris, chief economist of the Commodity Futures Trading Commission and chairman of the task force, said in a statement.
But Bart Chilton, a Democratic commissioner for the commodities regulator, said, "The findings are, to say the least, disappointing." He said senior administration officials, including the Treasury and Energy secretaries, had already said speculators weren't causing record prices.
"I'm not surprised, therefore, that the staff who work for them, and who comprise the staff of the 'task force,' have not contradicted their superiors in this study," Chilton said.
There has to be an effect from the nearly $250 billion in U.S. commodity futures markets that wasn't there a few years ago, he said.
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