Tuesday, May 26, 2015

Oil speculators off the radar

With crude oil prices at about half their painful July peaks, what became of the push to stop the evils of speculation?

Oil speculators off the radar

With crude oil prices at about half their painful July peaks, what became of the push to stop the evils of speculation?

It's hard to stay upset, after all, when gasoline at the pump has fallen to the $3-a-gallon range, from $4, and seems headed even lower.

OPEC, some of whose leaders railed the loudest against market speculators a couple of months ago, called an emergency meeting for this Friday to address the price drop. Analysts believe the cartel could decide to cut oil production by a million barrels per day.

Light, sweet crude finished last week at $71.85 a barrel compared with the summer high of $145.29 on July 3.

"One gets the sense that OPEC is beginning to panic," says Stephen Schork, Villanova-based energy consultant.

Back in May, when crude was at $135 a barrel and rising, I proposed five possible ways to stop the price escalation: reduce demand for oil, pump way more out of the ground, quell speculation, strengthen the weak dollar, and usher in a recession.

Only one of these - a substantial increase in oil production - didn't happen in the intervening months. The rest have come to pass, or are about to - sorry to say - in the case of the looming recession.

As for the speculators, they've unwound their positions. In fact, two summer reports, including one from the industry-funded Energy Policy Research Foundation, found that speculation had only a limited role in the oil bubble.

"And it's not a feature in why they're running down," Lucian Pugliaresi, the foundation's president, told me Friday. It issued one of the summer reports.

And, after some huffing and puffing, Congress did nothing about reining in wild speculation.

Perhaps lawmakers will take up the subject after the elections, but Pugliaresi doubts that. "The Congress is going to be extremely busy next year. I find it hard to believe that this will be at the top of their list."

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