Head of the European Central Bank says speculators not to blame
June 25, 2008
According to the Associated Press, the head of the European Central Bank said recently that he did not believe speculators should carry most of the blame for skyrocketing oil prices that have propelled euro-zone inflation to record highs.
ECB President Jean-Claude Trichet also called on oil producers to stick to their promise to increase output, saying this was critical to ease supply worries.
He blamed an unexpected surge in demand from oil in emerging economies that producers failed to anticipate. The remark suggested that he sees high prices as a continuing problem rather than a brief spike or speculative bubble.
This chimes with comments made by the chairman of oil giant BP PLC, Peter Sutherland, who earlier this month said oil companies never expected oil demand to climb so fast and, as a result, failed to make the investments needed to clear the current supply bottleneck.
But the Organization of the Petroleum Exporting Countries has insisted that they are pumping enough oil to meet current demand and higher prices are caused by speculators moving into oil markets after the slide of the U.S. dollar against other currencies.
OPEC nations as a group rejected a European plea during talks with the European Union to open up the taps to help cool soaring prices. However, Saudi Arabia, the world''s largest oil producer, has committed to raising output slightly.
Oil prices rose above US$138 a barrel during trading recently, less than US$2 away from crude''s trading record on the faltering dollar, Mideast tensions and concerns over supply disruptions out of Nigeria.
Trichet said regulators still needed to check that oil markets are functioning correctly, agreeing that there has been a massive shift in investment from currencies to commodities -- but refusing to label this as speculation.