Accusations of price manipulation in the soaring market for jet fuel are among dozens of allegations being investigated by commodities regulators in the United States, where the public and politicians have rounded on "speculators" for driving up the cost of oil and everyday inflation.
With airline ticket prices rising, the price of petrol at the pump reaching record levels and food and fuel costs being passed on to consumers across the board, the Commodity Futures Trading Commission (CFTC) has stepped up efforts to root out market manipulation.
The regulator disclosed on Thursday that it has been investigating allegations of manipulation in the crude oil markets for several months, but it also has about 60 other investigations under way, many in the energy trading markets.
The CFTC's unprecedented decision to reveal its crude oil investigation – it usually keeps its work a secret – came after intense political pressure, including a letter signed by 22 American Senators demanding action. "It shouldn't have taken oil and gasoline prices hitting Guinness-like record highs for the federal government to look into possible price manipulation by speculators," Senator Chuck Schumer said yesterday.
Details of the other investigations remain under wraps, but they are believed to include suggestions that traders in jet fuel have flooded the market with buy orders at certain times of the day, to temporarily inflate prices. The CFTC is investigating similar practices in the oil markets.
Light, sweet crude for July delivery settled up 73 cents at $127.35 on the New York Mercantile Exchange yesterday, having peaked above $135 in frenzied trading last week, barely five months after soaring through $100 a barrel for the first time in history.
Economists and market players are divided over whether speculators can actually influence the price of a commodity that – at the end of the day – has to be delivered to a buyer with a real-world use for oil, and the CFTC's in-house economist argued before Congress recently that the sharp price rises of the past few months have been driven by supply and demand fundamentals. The CFTC says it has an open mind on how widespread might be any market manipulation, which goes beyond simple speculating to try to influence the market price using outlawed trading practices.
Walt Lukken, its acting chairman, said: "In addition to the CFTC's ongoing examination of the role of fundamental economic forces and new investors in the recent commodity market price increases, the agency continues to pursue one of its primary missions – to deter, detect, and punish futures market manipulation."
The CFTC has also widened the scope of an information-sharing deal with the UK's FSA, which oversees electronic oil trading at the ICE, London's energy derivatives exchange. The ICE will share more details about traders' positions.