U.S. lawmakers urged to curb oil speculators

U.S. lawmakers urged to curb oil speculators

Price would fall to US$65 if government intervenes Congress told

Alia McMullen,

Financial Post Published: Monday, June 23, 2008

Oil prices could fall as low as US$65 in less than a month if the U.S. government passes laws to limit speculative activity in the oil trading market, four oil bears told a U.S. Energy and Commerce committee hearing Monday.

Fadel Gheit, senior oil analyst at Oppenheimer & Co., Roger Diwan, head of financial advisory at PFC Energy, Michael Masters, portfolio manager at Masters Capital Management, L.L.C., and Edward Krapels, director at Energy Security Analysis, Inc. told the committee they believed the government needed to intervene to stop speculators driving oil prices to unjustified levels.

Mr. Masters said oil prices would retreat quickly if congress was to limit speculation in commodities.

"Prices would probably drop over a reasonably short period of time back to somewhere closer to the marginal production cost of oil, to $65 to $70," Mr. Masters said.

Mr. Gheit said he could not think of any other reason responsible for driving oil prices to record highs other than speculation, with rising demand from countries such as China no surprise to the market.

"I believe, based on supply and demand fundamentals, crude oil prices should not be above US$60 per barrel," he said. "There is no reason to think that tighter regulation would do any harm to anyone but the speculators."