D26: Act on Oil Spec Now

Submitted by admin on Sun, 06/29/2008 - 10:29.

Oil Speculators Driving up the Price of Oil

State Senator Joe Pennacchio: Legislation, S-2085, would divest New Jersey of ‘Oil Futures’

Morris Plains, NJ -- State Senator Joe Pennacchio (R-Morris/Passaic) is calling on President Bush to take emergency action and place greater restrictions on oil commodity markets to stop speculators from driving up the price of oil.

Fadel Gheit, industry analyst for Oppenheimer said, in a Market Watch article titled Gas could fall to $2 if Congress acts, analysts say, “record oil prices are inflated by speculation and not justified by market fundamentals. Based on supply and demand fundamentals, crude-oil prices should not be above $60 per barrel.” In another related article, Gheit said it’s not supply and demand driving prices up but speculators. He claims that such speculation accounts for 100% of the recent increases in oil.

Trading on oil futures has increased from $13 billion to over $260 billion since 2000. Pennacchio contends that speculators are betting on price increases at the expense of consumers. Currently, a future contract of $110,000 in oil can be purchased with as little as $7,700. Pennacchio wants the President to issue an emergency order increasing the margin to 50%. Pennacchio contends that speculators will have to liquidate positions to satisfy higher margins, making it more difficult to trade. “Investing on oil futures is one thing. Using a 10% margin is gambling,” said Pennacchio.

“Unfortunately high oil prices are gambling with our country’s economy and with peoples’ lives. These hedge funds don’t give a damn that seniors will not be able to heat their homes this winter. This nonsense has got to stop!” added Pennacchio.

At the State level, Senator Pennacchio has introduced legislation, S-2085, that would prohibit New Jersey dollars from going into these speculative oil futures. Pennacchio contends that “taxpayers in the Garden State should not be feeding Wall Street speculators with their taxpayer funded investment dollars. Our investment dollars are ‘fueling’ increases in oil prices and helping to choke our economy while putting a terrible burden on our consumers especially those on fixed incomes,” concluded Pennacchio.