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http://levin.senate.gov/newsroom/sup...pec.062606.pdf
THE ROLE OF MARKET SPECULATION
IN RISING OIL AND GAS PRICES:
A NEED TO PUT THE COP BACK ON THE BEAT
June 27, 2006
I. EXECUTIVE SUMMARY
For the past five years, the United States Senate Permanent Subcommittee on Investigations has conducted a number of investigations into the pricing of energy commodities, including gasoline, crude oil, and natural gas.1 These investigations reflect a continuing concern over the sustained increases in the price and price volatility of these essential commodities, and, in light of these increases, the adequacy of governmental oversight of the markets that set these prices.
Over the past six years crude oil, gasoline, and natural gas prices have risen significantly. Crude oil has risen from a range of $25-$30 per barrel in 2000, to a range of $60-$75 per barrel in 2006. High crude oil prices are a major reason for the record or near-record highs of the prices of a variety of petroleum products, including gasoline, heating oil, diesel fuel, and jet fuel. The average price for a gallon of regular unleaded gasoline has jumped from $1.46 per gallon in 2000 to $2.36 per gallon over the past 12 months, with peaks at $3.14 per gallon in September 2005, and $2.93 per gallon in May 2006. Rising crude oil prices have helped push up natural gas prices as well: the price of natural gas has risen from $2-$3 per million BTU (British Thermal Unit) in 2000 to a typical range of $6-$8 per million BTU during the past year.
The traditional forces of supply and demand cannot fully account for these increases. While global demand for oil has been increasing – led by the rapid industrialization of China, growth in India, and a continued increase in appetite for refined petroleum products, particularly gasoline, in the United States – global oil supplies have increased by an even greater amount. As a result, global inventories have increased as well. Today, U.S. oil inventories are at an eightyear high, and OECD oil inventories are at a 20-year high. Accordingly, factors other than basic supply and demand must be examined. For example, political instability and hostility to the United States in key producer countries, such as Nigeria, Venezuela, Iraq, and Iran, threaten the security and reliability of these supplies. Furthermore, in each of the past two years hurricanes have disrupted U.S. oil and gas production in the Gulf of Mexico. As Saudi Arabia has increased its rate of production to meet increasing demand, its ability to pump additional oil in...
IN RISING OIL AND GAS PRICES:
A NEED TO PUT THE COP BACK ON THE BEAT
June 27, 2006
I. EXECUTIVE SUMMARY
For the past five years, the United States Senate Permanent Subcommittee on Investigations has conducted a number of investigations into the pricing of energy commodities, including gasoline, crude oil, and natural gas.1 These investigations reflect a continuing concern over the sustained increases in the price and price volatility of these essential commodities, and, in light of these increases, the adequacy of governmental oversight of the markets that set these prices.
Over the past six years crude oil, gasoline, and natural gas prices have risen significantly. Crude oil has risen from a range of $25-$30 per barrel in 2000, to a range of $60-$75 per barrel in 2006. High crude oil prices are a major reason for the record or near-record highs of the prices of a variety of petroleum products, including gasoline, heating oil, diesel fuel, and jet fuel. The average price for a gallon of regular unleaded gasoline has jumped from $1.46 per gallon in 2000 to $2.36 per gallon over the past 12 months, with peaks at $3.14 per gallon in September 2005, and $2.93 per gallon in May 2006. Rising crude oil prices have helped push up natural gas prices as well: the price of natural gas has risen from $2-$3 per million BTU (British Thermal Unit) in 2000 to a typical range of $6-$8 per million BTU during the past year.
The traditional forces of supply and demand cannot fully account for these increases. While global demand for oil has been increasing – led by the rapid industrialization of China, growth in India, and a continued increase in appetite for refined petroleum products, particularly gasoline, in the United States – global oil supplies have increased by an even greater amount. As a result, global inventories have increased as well. Today, U.S. oil inventories are at an eightyear high, and OECD oil inventories are at a 20-year high. Accordingly, factors other than basic supply and demand must be examined. For example, political instability and hostility to the United States in key producer countries, such as Nigeria, Venezuela, Iraq, and Iran, threaten the security and reliability of these supplies. Furthermore, in each of the past two years hurricanes have disrupted U.S. oil and gas production in the Gulf of Mexico. As Saudi Arabia has increased its rate of production to meet increasing demand, its ability to pump additional oil in...