WASHINGTON, Feb 13 (Reuters) - Hedge funds and other speculators are pushing up energy prices and hurting consumers, a top U.S. commodity regulator said, as oil and gasoline prices have surged to recent highs.
Bart Chilton, a commissioner at the Commodity Futures Trading Commission (CFTC), said that the markets watchdog would push on to impose maximum limits on speculative positions that investors can hold.
“There is plenty of reputable and reliable evidence documenting what many of us simply know: that excessive speculation can contort markets,” Chilton said in the text of a speech due for delivery on Wednesday.
A Reuters analysis this week found that hedge funds have almost doubled their bets on higher oil prices since Dec. 11, taking their total speculative position close to the highest level ever reported.
At the same time, U.S. crude oil prices have risen sharply, while Brent crude oil is trading near a five-month high.
U.S. gasoline prices have closely followed, surging 30 cents since the start of this year, hitting an average of $3.68 a gallon in the week through Monday, according to the Energy Information Agency.
“Today, energy costs for most families have risen more than 20 percent since 2001. This hurts not only American households, but also American business - like many of your businesses - that rely on energy,” Chilton said.
“That’s why I continue to lead the charge for position limits - to help keep the markets working for you,” he added.
A court ruling last September threw out the CFTC’s rule to curb speculation in commodity markets by putting maximum caps on trading positions. The CFTC is appealing that decision, and at the same time, is drawing up a new rule.
Chilton, one of the CFTC’s three-strong Democrat majority, is an often outspoken critic of the financial industry, and has usually sided with Chairman Gary Gensler in his overhaul of the opaque $650 trillion derivatives market.
A large influx of cash into index funds that track the overall market caused oil to spike in the middle of 2008, leading to gasoline prices of $4.10 a gallon at the pump in the United States, Chilton said.
He cited studies by Goldman Sachs, Rice University, the Massachusetts Institute of Technology and the Federal Reserve Bank of St. Louis, which all underscore the relationship between market speculation and high prices.
The CFTC’s staff had also found that speculators were dominating oil markets, establishing that only a tiny fraction of the trades that account for price changes were conducted by producers, processors and merchants.