Senator: Gas prices not tied to supply-demand

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Senator blames traders for high gas prices

PORTLAND, Ore. - A new report by a Portland-based research company about the dramatic rise of oil prices in June proves the price jump was not the result of supply and demand, U.S. Senator Maria Cantwell (D-WA) said Wednesday.

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Instead, it suggests it may have been the result of market manipulation.

Cantwell and Robert McCullough of McCullough Research, a former investigator who exposed Enron's market manipulation, released a new statistical analysis research report of oil futures and spot market prices.

The report shows that the dramatic rise in oil prices in June, and the subsequent fall in price in July, can't be explained by any of the fundamentals of supply and demand. Instead, it could be a result of the trading strategies of major market players.

Cantwell and McCullough said new data collection tools are needed so that federal agencies can identify the culprits and stop any market manipulation.

"Mr. McCullough's research clearly shows that oil prices are no longer tied to supply and demand," Cantwell said.

She called the report the first statistical analysis of what's been happening in the marketplace.

"Statistically, this research shows that prices are spiking absent of a crisis like a natural disaster or supply disruption. However, prices then fell when Congress began serious debate on how to crack down on those who may be trying to manipulate the markets. Research shows that traders may well be in control of the market, not supply and demand, and consumers have been left paying the price," she added.

"There is evidence of a troubling concentration of ownership in the oil markets," said McCullough. "This allows a few players to have undue influence on setting prices. However, the regulators are driving blind through this crisis since they are collecting such little information that reveals who is doing what in the market."

While many reasons have been offered as to why oil prices have been rising or falling on any given day, McCullough Research identified 25 significant events, or public announcements, made in June and July 2008 that historically have been the type that causes the future price of oil to rise or fall.