The record-shattering run-up in energy and food prices has put investors who buy and sell such things on the hot seat -- so hot that some in Congress on Tuesday threatened action.
"The American people are about to take out pitchforks" because of the cost of groceries and gasoline, Sen. Claire McCaskill (D-Mo.) said during a Senate hearing on whether commodities are being pushed higher by investors' high-stakes bets that prices will keep going up. Given the uproar from consumers, McCaskill warned an official from the U.S. Commodity Futures Trading Commission, "if you don't do something, Congress will."
Such strong words came on another record day for oil prices -- which flirted with $130 a barrel -- and as drivers in many states prepared to pay more than $4 a gallon for gasoline on Memorial Day trips.
Sen. Joe Lieberman (I-Conn.), who chaired Tuesday's hearing before the Homeland Security and Governmental Affairs Committee, said that commodities trading by pension funds and other institutional investors has risen sharply. He noted that investment in index funds tied to commodities has grown twentyfold to $260 billion in the last five years.
"This unbridled growth raises justifiable concerns that speculative demand -- divorced from market realities -- is driving food and energy price inflation and causing a lot of human suffering," Lieberman said.
Much of the focus has been on the stunning rise in the cost of crude oil, which has rocketed up by more than $40 a barrel since early February and closed Tuesday at $129.07, up $2.02, in New York futures trading. But similarly spectacular jumps have hit the prices of gasoline, diesel, heating oil, corn, wheat and gold.
The link between soaring prices and the vast sums of money flowing through commodity markets is controversial and hard to quantify.
Economists, traders and regulators routinely dismiss the notion that excessive trading is the culprit instead of traditional market forces such as supply and demand. And they warn that increased regulation could interfere with trading programs used by airlines and others to blunt the negative effects of rising commodity prices.
Jeffrey Harris, chief economist at the Commodity Futures Trading Commission, told lawmakers Tuesday that the high prices reflected increased demand from emerging markets and decreased supply because of bad weather or geopolitical events.
