Oil-speculation bill offers false hope

Lately, Baron Hill has been looking more like a populist than an economist. This was evident in his support of the Commodity Markets Transparency and Accounting Act, which recently passed through the U.S. House of Representatives.

The bill is supposed to increase regulation on oil speculators and lower the price of gasoline. The problem is that speculators aren’t to blame for the dramatic rise in oil and gas prices.

Hill would have us believe that this bill will significantly lower the price of oil, but almost any economist would disagree.

Economists like Daniel Yergin, chairman of the Cambridge Energy Research Associates, say it is supply and demand shifts, not oil speculation, that are affecting the price of oil.

The rise in oil price earlier this summer, from less than $100 a barrel to more than $140, was caused by increasing demand in China and India coupled with decreased supply coming out of Nigeria, Russia, Venezuela and Mexico, Yergin said, testifying before Congress on June 24.

It’s easy for Hill and other congressional representatives to point at speculators and give the public an easy scapegoat. No one wants to tell their constituents there is nothing they can do to lower the price of gas when asking for their votes. Hill faces an especially large amount of pressure with what looks to be another close race against former Indiana 9th District Rep. Mike Sodrel.  

Sodrel defeated Hill in 2004 but lost by 5 percent of the vote in 2006 and is back for another battle this year. Since then, the average gas price has increased from $2.45 to $3.75 nationally. Indiana has been one of the hardest-hit states, with the fifth most expensive gas in the country, according to the AAA.  

Supporting a measure that promises to lower gas prices and punish greedy investors will go far to solidify Hill’s image as a populist, but it won’t do much to actually help his constituents.