Sen. Sherrod Brown claimed Wall Street speculation accounts for $0.56 of the price of every gallon gas Monday on "Morning Joe."
MIKA BRZEZINSKI: Gas prices—there’s a Washington Post poll out looking at numbers this morning, 26 percent approval rating for the president on the handling of the gas prices. Can Congress do anything, can the president do anything in that realm?
SEN. SHERROD BROWN: Yeah, there are limited things we can do, but absolutely. A new study said $0.56 a gallon, $0.56 on every gallon of gas is attributable to speculation on Wall Street and among--
HOST: $0.56?
BROWN: $0.56 on every--for every gallon. And you know, you can see when energy production is generally up, as it is, when we're weaning ourselves off foreign oil is starting to happen--there's rigs and oil fields and all of that—and demand is pretty much constant because of conservation efforts and better mileage for cars, yet prices go up? It's almost like this, I think, Mika, every time there's a pipeline, fire at a refinery, a pipeline outage or any kind of turmoil in the Middle East, it's always used to jack up oil prices every single time at the gas pump. And I think you're seeing that again. It's always more than that, but speculation is clearly a role in this and I asked the Attorney General at a hearing last week, you've got to step up your task force and he has in his office and the Justice Department to use Dodd-Frank, the language wrote into Dodd-Frank to go after these speculators.
That figure is similar to statements about speculation made by Bart Chilton, the commissioner of the U.S. Commodity Futures Trading Commission, based off of a Goldman Sachs report.
But Goldman says calling this "speculation" is a mischaracterization.
In a statement last week, Goldman explained what Chilton and Brown call "speculation," is actually the market adjusting for changing supply and demand:
We do find that buying and selling in the oil futures markets exerts an influence on oil prices. Buying and selling is how information about current and expected future oil supply and demand conditions is transmitted through the market, allowing the oil market to adjust the oil price in order to balance supply and demand. This is how a market works. Commissioner Chilton characterizes this as "speculation," with the suggestion it is unrelated to supply and demand conditions in the oil market. We disagree. In our view, this is the mechanism by which the oil market becomes better informed and reaches a consensus on issues such as the likely impact of the improving world economic outlook on oil demand and the increasing tensions with Iran on crude oil supplies. To say that "speculation" is contributing to higher oil prices is no different than to say that oil prices are rising on the expectation that the improving world economic outlook will lead to more oil demand and that tensions with Iran could lead to a disruption in crude oil supplies.