Well, as it turns out, we have somebody to blame for high gas prices and skyrocketing food costs: it's all us AARP card-carrying senior citizens.
You just thought it was speculators plowing billions into petroleum and grain futures and hedge funds.
But, Sen. Susan Collins, R-Maine, said at hearings by the Senate Committee for Homeland Security and Government Affairs, that clamping down on excessive speculative trading in the commodity markets wouldn't ameliorate the runaway prices, but would adversely affect investments by private and public pension funds that invest in agricultural and energy commodities.
Of late, “speculation” has been the dirty word du jour as Capitol Hill lawmakers face the wrath of constituents over almost hourly increases in pump prices and record food costs.
Hearings have proliferated — as of late June, more than 40 had been held, with no end in sight. At least nine different pieces of legislation have been introduced to close energy trading loopholes and increase regulatory oversight of trading.
“A growing number of people believe a flood of speculative money into energy futures is driving oil and gas prices higher and creating instability,” House Agriculture Committee Chairman Collin Peterson said at a hearing to review trading in energy futures.
Rep. Bob Goodlatte, R-Va., ranking member of the committee, says, “America's farmers and ranchers are hit disproportionately hard by high energy costs; they need relief now. I believe increasing domestic supplies holds the greatest prospect for relief.”
Rep. Bart Stupak, D-Mich., says, “The excessive speculation in commodity markets is having a devastating effect … that is rippling through our entire economy,” and “we risk having our economy brought to its knees.”
Rep. Kirsten Gillibrand, D-N.Y., one of the sponsors of PUMP (Prevent Unfair Manipulation of Prices), cites industry analysts that “speculators make up anywhere from 30 percent to 50 percent of the price of oil on the market, meaning the actual price should be closer to $60 to $80 per barrel than $140.”
Doug Steenland, CEO of Northworst (err, Northwest) Airlines, told a House committee that “supply and demand fundamentals do not explain the price increases and volatility in the energy markets.”
Oil demand in the past year has risen by about 2 percent, he said, while fuel prices went up more than 100 percent in the same period and the volume of speculative trades on an average day was nearly 13 times more than the actual amount of oil consumed worldwide.
Bob Stallman, American Farm Bureau Federation president, told the House hearing that “while speculators … have always been integral to market function, they are now playing an exponentially greater role than ever before.”
He cited figures that total index fund investment in corn, soybeans, wheat, cattle and hogs is more than $42 billion, up from a bit over $10 billion in 2006. “Additional transparency about the funds in the futures market should be required.”
But futures industry leaders counter that restricting investments in commodities could have consequences beyond the pension crowd, saying it could further increase market volatility and cause trading to move offshore, where monitoring would be more difficult.