The Washington Times - July 29, 2008, 01:30PM

A top Treasury Department official on Tuesday dismissed the argument that speculation has fueled skyrocketing oil prices, arguing that a steady growth in international demand for oil has coincided with decreasing supply.

“Speculation is very different from manipulation,” said David McCormick, under secretary of the Treasury for international affairs, during a speech at the Peterson Institute for International Economics, a Washington think tank.

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“There’s no evidence, there’s no suggestion, that the underlying root cause of oil prices is this short-term investment,” Mr. McCormick said.

“There is no evidence of hoarding,” he said.

Mr. McCormick also defended the Commodity Futures Trading Commission, the goverment regulator that polices futures markets to protect against manipulation, which has been criticized by some Democrats and one of its own comissioners as having a political agenda.

“CFTC is in a very strong position to act … when the need arises,” Mr. McCormick said.”We think the CFTC has the authorities it needs to operate within this market effectively.”

Democratic leaders in Congress recently have responded to the public outcry on oil prices by condemning speculators and saying their first legislative action will target these short-term investors.

Mr. McCormick, however, said not only that speculators don’t drive prices up or down over the long term, but that “by creating a large and liquid market, they also help reduce volatility.”