Obama cites speculators as a cause of oil-price spike

Washington (Platts)--19Apr2011/436 pm EDT/2036 GMT

In an apparent change of direction, President Obama Tuesday took aim at speculators as a key cause of the rise in oil prices.

In a speech at Northern Virginia Community College outside Washington, President Obama also brought up oil company profits -- to be announced in the next few days -- but did not actually blame oil companies as the reason behind the increase.

"It is true that a lot of what's driving oil prices up right now is not the lack of supply," Obama said, according to a transcript of his remarks. That statement echoed one that Energy Secretary Steven Chu made Monday.

"There's enough supply," he added. "There's enough oil out there for world demand. The problem is, is that oil is sold on these world markets, and speculators and people make various bets, and they say, you know what, we think that maybe there's a 20% chance that something might happen in the Middle East that might disrupt oil supply, so we're going to bet that oil is going to go up real high. And that spikes up prices significantly."

Numerous political leaders in Washington have made the oil price rise-speculator tie a feature of their comments on oil prices in recent months, but Obama has generally steered clear of that accusation.

Not only did he bring up speculators as a cause of the rise in prices, he also suggested his administration might launch an investigation into "price gouging" by retail stations. "We're now in a position where we can investigate if there's unfair speculation. We're going to be monitoring gas stations to make sure there isn't any price gouging that's taking advantage of consumers," Obama said.

In referring to oil company profits, which will be released by the world's largest oil companies in coming days, Obama said: "I know that if you've got a limited budget and you just watch that hard-earned money going away to oil companies that will once again probably make record profits this quarter, it's pretty frustrating." He made no other reference to oil companies in his remarks.

US Commodity Futures Trading Commission member Bart Chilton, who supports speculative position limits in energy markets, on Tuesday also echoed Obama's views that speculators were affecting fuel prices.

"There is a Wall Street premium on gas prices today," Chilton said. "Every time folks fill up their tanks, they can expect that several dollars are due to speculation."

Calling Obama's gasoline-talk pure politicking, Tim Columbus, general counsel for the Society of Independent Gasoline Marketers of America, called the retail gasoline market the most transparent in the US economy.

"We have great, big price signs," he said, "and what that means is that in the absence of an antitrust violation, it is simply impossible to gouge."

Columbus said independent operators make up 95% of the market and added that the small guys are barely getting by, while crude oil producers and credit card companies rake in profits.

"I understand why people look up and go, 'Somebody must be making a lot of money,'" he said.

--John Kingston, john_kingston@platts.com --Brian Scheid, brian_scheid@platts.com --Meghan Gordon, meghan_gordon@platts.com

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