World Business

It’s the interests of pension-fund managers against those of waitresses viewed like Congress digs into the discussion surrounding oil speculation

by Moira Herbst

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Are oil speculators just construction sure they retire comfortably—or bleeding laboring Americans? It depends on your perspective.

On a day whereas oil futures prices shot up greater quantity than $5 per barrel, to $141.65, a congressional hearing on oil speculation heard from both proponents of unfettered commodity trading and those who would rein it in.

Representatives of Wall Street traders told the House Agriculture Committee at the July 10 hearing that more lapse of the oil emporium would cause consumers more pain than relief. Barring absolute types of investors from commodities markets would send investment offshore, they reported. And because much of the cash being invested in oil futures contracts is coming from pension plans, such a move would "put at risk the retreat funds of the very workers it intended to help. In general intent, it would be robbing Peter to pay Paul," said Robin Diamonte, on behalf of the Committee on the Investment of Employee Benefit Assets (CIEBA), the lobbying group for incorporated pension plans.

But other witnesses aforesaid that the massive introduction of investment into commodity markets is taking a great duty on working Americans. Representative Steve Kagen (D-Wis.) spoke of a waitress in his district earning $2.43 an hour plus tips who is spending 25% of her paycheck on elastic fluid and having woe raising her children. "We are in a very real rub, and we have to take it seriously," said Kagen.

The hearing was the latest public airing of a debate over the role speculators are playing (BusinessWeek.com, 7/9/08) in boosting oil prices, and what government should do, if anything, to stop them. For the past two months, Congress has been roiling over the politics of oil since pressure mounts for the U.S. government to assist consumers and businesses from the sting of $4-a-gallon gasoline, high-priced jet firing, and other fast-rising petro prices. On July 9 six members of Congress laid out bills aimed at curbing scheme. Testimony will keep on July 11.

Also upon July 10, Acting Chairman Walter Lukken said the Commodity Futures Trading Commission would issue a common fame on its oil markets investigation in the coming weeks. The final report is due on or before Sept. 15. He told a House Appropriations subcommittee that the CFTC has seen no evidence so far that speculators are driving record oil prices.

At the House hearing, some little-seen members of Wall Street pleaded their case. Greg Zerzan, caution and fit with a head of global open policy for the International Swaps & Derivatives Assn. (ISDA), and Charles Vice, president and chief operating officer of IntercontinentalExchange (ICE), defended the current commercial regime and talked of the virtues of speculation.

They urged Congress to trust the market to allocate resources. Far from undermining the interests of Main Street, Zerzan and Vice argued, banks like Goldman Sachs (GS) and Morgan Stanley (MS) are actually helping airlines and pension funds hinder against inflation when they engage in swaps deals in opposition to oil trades. "Removing swap dealers [from the market] would mean their clients wouldn’t be able to obtain their protection," said Zerzan. "That risk would be passed in continuance to consumers."