“WASHINGTON — Two economists at the St. Louis Federal Reserve have published findings that indicate that Wall Street speculation is responsible for 15 percent of the increase in oil prices over the past decade, a finding with significant implications for the recent sharp rise in gas prices.
While politicians have little ability to alter the price swings of commodities like oil, regulators have both the authority and policy tools to do so. The Commodity Futures Trading Commission is responsible for overseeing the financial market for oil. The 2010 Wall Street reform bill gave the CFTC new power to limit excessive speculation, but the rule will not go into effect until later this year.
According to St. Louis Fed economists Luciana Juvenal and Ivan Petrella, speculation in oil markets was the second-biggest factor behind the past decade’s price run-up, behind increased global demand for oil, which accounted for 40 percent of the increase.
“Speculation was the second-largest contributor to oil prices and accounted for about 15 percent of the rise,” the economists wrote. “The effect that speculation had on oil prices over this period coincides closely with the dramatic rise in commodity index trading — resulting in concerns voiced by policymakers.”
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