Transcripts

The Outlook for Oil Amid Hurricanes & Excessive Speculation

SUSIE GHARIB: Oil prices crept higher today, as traders kept an eye on Tropical Storm Dolly, the first storm of the year to enter the Gulf of Mexico. Shell Oil is pulling 185 workers from platforms in the region as a precaution. As a result, August crude futures rose $2.16 to $131.04 a barrel in New York trading. There's also a storm brewing on Capitol Hill, this one over the role of speculators in the oil market. As Stephanie Dhue reports, lawmakers are poised to crack down on what they call excessive speculation.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: With gas prices above $4 a gallon, Congress is under pressure to do something about it. Senate Democratic leaders want to take up a bill to crack down on excessive speculation in the oil futures market. Minnesota Democrat Amy Klobuchar blames traders for the run-up in fuel prices.

SEN. AMY KLOBUCHAR, (D) MINNESOTA: Large hedge funds, investment banks are buying and selling oil contracts, not to fuel cars, not to run factories or fly airplanes, but to profit from the transactions themselves. These speculators have a vested interest in running up the price of oil so they can take the money and run.

DHUE: The Senate is expected to vote tomorrow on whether to debate what's called the Stop Excessive Energy Speculation Act of 2008. The bill would add 100 new regulators to the Commodity Futures Trading Commission. It would require firms report more information to the CFTC, and it would have the commission conduct a long-term study on possible manipulation in the energy trading market. The hedge fund industry is geared up to lobby against the bill. Richard Heller, who is a law partner at Thompson Hine and sits on the board of the Hedge Fund Association, says to blame speculators is naive.

RICHARD HELLER, PARTNER, THOMPSON HINE: To take one component of the overall issue and attempt to legislate it away will be ineffectual.

DHUE: Senate Republicans support a competing bill, called the Gas Price Reduction Act, that addresses speculation, but also increases domestic oil drilling. Last week, President Bush lifted a presidential moratorium on offshore drilling. Senate Minority Leader Mitch McConnell says it's time for his Democratic colleges to roll back the congressional ban.

SEN. MITCH MCCONNELL, (R) KENTUCKY: They need to unlock the outer continental shelf and lift their ban on the development of vast oil shale deposits in Western states.

DHUE: Analysts say, given election year politics, it's unlikely Congress will pass legislation that either cracks down aggressively on oil speculators or opens up drilling in a substantial way. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.