Lowering Oil Prices

June 10, 11:21 AMProgressive Politics ExaminerJay McDonough

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1.  Perhaps the quickest action, the experts said, would be ordering curbs on financial speculation. Financial industry heavyweights have acknowledged in recent testimony before Congress that such speculation is driving oil prices higher.

Pension funds, endowments and other big institutional investors are pumping big money into index funds linked to commodities, including oil, driving up demand — and prices.

President Bush could order the Commodity Futures Trading Commission (CFTC) to regulate U.S. investments in those markets with a snap of his fingers, said Michael Greenberger, a law professor at the University of Maryland and a former director of trading for the CFTC.

2.  A second partial solution would be to boost the supply of oil available on the market by releasing as much as 1 million barrels a day of oil now held in the nation's Strategic Petroleum Reserve.

It's not entirely clear that U.S. refineries could handle all that extra oil, but it would signal to traders of oil contracts that the U.S. market is adequately supplied.

3.  Finally, the Federal Reserve could act to boost the weak dollar, which has led oil producers to demand higher prices for oil, because oil generally is traded in dollars. Oil producers want higher prices to offset the cost of converting dollars into euros and other currencies that have grown stronger against the dollar.

The best way to bolster a currency is to boost interest rates, but the Federal Reserve has been reluctant to do that with America teetering on the brink of recession.