Speculators not behind oil rise: U.S. task force

WASHINGTON (Reuters) - The Commodity Futures Trading Commission said on Tuesday that a government interagency task force has found that the huge jump in oil prices is due to “supply and demand factors” and that speculators are not to blame for high fuel costs.

A New York City cab driver fills his taxi up with gas at a Hess station in New York July 2, 2008. REUTERS/Shannon Stapleton

In its interim report, the task force said “preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices.”

The world economy has expanded at its fastest pace in decades, especially in developing countries like China and India, which has led to substantial increases in oil demand, according to the task force.

“The imbalance between scarce supply and growing demand, and expectations that this imbalance will persist in the future, have led to upward pressure on oil prices and greater market reactions to any actual or perceived disruptions in available supply,” the group said in its report.

The task force looked at both supply and demand factors and trading activity in the crude oil futures market from January 2003 through June 2008, when prices steadily increased. The report does not focus on the markets in the last year, when the price of oil doubled.

U.S. crude oil futures CLc1 on Tuesday fell by 2.4 percent to settle at $127.95 a barrel, compared with the contract high of $147.27 hit on July 11.

The task force, which was created in June, is made up of staff members from the Department of Agriculture, the Department of Energy, the Department of the Treasury, the Board of Governors of the Federal Reserve, the Federal Trade Commission and the Securities and Exchange Commission.

The CFTC chairs the panel.

The task force’s findings counter many Democratic lawmakers and some energy experts, who argue that the billions of dollars invested in energy markets by hedge funds, pension funds and other speculators have pushed up oil prices.

The U.S. Senate this week is considering legislation that would rein in excessive oil speculation.

The White House on Tuesday said while speculators have caused some of the daily wild swings in energy prices, the “root cause” of high fuel costs is the failure of supply to keep up with growing demand.

Reporting by Tom Doggett, editing by Matthew Lewis