Task Force Finds That Speculators Are Not Driving Up Crude Oil Prices

The NY Times has an article regarding the preliminary results of a task force study headed by the Commodity Futures Trading Commission, along with staff from the departments of Agriculture and Energy, Treasury, the Federal Reserve, the FTC, and the SEC. While some will argue with the composition and motivations of the task force group, the study found that speculators were not responsible for driving crude oil prices higher. As an example of their findings, swap dealers who provide investors a future return tied to commodity market performance were nearly balanced between purchases and sales of energy futures contracts. In fact, from January to May of 2008, more of these swap positions were selling than buying, even while oil prices rose 28% during the same period. Furthermore, the task force found that speculators were more likely to change their positions after prices had moved, and not before, suggesting they were responding to new information as is typical in an efficient market. The compete report is due in September, but the initial findings are interesting nonetheless.