The blame game: What’s causing high gas prices?

The role of market speculation and its effect on the dramatic increases in the price of oil was discussed by the House Energy and Commerce Committee’s Oversight and and Investigations Subcommittee. Rep. Michael Burgess (R-Texas) stated that the American economy will not be sustainable if high prices at the pump continue to climb.

Rep. Jay Inslee (D-Wash.) said a solution to inappropriate speculation would help to lower prices in the short term, contrasting this idea with calls to increase supply by drilling in the ANWR. Inslee said that these measures would affect future generations but have no immediate result now. Rep. Bart Stupak (D-Mich.) stated that speculation of future demand for oil has played a large role in oil’s price increase and that one can solve the issue of high prices by traveling to New York or Chicago.

Rep. Joe Barton (R-Texas) said the cost of oil can be attributed to low supply, not market speculation. Barton suggested opening the Strategic Petroleum Reserve and selling two million barrels each day. Barton said this would return oil prices to under $100 per barrel. He noted that the Bush administration opposes this strategy and that its success would rely on an act of Congress. Rep. Greg Walden (R-Ore.) said supply and demand principles, as well as deflation and market forces cannot be ignored.

Michael Masters of Masters Capital Management said that investment firms are good at making profits but ignore the long-term consequences of their decisions, naming the subprime mortgage crisis as an example. Inslee recalled being told by Vice President Dick Cheney that he did not understand economics when he presented Cheney with information concerning Enron, comparing that experience with what he views as the Bush administration’s refusal to acknowledge the effect of futures markets on oil.