Larson: Oil Speculation Driving Gas Prices
by Hugh McQuaid | May 31, 2011 1:36pm
(7) Comments | Commenting has expired
Posted to: Congress, Town News, State Capitol
Connecticut residents suffering at the gas pump should know that it is industry speculation, rather than supply and demand, that has gas prices around $4 a gallon, U.S. Rep. John Larson said Tuesday.
Were it not for speculation and the dropping value of the American dollar, the price of gas would be closer to $2.50, said Executive Director Gene Guilford of the Independent Connecticut Petroleum Association.
“What’s happening all across this country and here in the state of Connecticut is these prices are being artificially driven up by speculators,” Larson said.
The Congressman pointed to testimony from Exxon CEO Rex Tillerson before the U.S. Senate where he admitted that if it were based solely on supply and demand, the price of a barrel of oil should cost between $60 and $70. On Tuesday morning a barrel of oil was trading at between $102 and $116.
Guilford recalled recent fluctuation in oil prices: on February 1, the wholesale price of gasoline in New Haven Harbor was $2.55, by mid-May that had risen to $3.42.
But just this weekend Goldman Sachs predicted the price of a barrel of crude oil will rise to $135 and the price of gasoline to $5, he said.
“This morning, on these markets because Goldman said jump, people are now voicing, ‘how high?” he said.
Larson questioned the allegiance of conservatives in the Republican-controlled House, who he said have recently been trying to derail Wall Street reform laws passed by the last Congress.
He condemned a move last week by Republicans on the House Financial Services Committee to delay the implementation of the Dodd-Frank bill, which was aimed at deterring abusive oil speculation practices. Those regulations were scheduled to go into effect this July. That would be delayed one year by the proposal.
“To postpone the positions in that bill that would reign in speculation is inane. It makes no sense,” he said.
The U.S. House Appropriations Committee also recommended cutting $30 million from the budget of the Commodity Futures Trading Commission, the group that regulates such practices, Larson said. That news came the same week the commission brought federal charges against five oil speculators, accusing them of willfully manipulating the cost of crude oil for profit.
“Prosecutors finally have brought speculators to court. Now Republicans in Congress are proposing cutting that budget by 30 percent? That’s incredible. This is a time when we need more regulation,” he said.
Larson said now is not the time to be cutting funding to the agency, which consists of about 600 people and operates with a budget of $168 million.
Despite being a small agency by federal standards, Guilford said the CTFC has the responsibility of overseeing a $600 trillion commodity market. But House Republicans now want to cut $57 million from the agency’s budget and force layoffs, he said.
“The answer for Republicans as the agency of the federal government is about to bring down manipulation in the crude oil market is—wait, not yet,” he said.
Larson admitted there is not much that can be done to stop the proposal from leaving the House but said he’s confident it can be defeated in the Democratic-controlled Senate. But Larson said he would like to encourage a grassroots movement against market manipulation.
“I think the American public needs to be educated to the fact of how much money is spent in Washington to stop usually consumer-oriented legislation, like the Dodd-Frank bill. That was lobbied against severely and now as the regulations and implementation is coming into effect, the lobbying is still going on,” he said.
Larson said that if all else fails, oil prices could be dropped by drawing down the strategic oil reserves maintained by the U.S. Department of Energy. Flooding the market takes away some of the ability of spectators to take advantage of the system, he said.
President Barack Obama has been hesitant to use that option, however. Larson said he understands why—in this case supply and demand is not the problem, so increasing supply is not really an answer. A better way to address the issue would be to bolster the CFTC, rather than cut it, and implement the Dodd-Frank act on time, he said.
Tags: Larson, Gas, oil, speculation, market manipulation
(7) Comments
posted by: Matt W. | May 31, 2011 2:23pm
Idiot: Johnny if you knew half of what you think you know, you’d be down-right dangerous! The fact is that you’re partially right but you have no idea why. The problem is not “speculators” the problem is that the Treasury has allowed the value of the dollar to fall so far that, as a net importer of about 85% of the oil we need, we are paying more and more for the same barrel b/c our dollar is worth less and less. Are speculators taking advantage of this? Sure but they’re not causing it!
And tell me this Johnny, if speculators are the problem then why have gas prices come down a bit in the last week or two? Speculators stop buying or did the dollar gain a little ground in May?
You’re either a moron or you’re only interested in telling half the truth. Either way I have no use for you.
posted by: Disgruntled | May 31, 2011 2:52pm
And why is gas cheaper by .25 in the next town over? Or .50 cheaper upstate?
Mr. Larson clearly spends too much time on his hair and not enough time on working for the citizens of Connecticut.
posted by: Disgruntled | May 31, 2011 2:54pm
Implementing ANYTHING with Dodd’s name on it is a criminal act.
Chris Dodd should be in jail.
posted by: newview | May 31, 2011 8:37pm
Remember now…John is riding the coattails of the T.Booone Pickens energy legislation. So anything to make the oil industry look foolish…especially imported oil…as opposed to the domestic natural gas plan T. Boone has up his sleeve…makes John look a step ahead of the rest when it comes to domestic energy policy.
So…take this little PR blitz with a grain of salt. There’s always a motive…there’s always a plan..and there’s always a benefit right around the corner. and yes..you’re right disgruntled….Dodd should be in jail…but ..evidently…he’s made for Hollywood…doesn’t say much for us I’m afraid! 
posted by: Hoosier@CT | June 1, 2011 9:13am
Blaming this on speculators is a rediculous aqusation. For Connecticut, it is the huge tax burden placed upon the citizens of CT. For the rest of the country, it is the brick wall built by our legislators that prevents any drilling, or new founderies being established within our boundries. Talk about subsidies, our legislators are purposefully shiping our $$ into the purses of OPEC. Mr Larson is so off base it is beyond believing. But that is not his fault, he takes no responsibility, and I agree. Its the CT citizens that vote for him year after year, when will they wake up.
posted by: ctperson13 | June 1, 2011 8:50pm
Matt W. Really, who is the idiot here? It says right in the article that a large part of the problem is a combination of the devaluation of the dollar AND the actions of speculators. Yes, the dollar probably did gain a bit of ground, thus the SLIGHT decrease in gas prices. Again, there are a combination of factors at play here. Really, do you all ENJOY getting gouged at the pump while rich aholes on the Gold Coast line their pockets? Why do you think that CT was identified as a major exporter of fuel? Yep, lots of fuel production in CT—NOT. We have a huge number of hedge fund managers and investment bankers living in this state—THAT’s why.
posted by: ThomS | June 7, 2011 10:05am
Natural gas is also traded on the open market. Those prices went up, new supply was found and the prices dropped. Oil prices increased but not only was sufficient new supply not found but some has been disrupted (Libya) and demand continues to rise. When you read the word speculation think politics because that is what is going on. The politicians need someone besides themselves to blame for our woes. Unfortunately with Dodd-Frank and all their other mindless meddling they are systematically crippling the US economy.