From NBC's John Bailey
With the price of Brent crude oil spiking -- up 22% since the first of the year, and up 17% since the unrest in the Middle East first began -- the conventional wisdom is that the violence in Libya has contributed to the rise in gas prices.
But Libya supplies less than 2% of the world’s oil. And even though the country's oil supply has seen disruptions, Bloomberg reports that Saudi oil officials have said, “Saudi Arabia and other OPEC nations ... are willing and able to replace any lost Libyan oil as soon as companies ask for it.” Some producers in the Persian Gulf have even said the market may be over supplied.
That has led some to believe that market speculation is to blame for the high gas prices. Back in 2006, a Senate Homeland Security report on the role of speculation in rising oil and gas prices reported that “there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.” As to how much it affected oil prices then, the report said, “analysts have estimated that speculative purchases of oil futures have added as much as $20–$25 per barrel to the current price of crude oil.”
Yet get this: The House spending bill -- which cuts $61 billion in federal spending and which failed to clear the Senate on Wednesday -- reduces the federal government's ability to regulate oil commodities.
The Dodd-Frank Wall Street Reform and Consumer Protection Act included a provision for rules regulating these types of trades via the Commodities Futures Trading Commission (CFTC), the federal regulator of the commodities futures markets. These rules would attempt to decrease volatility and prevent unhealthy amounts of leverage.
But last week, CFTC Chairman Gary Gensler told the Senate Agriculture Committee that “the CFTC's current funding is far less than what is required to properly fulfill our significantly expanded mission.” However, per CNN Money: “The most recent comprehensive spending bill produced by House Republicans would chop the CFTC's funding by $56.8 million -- almost a third of the agency's entire budget -- over the next seven months.”