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Pressure builds to crack down on oil speculators
This won't make tomorrow's drive any less painful than today's, but it might comfort you slightly to know that if you're having a really hard time understanding why the price of oil has doubled in the last year, you're in good company. "Something is just not right," said Sen. Amy Klobuchar (D-Minn.). She was joined at a news conference Monday by the president of Jefferson Bus lines and a petroleum marketer who agreed the sudden spike in oil and gas prices doesn't make sense. Vern Kelley, the petroleum marketer who owns of Kelley Fuels -- a business that supplies gasoline to gas stations -- said "I watch these news shows, and they talk about the demand, and India, and everything (except) what's really raising this market." What's really raising the price of oil, they say, is a group of people called oil speculators. People who, Klobuchar said, need to be policed. "When industry experts, including top oil executives, tell us that oil should really be priced well beneath its current level, that's a call to action," she said. Klouchar is co-sponsoring a bill to crack down on oil speculators. Speculators are people who work at big hedge funds and investment banks and buy huge quantities of oil futures. The theory is that their investments in oil futures create an artificial demand for oil, which helps drive up the price. Then speculators sell their futures at a higher price and make truckloads of money. Very Kelley compared it to real estate speculators who made money by flipping houses. "They really don't want to live in that house, they just want to buy it and flip it," he said. One reason oil traders can do this is the so-called "Enron loophole," named after the infamous collapsed energy company. In 2000, Congress passed the loophole, which lets traders trade energy futures without government oversight. Klobuchar said the bill in Congress would add more regulators to watch these trades and block U.S. traders from making shady oil deals overseas. Northwest Airlines CEO Doug Steenland, who testified on Capitol Hill Monday, said the legislation just might work. "There's a distortion going on that we think Congress can correct," he said on CNBC. "And the experts today who testified said that it will have a material benefit on the price." Translation: crack down on speculators, and you'll bring down oil's price. Economists do not universally agree that oil speculators are having such a huge impact on oil prices. But Klobuchar said CEOs of oil companies have testified to Congress that they think oil should be trading closer to $60 a barrel right now -- certainly not $137, where oil closed Monday.
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