George,

Who is going to "bell the cat?"

Virtually,everyone with a scintilla of knowledge of the subject, knows that the skyrocketing cost of a barrel of oil is largely the result of futures speculators.

Each day on the trading floor of the New York Mercantile Exchange, a limited number of crude oil futures contracts are gobbled up by more buyers than there are available contracts. Ostensibly, these are agreements to take delivery of thousands of barrels of crude oil at the agreed price negotiated through competitive bidding, each contract is for a thousand barrels of oil, or forty two thousand gallons. Technically the "buyer" is obligated to take the product from the "seller" at a set future date.

Rarely does actual delivery take place - the contract is simply sold to a higher bidder, often within seconds of the initial purchase.

The price is driven higher by a combination of too many buyers chasing too few contracts and a media circus pushing the news of worldwide oil demand far exceeding supply.

Many futures contracts in a volatile market such as crude oil and related products (gasoline, home heating oil etc.) are usually short-term trades - many trade the same day. So the morning buyer will carefully and slowly "feed" his contracts into the buyers market, hoping that his guess was right and the price continues to spiral upward. Selling too many contracts all at one time can start a panic and suddenly there are too few buyers buying too many contracts!

It takes as little as 5% of the price of a barrel of oil to buy billions of dollars worth of a negotiable product.

So who in Washington can do anything about a process that, by the estimates of many experts, has driven up the price of a barrel of crude oil by as much as eighty dollars?

Surely no help from the "Oil Administration," but the Democrats in Congress could ask that margin requirements be substantially raised, thereby making the risks more intolerable; just by threatening to legislate this requirement might create a "buyers market" as the greedy futures contract holders rushed to sell.

Taking oil from the Strategic Reserves, would not suddenly produce a huge surplus of crude oil, but any indication of concern by our representatives in Washington might dampen the speculators enthusiasm.

Who will take the initiative remains a mystery - the "fat cats" for the moment remain "unbelled."

Harry Tenney (Electonic mail, June 25, 2008)