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U.S.
Senator Member: Finance, Agriculture, Energy, Ethics and Aging Committees |
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For Immediate
Release Thursday, April 3, 2008 |
CONTACT:Stephanie Valencia – 202-494-8790 |
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| Sen. Salazar Examines Influence of Speculators, Investors on Oil Prices
WASHINGTON, DC – Today, the Senate Committee on Energy and Natural resources held a hearing to consider the question of whether speculation in financial energy markets is contributing to the high price of oil. Specifically, the committee examined the role non-commercial, institutional investors play in determining the price of crude oil, the world’s most actively traded commodity. American consumers are suffering under the strain of almost $3.50 per gallon gasoline, and businesses are feeling the high costs of transportation fuel in their bottom lines. In his remarks at today’s hearing, United States Senator Ken Salazar, a member of the committee, focused on how increased speculative activity in the energy commodities market may be pushing up the price of oil/gasoline, leaving American consumers and businesses to pay the price for investors’ and speculators’ priorities. Below is Senator Salazar’s statement from today’s committee hearing, as prepared for delivery: “Thank you Chairman Bingaman and Ranking Member Domenici for holding today’s hearing on the influence of speculators and non-commercial investors on the price of oil. Today’s hearing should shed light on the economic and market forces that determine the price of oil. Global demand for this resource grows stronger daily. This demand now comes in two varieties: demand for the physical product itself, and demand for oil as an investment commodity – so-called “paper barrels.” In an increasingly uncertain global financial climate, many investors are seeking to lock their capital into commodities. At the same time, consumers and businesses are powerless as gasoline prices skyrocket. “We are all aware that the price of oil hit an all-time inflation-adjusted high last month. Some are projecting that we’ll have $4 per gallon gasoline this summer. Many analysts have suggested that speculation in the crude oil market has played a determining role in the price surge. The recent increase in trading volume on energy commodities markets highlights the rising significance of investors’ and speculators’ behavior. It is reasonable to suspect that this behavior plays a significant role in determining the price of oil, and therefore the price of gasoline. If this is in fact the case, consumers are paying the price for investors’ priorities. “Many people are also worried that the crude oil derivatives markets are susceptible to manipulation. We know from the Enron scandal that without adequate oversight and regulation, market manipulation is possible – and that the consequences can extend far beyond the bottom-lines of the investors involved and their share-holders to affect the lives of individual consumers. The new Energy Independence and Security Act explicitly prohibits manipulation of crude oil, gasoline and petroleum distillates wholesale markets. I am particularly interested to hear our panelists’ assessments of whether the regulatory structures exist to properly enforce this new statute. “In the bigger picture, oil prices are still largely a function of OPEC’s supply- and price-setting whims. The U.S. consumes 25 percent of the world’s oil, but produces only 3 percent. Given our limited domestic supplies of crude oil, it is wrong to suggest that drilling in the Arctic or even offshore would have any impact on world prices. At the end of the day, we are still captive to OPEC’s preferred oil price. “Ensuring a rational and open crude oil market is a matter of national and economic security. Because of strong leadership from this Congress, our country is on the verge of a clean energy revolution that will reduce our oil consumption. However, as we continue to rely on foreign oil in our transportation sector, it is imperative for us to understand the forces that affect the oil market. We must do everything we can to shield consumers from oil price shocks. I look forward to discussing these issues with our witnesses today, and I thank them each for participating.” “Thank you, Mr.
Chairman.”
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