Speculation behind global commodity price rise

By Ramgopal Agarwala

03/08/08 "Economic Times' -- - There is now a growing discomfort about the
role of speculative finance in the US, the capital of global finance. In an
open letter addressed to all airline customers, leaders of airlines in the
US have recently requested the passengers to join them in pushing
legislation to add more transparency and disclosure in the oil markets.

They argue that "twenty years ago, 21%% of oil contracts were purchased by
speculators who trade oil on paper with no intention of ever taking
delivery. Today, oil speculators purchase 66%% of all oil futures contracts,
and that reflects just the transactions that are known. Speculators buy up
large amounts of oil and then sell it to each other again and again. A
barrel of oil may trade 20-plus times before it is delivered and used; the
price goes up with each trade and consumers pick up the final tab. Some
market experts estimate that current prices reflect as much as $30 to $60
per barrel in unnecessary speculative costs."