Just in the nick of time: The Commodities Futures Trading Commision has reclassified a large, unidentified oil trader as a “noncommercial” speculator. As a result, the proportion of bets being made on oil by speculators, as opposed to “real” oil traders (commercial interests that try to mitigate risks resulting from volatility in crude prices by hedging), rose from 38% to 49%.
Congress is of course seizing on this as evidence of the dying theory that speculators are responsible for high oil prices and that the CFTC is trying to hide this fact. WSJ:
Four Democratic senators on Thursday called for an internal CFTC inspector-general investigation into the timing of a July 22 release of a report led by the agency. That report concluded speculators weren’t “systematically” driving oil prices. Oil prices soared until mid-July before beginning a decline.
The senators question whether the report, which played down the role of speculators, was intentionally released before this more recent raft of data, which shows speculators play a larger role than many thought.
The presence of speculators in the oil market, of course, doesn’t mean speculators are driving the price up: speculators go both ways. But by allowing Congress to say “see, we told you so,” this increases the likelihood that energy trading will be restricted.
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