June 24, 2008
Brian Kennedy (202) 434-8200

WASHINGTON, D.C. – The Institute for Energy Research (IER) today released a study authored by its resident economist, Robert Murphy , on the role speculators are playing in the global oil market. The report, Speculators Fixing Oil Prices? Don’t Bet On It , separates fact from fiction as consumers continue their struggle with soaring energy prices.

“American consumers are demanding answers about the skyrocketing costs of energy, as they should,” Murphy said. “Unfortunately, that means it’s finger-pointing season in Washington and speculators appear to be the new scapegoats for the imbalance between supply and demand. My analysis demonstrates that there is simply no hard evidence to support such a conclusion, but there is plenty of evidence to prove that government ‘solutions’ would just make matters worse. Consumers would be better served if their elected leaders spent less time talking about new regulations and more time addressing the law of supply and demand.”

Among Murphy’s key findings:

  • Record-high oil prices demand a target, and some politicians are increasingly pointing the finger at speculators in the commodities futures markets. But high oil prices are due to restricted supply , booming demand, and a weakening dollar.
  • There is no hard evidence that speculators are responsible for high oil prices. If the price of oil truly were above the level that the fundamentals could support, we would see growing inventories of crude. But inventory levels show no such pattern.
  • Speculators provide a vital function. By buying when prices are low and selling when prices are high, they actually make oil prices less volatile. Large investment funds provide liquidity to the commodities futures markets, and allow producers and consumers to concentrate on their core businesses.
  • Government restrictions on investment in the oil futures market will only hurt consumers by making the oil market less efficient. New regulations will do nothing to ease oil prices in the long term.

Click here for the IER report, Speculators Fixing Oil Prices? Don’t Bet on It .


The Institute for Energy Research (IER) is a not-for-profit public foundation that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. Founded in 1989, IER is funded entirely by tax deductible contributions from individuals, foundations and corporations. No financial support is sought for or accepted from government (taxpayers).

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