Dorgan calls for action on oil speculation
BISMARCK - The federal government should stop burying the highest quality oil in an underground reserve and quit making it easy for speculators to drive up crude prices, Sen. Byron Dorgan, D-N.D., said Friday, echoing a demand Gov. John Hoeven made a week ago.
Dorgan said Congress can act on those issues to ease oil and gasoline prices.
Crude oil has gone from about $65 per barrel in April 2007 to $126 per barrel on Friday.
The Senate will vote Tuesday on whether to halt deposits of nearly 70,000 barrels a day of light, sweet crude into the nation's Strategic Petroleum Reserve. While the amount is only a small percentage of the 21 million barrels a day the U.S. consumes, it's the most valuable subset of crude, Dorgan said, and its absence from the market has a disproportionate effect on prices - as if it were 10 percent of daily production.
"It makes no sense that our federal government is buying $120-a-barrel oil and putting it underground into a reserve that is 97 percent full," Dorgan said. The reserve is supposed to hold 700 million barrels.
Dorgan also said Friday that Congress needs to change laws that allow oil speculators to invest in oil futures on a 5 percent to 7 percent margin; that is, they can take ownership of oil stocks with only 5 percent to 7 percent of the purchase in cash. In the stock market, investors must pay at least 50 percent to buy on margin, Dorgan said. Hedge funds and investment banks are buying oil storage so they can take it off the market and wait for the price to go up, he said.
It's been "an open invitation" for speculators, he said, and created a bubble of speculation on the oil commodity exchange. Congress needs to increase the margin requirement because "the Commodities Futures Trading Corp. is doing its best imitation of a potted plant," Dorgan said.
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