Chu sees Wall Street role in oil market swings

Energy Secretary Steven Chu said in Saudi Arabia Monday that oil market volatility is “far in excess” of supply and demand, according to Reuters, showing that he’s more willing than his Bush-era predecessor to see a Wall Street hand in price swings.

“We are going to be undergoing studies to try and find out how much has the volatility been increased by large financial institutions taking positions,” Chu told reporters in Riyadh, the news service reported.

“Certainly the volatility of the price seems to be far in excess of demand and supply,” added Chu, who is visiting several Middle Eastern countries this week.

Chu’s comments contrast with Samuel Bodman, who led DoE under former President George W. Bush.

Bodman said during his tenure that did not believe that futures market speculation by banks, hedge funds and other institutions were driving oil prices, which soared to record highs in 2008.

But President Obama's election and his subsequent appointments have prompted an increased willingness by federal agencies to address market speculation.

The Commodity Futures Trading Commission floated a proposal last month that would place restrictions, called positions limits, on the number of energy futures contracts that market players may hold.

Also, the Energy Information Administration – which is the independent statistical arm of DoE – last year began broadening its analysis of energy prices to look at speculation, hedging and other financial market factors.