Right-Wing Media Dismiss Role Of Speculators In Oil-Price Spikes

Stuart Varney: “Let's Not Demonize Speculators.” From The O'Reilly Factor:

BILL O'REILLY (host): What good does it do, tapping into the U.S. oil reserves? What is that going to do? There is plenty of supply, am I wrong?

VARNEY: Yeah, there is plenty of supply. We don't have a supply problem. We have a fear of future supply problem.

O'REILLY: So why would [Obama chief of staff Bill] Daley be saying we're looking at the strategic oil reserve?

VARNEY: I personally think it's a smokescreen to divert attention from the absence of drilling. We are not going after our own oil reserves, not increasing our own supplies. And we should be.

O'REILLY: There's an excuse for that. I mean, you know, you had the ecological disaster in the Gulf, and there's an excuse for that, but let's just keep it on the oil reserves. So he goes and he says, “Well, we're looking at that.” And I'm going, “Why?” Do you know?

ERICA PAYNE (Agenda Project founder): Well, I think the thing that people forget about markets in general is that people are not rational actors, and so they're really emotional. I think that probably what Bill was trying to do is just signal into the market that the United States is willing to take major action if necessary.

O'REILLY: So psychologically --

PAYNE: Right.

PAYNE: -- trying to bring it down. Because all of this, Stuart, is psychological. Right? I mean the speculators are buying up the oil futures, and then OPEC raises the barrel, and then the gas companies immediately raise the price, even though they have barrels at much cheaper price.

VARNEY: Look, let's not demonize speculators. Speculators are -- wait a second. They are airlines. They are heating oil companies. They are truck suppliers.

O'REILLY: Yeah, they are investors. I understand.

VARNEY: Those are people who are locking in the price now so that they know what the price they are going to pay in the future.

O'REILLY: Because they think it's going to go up, and if it comes down, they'll lose. Right?

VARNEY: There's nothing wrong with that.

O'REILLY: There might not be anything wrong with it, but it's an artificial move. It's not a supply and demand move, and that's -- look, OPEC doesn't have to raise the price of oil. It raises it in concert with the speculators. It just raises it. It doesn't have to, because they have plenty of supply and demand. [Fox News, The O'Reilly Factor, 3/7/11]

Napolitano: “Part Of The Reason Gasoline Is So Expensive Is Because Of Inane And Unconsitutional Government Interference.” Guest-hosting Glenn Beck's Fox News show, Fox Business host Andrew Napolitano said:

NAPOLITANO: The bloody protests in the Middle East and North Africa have sent the price of oil skyrocketing. Oil is trading at a half-year high of over $100 a barrel. And consumers saw a 33 percent gallon gas price jump at the pump just in the last two weeks.

Meanwhile, the federal government continues racking up endless debt. Today, it's $14 trillion. But by the end of next year, if the president gets his way, it will be over $15.6 trillion.

That debt is money. You and your children will have to pay back. Our progeny will be born as financial slaves to the federal government, as they will have their wages taxed to spend for spending that occurred before they were born.

Yet, the big government shakedown doesn't stop there. Part of the reason gasoline is so expensive is because of inane and unconstitutional government interference. You see, the government, the federal government is sitting on huge reserves of oil. It places all sorts of nonsensical drilling restrictions on oil companies, and it levies huge taxes on gasoline.

In fact -- are you ready for this? -- from 1981 to 2008, federal and local governments, state governments as well, have collected half a trillion dollars more in oil tax revenue than oil companies made in profit. So, who is really gouging you?

After all of this big government meddling and gasoline and debt, it all means one thing. That gas costs more than it should. And that our children are going to pay for the drug addict-like spending addiction of politicians today. [Fox News, Glenn Beck, 3/7/11]

Eric Bolling Dismisses Speculators And Ties Oil-Price Fluctuations To Offshore Drilling Policies. From Follow the Money:

BOLLING: Here's what happened: $147 the same exact week -- the highest price it's ever traded -- George Bush said, “You know what, no more moratorium on offshore drilling.” It tanked $110 off.

BOB BECKEL (Fox News contributor): You think if you drilled everything that there was to drill the price of oil would be down today?

BOLLING: Let me give you another one. Let me give you the next scenario. BP disaster happens, right? The moratorium gets put back on by Obama, and guess what happens to the price of oil. It skyrockets.

BECKEL: Yeah. It skyrockets for a few days, and it's going to come back down. It's skyrocketing because of people who are in your business, who exploited it for price differences. Now, you were an oil trader. Right?

BOLLING: Take a look. See this? There it is. That's the highest price it's ever traded. It also happens to be two days apart from when George Bush said, “You know what, guys, we're pulling that offshore moratorium on prices.” It went from $147 to $33. And I'll show you this.

BECKEL: How long did that take?

BOLLING: And here it is right here. Here's the recent spike. [Fox Business, Follow the Money, 3/7/11]

Peter Barnes: “Oil Prices Closed Higher Again, Too, Over $105 A Barrel On Concerns About Supply Disruptions.” From Special Report:

SHANNON BREAM (guest host): Oil and gasoline prices hit two-and-a-half year highs today on worries about Libya and oil supplies. Now Washington is considering steps to check the price increases. Fox Business Network correspondent Peter Barnes has details.

Good evening, Peter.

BARNES: Good evening, Shannon.

The national average price for a gallon of regular gasoline hit $3.51 today. Oil prices closed higher again, too, over $105 a barrel on concerns about supply disruptions. Now the Obama administration is considering tapping the Strategic Petroleum Reserve to ease those fears. The reserve is 727 million barrels of oil stored in natural caverns along the Gulf Coast. Since we import about 10 million of barrels of oil a day, the amount on the reserve would replace about 70 days of imports. It has been tapped 17 times since it was created after the Arab oil embargo in the early 1970s.

JAY CARNEY (White House press secretary) [video clip]: When we have unrest in the Middle East, that that is not a market issue. It potentially could create a major disruption. It hasn't -- I'm not saying that's happened but that is the issue here. It is not simply the market setting a price.

RICHARD DEKASER (Parthenon Group economist) [video clip]: I think if we were viewing unrest in the Middle East as a temporary situation which could be ameliorated by a sudden release of reserves from strategic stockpiles, then I think we would get some oil price relief.

BARNES: Now this has worked. An SPR sale announced after Hurricane Katrina in 2005 dropped prices nearly 4 percent in one day. A sale announced after the first Gulf war in 1991 pushed prices down 33 percent in a day -- Shannon.

BREAM: All right, Peter Barnes with the latest. Thank you, Peter. [Fox News, Special Report, 3/7/11]

But Experts Have Said Speculators Are Playing A Role In Driving Up Oil Prices

AP: “Analysts Said Speculators Also Were Playing A Role” In Driving Up Oil Prices. The Associated Press reported on March 7:

Oil prices climbed to near $106 a barrel Monday as intense fighting between Libyan government forces and rebels appeared to be turning into a civil war and raised the prospect of a prolonged cut in crude exports from the OPEC nation.

By early afternoon in Europe, benchmark crude for April delivery was up $2.25 to $106.67 a barrel, the highest since September 2008, in electronic trading on the New York Mercantile Exchange. The contract had gained $2.51 to settle at $104.42 a barrel on Friday.

[...]

While the fear of supply disruptions was usually mentioned as the key factor for higher oil prices, analysts said speculators also were playing a role.

The large trading volumes tied to speculative investments had helped boost market transparency and liquidity, Commerzbank said.

“Things become critical, though, when speculators become the main driving force behind prices and, as we see it, this is the case at the moment on the energy markets,” the German bank said. [AP, 3/7/11]

McClatchy: “Wall Street Speculators Are Driving Up Oil And Gasoline Prices Again.” McClatchy reported that speculators were “driving up oil and gasoline prices” in December 2010:

Despite weak demand in the U.S. and Europe, oil prices climbed this week to near $90 a barrel and gasoline prices have passed $3 a gallon on the West Coast and parts of the Northeast.

Why? If demand is down and supplies are plentiful -- and they are -- why would prices be going up?

Because Wall Street speculators are driving up oil and gasoline prices again -- just in time to dampen holiday cheer. [McClatchy Newspapers, 12/8/10]

Sydney Morning Herald: “Hedge Funds Raised Bullish Oil Bets ... Driving Crude To $US100 A Barrel.” The Sydney Morning Herald [Au] reported on March 1:

Hedge funds raised bullish oil bets to a record as violent clashes in Libya curbed output from Africa's third-largest producer, driving crude to $US100 a barrel for the first time in more than two years.

The funds and other large speculators increased net-long positions, or wagers on rising prices, by 30 percent in the seven days ended February 22 to 240,572 futures and options combined, the highest in records dating back to June 2006, according to the Commodity Futures Trading Commission's weekly Commitments of Traders report.

Oil in New York surged to a 29-month high of $US103.41 a barrel on February 24 as Libyan leader Muammar Qaddafi vowed to crush an uprising that threatens his 42-year rule. Protests were ignited by the ouster of Tunisia's president last month and fanned by the February 11 fall of Egyptian President Hosni Mubarak. [Sydney Morning Herald, 3/1/11]

In Fact, Speculators Reportedly Hold “Extraordinary” Amounts Of Oil Futures

Energy Market Analyst: “It Does Not Get Any Clearer Which Way Wall Street Is Trying To Take Oil.” According to CNN's Street Sweep blog:

Large noncommercial speculators -- firms that play the futures markets without taking delivery -- added to their long position in West Texas Intermediate crude by 50,200 contracts last week, according to Commodity Futures Trading Commission data.

The surge of speculative money into the oil futures pits shows that big financial players are expecting the price of WTI crude to surge well above the recent $105 or so seen last week. If they are right, it will bring $4 gasoline a step closer.

That will not be good news for most consumers, though it could help some big energy traders score big paydays, thank goodness. You would hate to see the talent fail to get its due.

“It does not get any clearer which way Wall Street is trying to take oil,” says Stephen Schork, who writes the Schork Report energy markets newsletter in Villanova, Pa.

Schork notes that speculators now own nearly six times as many barrels of oil -- 268,622 futures contracts representing nearly 269 million barrels -- as can be stored at the WTI trading hub in Cushing, Okla. And since the CFTC numbers released Friday only go through last Tuesday, they likely underestimate the degree of speculative fervor building in the energy markets.

Olivier Jakob, who covers energy markets for Petromatrix in Zug, Switzerland, estimates that traders added 40,000 to 50,000 crude contracts to their long positions in the second half of last week. That would take them up to seven times the Cushing capacity, a level he calls “extraordinary.”

The speculative fervor is so remarkable that the big trading firms now have nearly twice as many long contracts open as they did in 2008, when oil spiked to $147 in the summer, a development that either foreshadowed or caused the global economic meltdown, depending on how you look at it. [CNN.com, 3/7/11]