Congressional oil price focus moves to non-commercial, institutional investors

Heating up: Congressional interest in the influence of non-commercial, institutional investors on crude oil prices. The Senate Energy and Natural Resources Committee will hold a hearing April 3 on that very subject as lawmakers try to determine what has pushed crude prices past $100/bbl. Several are convinced that it's more than market fundamentals and want to learn, for example, if there's any truth behind allegations that unregulated hedge funds are buying oil and putting it into storage simply to push prices higher. This is possibly the most entertaining oil price theory since New Jersey officials claimed during the 1970s that tankers were parking offshore so their cargo would be more valuable when it finally was unloaded.

Others would like to see energy futures trading regulated more closely. Rep. Bart Stupak (D-Mich.), who chairs the House Energy and Commerce Committee's Oversight and Investigations Subcommittee, wants all transactions to follow the same disclosure rules. "As much as half of energy trading occurs without transparency and without oversight. Speculation and market manipulation in the energy futures market can create a snowball effect and consumers ultimately pay the price when they are heating their homes or putting gas in their cars," he said on Feb. 1.

Cooling off: Allegations that refiners are manipulating retail prices for oil products. Stupak still wants to make so-called "price gouging" a federal crime. So does Sen. Maria Cantwell (D-Wash.), a member of the Energy and Natural Resources Committee. But public and political attention is focused farther upstream on crude oil prices. That could change in the next few weeks if gasoline prices break the $3.50/gal retail price barrier before Memorial Day, as the Energy Information Administration has predicted.

Give the 110th Congress some credit, however: Most of its members aren't blaming the oil industry for the current high prices. Senate Majority Leader Harry M. Reid (D-Nev.) and House Speaker Nancy Pelosi (D-Calif.) are saying that the majors are making record profits as a result, but their main interest is in raising taxes to fund incentives for alternative and renewable energy projects. The fact that 2008 is an election year also suggests that the anti-oil rhetoric could intensify once federal lawmakers return from their spring recess.

Contact Nick Snow at nicks@pennwell.com

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