Calls for crack down on oil speculation increase

Pension funds, Wall Street banks and other large investors that have no intention of taking delivery of fuel have increasingly pumped money into contracts for oil and other commodities as a hedge against inflation when the dollar falls.

After more than a half dozen hearings in Congress on the issue, Democratic House lawmakers said they intend to tighten restrictions on pension funds, investment banks and other large investors that they blame for driving up fuel prices.

Many Republicans, analysts and regulators, however, say soaring oil prices are a reflection of macro-economic factors, including the falling dollar, unrest in the Middle East and increased demand from countries like China and India.

Oil prices rose $1.38 to settle at $136.74 a barrel Monday on the New York Mercantile Exchange on disappointment over Saudi Arabia's modest production increase and concerns that output from Nigeria will decline.

Saudi Arabia said Sunday it would add 200,000 barrels per day in July to a 300,000 barrel per day production increase it first announced in May. But that pledge at the meeting held in the Saudi city of Jeddah fell far short of U.S. hopes for a larger increase.

"Make no mistake about it, the excessive speculation in commodity markets is having a devastating effect at the gas pump that is rippling through our entire economy," said Rep. Bart Stupak, D-Mich., who chaired the hearing of a House Energy and Commerce subcommittee.

But Rep. Joe Barton, R-Texas, said insufficient supply is the main driver behind rising energy prices. He called for increased domestic production of oil, natural gas and coal.

Speculators have increased their share of oil futures contracts on the Nymex to 71 percent this year, up from 37 percent in 2000, according to figures released by Stupak's office. At the same time contracts held by traditional oil users have fallen to less than 30 percent from over 60 percent.

House Democrats on Monday suggested a range of remedies, including: higher margin requirements and stricter position limits on investors.