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Networks Look to Oil Speculators as Gas Price Scapegoat

     On the same day Democrats on the House Energy and Commerce Committee condemned oil speculators, the “CBS Evening News” and ABC’s “World News” blamed oil speculation for a large chunk of the spike in prices.


     “There’s no doubt speculation plays a role in the skyrocketing price, but how much?” ABC correspondent Ryan Owens said June 23. “Experts say if it were just simple supply and demand a barrel would cost $75. Today it closed north of $135.”


     Owens reported that $30 a barrel, or 22 percent of the price of oil, is attributed to speculators. The rest of the difference between the market price and what he claimed it should be is made up in “weak dollar” effects and a “risk premium,” he said.


     “According to Moody’s Economy.com, $30 a barrel is actually driven by those speculators, investors from hedge funds to everyday pensions who are betting so much that the price of oil will go up, they’re actually driving that price up even further.”


     But, CNBC “Mad Money” host Jim Cramer said he doubts the amount ABC claimed speculators are adding to the price of a barrel of oil – much less than the $30 “World News” claimed.


     “[I] regard the people buying oil [speculators] as geniuses,” Cramer said on MSNBC’s June 23 “Hardball.” “They’re not speculating. They hit upon the right commodity and they made the right bet, which is that – we’re running out of oil. If these guys were really powerful – well where would they put all the oil they’re speculating in – like some sort of Area 57 where they bury it in the ground? These guys are worth maybe two, three bucks to the price of oil. The weak dollar’s worth two, three bucks.”


     Cramer told Mike Barnicle, fill-in host for “Hardball,” that eliminating speculators, as some in Washington want to do, would have a negligible effect on the price.


     “If you eliminate both, let’s say you shoot, you literally shoot all the speculators – oil trades to $131 [a barrel],” Cramer added.


     Still, CBS chief investigative correspondent Armen Keteyian took a populist tone in his report, stating that speculators “are fueling the rising price of oil.”


     “A series of charts [shown at the House Energy and Commerce Committee hearing] detailed the massive influx of money pouring into the oil futures market from pension and hedge funds and investment banks – whose only intention is to make money, not actually own oil,” Keteyian said on the June 23 “Evening News.”


     Of course, people who invest money do expect to see a return on their investments.


     Alan Reynolds, a senior fellow with the Cato Institute, said it is fundamentally incorrect to blame speculators.


     “There is no mystery behind the rise in oil prices. They rose too high too fast because of booming demand for oil for petrochemical products, electric power and shipping from many emerging economies (particularly China, India and the Middle East),” Reynolds wrote for the New York Post on June 20.


     “Meanwhile, the supply of oil slipped in the US, Mexico, Venezuela, Nigeria and Russia,” Reynolds wrote. “But now JPMorgan analysts estimate that oil will drop to $85 a barrel from 2009 to 2011. Even Goldman Sachs analyst Arjun Murti, who recently guessed oil might reach $200, later told Barron's that oil will likely drop to $75 or less in the long run.”


    Reynolds concluded blaming speculators, as legislators did in Keteyian’s report, is just grandstanding.


     “The urge to blame speculators is as big a waste of time as blaming oil companies. Americans want more oil and gas – not more hot air from politicians,” Reynolds wrote.


     With their segments June 23, ABC and CBS caught up with NBC’s “Nightly News,” which attacked speculators in a June 10 segment. On June 17, CBS’s Keteyian broadcast another report attacking oil futures traders.