The search for a villain in the story of rising gas prices has become a daily pursuit for journalists and politicians seeking the spotlight. The latest party to be indicted are so-called “market manipulators” who trade oil as a commodity beyond the jurisdiction of U.S. regulatory authorities.
On May 29, the Commodity Futures Trading Commission (CFTC) announced  they were investigating potential oil-market manipulation and cited the recent run-up in the price of oil  as the reason for making this investigation public.
“[S]o this is a very important, significant event,” University of Maryland professor Michael Greenberger said on CNN’s May 30 “American Morning.” “The Bush administration had been saying up to yesterday this was all supply/demand. But, now there’s recognition of what many of us have been saying is that investment banks, hedge funds and wealthy investors in dark corners of these markets are taking money out of the consumers’ pockets.”
Previous government investigations of gas price manipulation or “price gouging” – more than 30 in recent decades, according to the American Petroleum Institute – haven’t found problems.
Some analysts are denouncing the investigation as the CFTC going through the motions. “The CFTC is paying lip service to Congress by having to be seen to be investigating speculation,” MF Global Ltd. senior broker Rob Laughlin told Bloomberg.com . “They will spend months, and quite possibly millions of dollars, to find nothing.”
But in spite of analysts’ low expectations for the probe, it has generated a lot of media attention, including the front page of The Wall Street Journal , an above-the-fold headline on the B-section of the May 30 Financial Times  and four segments on CNN’s May 30 “American Morning.”
“[T]here’s no news of a pipe bursting in Nigeria,” CNN senior business correspondent Ali Velshi said. “There’s no news of a facility being … attacked in Iraq. We don’t know why it’s up and that’s the point. What is causing oil to go up and down?”
“The Commodities Futures Trading Commission, which is the U.S. agency that regulates oil, has said yesterday that it has been investigating oil for the last six months, since oil was in the 90s [dollars per barrel],” Velshi said. “But, we don’t know what they’re investigating and we don’t know what the problem is, so we’re trying to learn more about this.”
“It is wise to take the future into account in decisions that one makes today,” wrote Williams, a Business & Media Institute adviser and George Mason University professor of economics.
Some experts doubt market “manipulation” has the enormous impact Greenberger indicated.
“Many economists and oil-industry executives say possible shenanigans by market traders have little or nothing to do with the high price of oil,” Ian Talley, Ann Davis and Gregory Meyer wrote in the May 30 Wall Street Journal. “They maintain that the rise is mainly due to fundamental factors such as rising demand, constrained supplies and the weak dollar.”
Williams also downplayed the role of market manipulators in the price of a barrel of oil on the global market.
“I don’t [think] manipulation explains much,” Williams told BMI.
Oil closed at just above $124 a barrel on May 29, coming off of a close of just above $130 the day before. Greenberger attributed the decrease to the CFTC’s announcement. However, during trading on May 30, oil has rallied back to just above $127 a barrel.