- Chinese Death Star: The moon cited as the perfect launch pad for ballistic missiles
- Help wanted: Homeland Security plagued by vacancies at the top
- We are not amused: Queen’s protection officers warned to keep ‘sticky fingers’ off the royal cashews
- Unleash the crossbows: Gov. Scott Walker creates new hunting season
- Bubonic plague kills 20 in Madagascar
- G-20 diplomats fell for hacker attack promising nude photos of former French first lady Carla Bruni
- Minnesota guardsman charged with stealing private soldier data for fake IDs
- Florida appeals court rules universities can’t regulate guns
- Vladimir Putin defends Russian conservative values
- Tea Party Patriots call key GOP firing a declaration of war
Officials to probe traders of crude
Question of the Day
Securities regulators Tuesday vowed to pursue possible illegal manipulation of the oil market through an expanded task force including the Federal Reserve and Treasury, helping to drive premium crude prices down $3 to $131.31 a barrel in New York trading.
The regulators will investigate the “role of speculators and index traders in the commodity markets,” officials said in their latest concerted effort to jawbone markets to bring down oil prices.
The move, launched under threat of increased regulation by Democrats in Congress, is aimed at “ensuring that commodity prices are determined by the fundamental forces of supply and demand, rather than by abusive or manipulative practices,” said Walter Lukken, chairman of the Commodity Futures Regulatory Commission.
On Capitol Hill, Republicans blocked a Democratic energy plan that included provisions to curb oil speculation.
“What we’ve been hearing increasingly in recent months is the degree to which Wall Street and hedge funds and companies like Goldman Sachs are speculating in oil futures,” said Sen. Bernard Sanders, Vermont independent. “There are estimates out there that 25 [percent] to 50 percent of the cost of a barrel of oil has to do with speculation. Should we address that issue? Obviously, we should.”
Oil prices soared to a record near $139 Friday - pushing regular gasoline prices above $4 a gallon nationwide for the first time - after economic reports showed a weakening in the U.S. economy that undermined the U.S. dollar.
Since oil and other commodities are priced in dollars, the sagging U.S. currency has become a principal reason cited by speculators for driving up fuel and food prices in international markets. But economists say the 17 percent decline in the dollar against the euro in the last year can account for only 18 percent of the increase in oil prices, which have doubled.
Regulators warned that they are concerned that “high commodity prices are posing a significant strain on U.S. households,” in an announcement of the joint investigation by the commodities commission, the Fed, Treasury, departments of Energy and Agriculture, and the Securities and Exchange Commission.
Underscoring the administration’s resolve to tame the downward spiral in the dollar that has fed rising commodity prices, Treasury Secretary Henry M. Paulson Jr. continued Tuesday to stress his commitment to a strong dollar.
Mr. Paulson said the dollar should reflect the U.S. economy’s fundamental soundness, adding to comments late Monday that he is not ruling out intervention in the financial markets to support the U.S. currency.
His comments contributed to a rally in the dollar against the euro and yen, the biggest since 2005, which eased pressure on oil and other commodity prices.
Mr. Paulson on Tuesday also took aim at another cause of high oil prices, urging China to abandon its fuel-price controls in a speech on U.S.-China economic relations.
Oil analysts attribute much of the jump in oil prices this year to robust growth in demand for fuel in China and other Asian nations that prop up oil consumption with price controls and fuel subsidies.
“We also learned a costly lesson in the 1970s when we attempted to defy market forces and imposed oil-price restrictions,” Mr. Paulson said. “Rather than achieving our intended result, we experienced winter heating-oil shortages, supply problems, rationing, and a reduction in domestic oil and gas investment and exploration.”
“China, by setting price controls on fuel, is facing similar consequences today - as can be seen by persistent gasoline and diesel shortages throughout the country.”
India, Malaysia, Bangladesh and other Asian countries in recent days have been abandoning or lifting some of their price controls and fuel subsidies, but China has stuck by its fuel subsidies, which consume 3 percent of the state’s budget.
China’s ambassador to the United States, Zhou Wenzhong, defended the subsidies as necessary to maintain growth in China’s economy, but said the Asian giant will withdraw them very slowly.
“You will see subsidies cut gradually,” he said in an interview with editors and reporters of The Washington Times last week. “If you liberalize the prices suddenly, it will upset the economy a lot.”
Mr. Wenzhong disputed economists who say China’s rapidly rising demand for fuel has been driving up prices. “The oil we import amounts to a very small percentage of oil trade - 6 percent,” he said.
The International Energy Agency predicted Tuesday that China’s rapid growth in fuel consumption would continue, surging by 5.5 percent this year as the country rebuilds from a devastating earthquake. The agency said that increase would more than offset a big reduction in demand in the United States and other Western countries, where high prices are cutting into consumption.
Demand for fuel has been dropping in the United States at a 1 percent rate - something that has not happened since the 1970s.
Helping the administration in its jawboning campaign, Federal Reserve Chairman Ben S. Bernanke repeated the Fed’s vow to fight a rise in inflation that could result from the latest round of oil-price increases.
In a speech late Monday, Mr. Bernanke dismissed apparent weakness in Friday’s jobs report showing unemployment increased from 5 percent to 5.5 percent in May. The economic outlook has not materially changed and the pace of job losses remains modest, he said.
Mr. Bernanke’s comments boosted the dollar by bolstering expectations that the Fed will not lower interest rates again to support the economy, and in fact may consider raising rates later this year if inflation heats up.
The Democratic proposals to curb speculation would require traders to put up more collateral in the energy-futures markets, and regulate traders who are based in the United States but use foreign trading platforms.
The proposals were part of a larger energy package that included a 25 percent “windfall profits” tax on large oil companies.
The plan also called for making oil and gas price-gouging a federal crime, and would have given the Justice Department authority to file price-fixing charges against countries that belong to the Organization of the Petroleum Exporting Countries oil cartel.
Democrats said Republicans bowed to pressure from the oil industry, while Republicans said the majority party’s plan would do nothing to increase domestic oil production, which would lead to lower gas prices.
*Sean Lengell contributed to this report.
About the Author
- Russian officials press bilateral U.S. trade deal
- Inconvenient truth: China, developing world now biggest source of greenhouse gases
- U.S. unemployment falls to five-year low of 7 percent; 203K jobs added
- Economic growth jumped to 3.6 percent in summer
- Spending on social welfare rose as economy tanked during recession
Latest Blog Entries
By Matt Kibbe
The short-term deal will assure long-term overspending
- Obama's Afghanistan experts stumped on U.S. death toll, war costs during hearing
- Comma on!: Twitter erupts over Obama-Castro 'marriage'
- NAPOLITANO: A conspiracy so vast
- All-out war breaks out in GOP over budget pact
- White House faces press revolt over access to Obama's South Africa flight
- MALCOLM/REIMER: Over-criminalization undermines respect for legal system
- GOP Rep. Tim Murphy rolls out mental health legislation
- U.S. pilot scares off Iranians with 'Top Gun'-worthy stunt: 'You really ought to go home'
- Selfie at heart of Obama fiasco to stay secret
- Biden guarantees victory on immigration reform
Independent voices from the The Washington Times Communities
Chef Mary Moran discusses the food we eat, where it comes from and what it does for us.
An informed and often humorous take on the world of advertising, public relations and social media. 100% Pure. Not from concentrate.
Does it take over 25 years in public service to really know what goes on in Washington?
NFL junkie Eric Golub reports on his favorite obsession. There is no football offseason. Every February he pretends to care about other sports while sobbing uncontrollably each Sunday until September.
Extraordinary day at Redskins Park
White House pets gone wild!
Let it snow