As the week ended with oil prices climbing more than $10 to close at a new record high of $138.54 and food prices continued their upward climb, analysts, farmers, politicians, and consumers began publicly pointing fingers and demanding answers.
The biggest spotlight in the blame game was cast upon speculators of the futures markets. Felice Pace of Goat: A High Country News Blog wrote:
If anyone still thought the reason for high gasoline and diesel prices had everything to do with supply and demand the past week should have disabused them of that fantasy........ The truth is that the sudden jump in the price of oil futures was purely an artifact of rampant and unrestrained speculation.
Even the Senate Commerce, Science, and Transportation Committee joined the parade, holding a hearing to discuss commodity speculation. Billionaire hedge fund manager and speculator George Soros even pointed the finger at the speculators, saying:
It is intellectually dishonest, potentially destabilizing and distinctly harmful in its economic consequences.
The Salt Lake Tribune has more on the Senate Hearing here, while Howe Street's Mike Larson gives his opinion of speculators and the fault of the government in his column.
Conversely, Secretary of Energy Samuel Bodman told world energy officials in Japan that supply and demand was the cause of high oil prices. In an interview with reporters he dismissed the backlash against speculators and said:
I would devoutly hope we ... see a reduction of the use of oil in the world on the one hand, and an increase in the supply so we can see some mitigation in the pressure on price.
MSNBC reported more on the meeting emphasizing greater oil supply here and here.
Many consumers are wondering who is making all of the money from these dramatic price increases. Farmers around the country have begun raising their hands to remind people that they are impacted from high fuel prices as much as the rest of us. Both the Pensacola News Journal and the Naperville Sun ran articles with multiple quotes from farmers assuring readers that while their incomes may have increased so has the cost of doing business.
Interestingly, in the middle of all of the talk about price bubbles, devious speculators, and food shortages, the New York Times published a new article in their Food Chain series talking about how large investment firms are pumping billions of dollars into the farming industry, buying up things like land, gain storage, and fertilizer in mass quantities. From the article:
Mark Lapolla, an adviser to institutional investors, is also a bit wary of the potential disruption this new money could cause. “It is important to ask whether these financial investors want to actually operate the means of production — or simply want to have a direct link into the physical supply of commodities and thereby reduce the risk of their speculation,” he said.
By the end of the week the only clear winners were discount stores, who proudly stated that all of these high prices have driven customers back to their stores in search of deals on food and essential items. The Financial Post has a look at their numbers here.
