'60 Minutes': Did speculation fuel oil price?
There was an excellent item last night on 60 Minutes about the role speculators played in the oil price spike this summer.
Dan Gilligan, president of the Petroleum Marketers Association, told 60 Minutes the oil price problem was a result of the commodities markets being "invaded by a new breed of investor."
"Approximately 60 to 70 percent of the oil contracts in the futures markets are now held by speculative entities. Not by companies that need oil, not by the airlines, not by the oil companies. But by investors that are looking to make money from their speculative positions," Gilligan explained.
Michael Greenberger, a former director of trading for the U.S. Commodity Futures Trading Commission, told 60 Minutes reporter Steve Kroft there were no supply disruptions that could have justified such a big increase last summer.
"Did China and India suddenly have gigantic needs for new oil products in a single day? No. Everybody agrees supply-demand could not drive the price up $25, which was a record increase in the price of oil. The price of oil went from somewhere in the 60s to $147 in less than a year. And we were being told, on that run-up, 'It's supply-demand, supply-demand, supply-demand,' " Greenberger said.
This conclusion is backed up by several recent studies, the program points out. In fact, if the markets had been working properly, the price of oil should have been going down, not up.
Dan Gilligan, president of the Petroleum Marketers Association, told 60 Minutes the oil price problem was a result of the commodities markets being "invaded by a new breed of investor."
"Approximately 60 to 70 percent of the oil contracts in the futures markets are now held by speculative entities. Not by companies that need oil, not by the airlines, not by the oil companies. But by investors that are looking to make money from their speculative positions," Gilligan explained.
Michael Greenberger, a former director of trading for the U.S. Commodity Futures Trading Commission, told 60 Minutes reporter Steve Kroft there were no supply disruptions that could have justified such a big increase last summer.
"Did China and India suddenly have gigantic needs for new oil products in a single day? No. Everybody agrees supply-demand could not drive the price up $25, which was a record increase in the price of oil. The price of oil went from somewhere in the 60s to $147 in less than a year. And we were being told, on that run-up, 'It's supply-demand, supply-demand, supply-demand,' " Greenberger said.
This conclusion is backed up by several recent studies, the program points out. In fact, if the markets had been working properly, the price of oil should have been going down, not up.
Watch the segment here.
David Adams, Times Staff Writer
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60 minutes forgot to mention what inflation has done to the country within the past 8 years. The segment also failed to acknowledge the role of global politics. Speculation wasn't the only reason for the oil price to leap--it was only one small one of many. Not to mention Americans are pigging out on energy more and more than ever.
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