Though Congress is technically out of town for the week, House Democratic Leader Nancy Pelosi (D-Calf.) held a quasi congressional hearing Wednesday to take a deeper look at the effects of oil speculation on rising gas prices.
“[Gasoline prices] are a burden in the micro sense in that people simply don’t have the money to pay for $4 and, maybe soon, $5 a gallon gasoline,” professor at the University of Maryland School of Law and formerly a lawyer at the Commodity Futures Trading Commission (CFTC) Michael Greenberger said at the hearing. “This will break the back of the recovery.”
Greenberger argued that, though many members of Congress have publicly blamed rising gas prices on a supply shortage or the potential of one given the instability in global relations with Iran, the true cause of the nation’s pain at the pump stems from excessive oil speculation.
In his prepared testimony, Greenberger cites analyses by more than 60 colleagues who’ve argued that the disruption in the supply of crude oil is not a factor in increasing gas prices. Instead, Greenberger believes that the supply and demand of oil is in equilibrium, given that the Saudi king has publicly said he would increase production by 25 percent to offset any disruption.
Additionally, Rex Tillerson, chairman and CEO of ExxonMobil, has said that the price of crude oil should be between $65 and $75 a barrel, but that price currently sits upwards of $105.
The problem, Greenberger said, is that Wall Street is gambling on the price of oil.
“It is similar to the gambling Wall Street did on whether or not people would pay their subprime mortgages in the mortgage meltdown,” he added. “Now they are betting on the upward direction of the price of oil and [experts] have said it is excessive speculation, which is a fancy word for saying that gamblers wearing Wall Street suits have taken these markets over and are controlling the price. They create investment vehicles that are designed to push the price of oil up.”
As a solution, Greenberger urged the Justice Department to seriously investigate the amount of speculation taking place in the oil markets, a solution he said would immediately yield results in the form of lower gas prices.
“If there is a real investigation, just the appearance of it will cause these cockroaches to scatter because the light will be turned on,” Greenberger said. “They don’t want to go to jail, and if they think they’re not going to jail, they’ll keep damaging the American economy.”