The Commodity Futures Trading Commission has launched a witch hunt to slake the blood-thirst of Congresscritters and their constituents looking for someone to blame for high oil prices.

A Wall Street Journal story describes the CFTC “expanding surveillance of energy markets” to counter “potential oil-market manipulation.” The Journal notes that it’s unusual for the CFTC to announce an investigation in progress, so there’s a clear PR component to all this. Too bad there’s not a sanity component.

According to Rupert’s new rag:

Many economists and oil-industry executives say possible shenanigans by market traders have little or nothing to do with the high price of oil. They maintain that the rise is mainly due to fundamental factors such as rising demand, constrained supplies and the weak dollar.

Still, suspicions have lingered that speculators have helped drive oil prices higher. At a series of congressional hearings over the past month, energy consumer groups and some financial insiders have contended that large investments in commodity futures by hedge funds and pension funds are distorting prices.

After months of a building blame-game against “speculators” across nearly every commodity sector, I just want to tear my hair out when I see reporters posit these either-or explanations. Because, as even a middling UN bureaucrat can recognize, an increasingly worthless U.S. dollar is what’s driving hedge funds and pension funds to seek shelter in tangible goods.

But as long as this elephant in the room goes unrecognized and/or unacknowledged, we get pernicious proposals like that of Holy Joe Lieberman, aiming to limit the role of institutional investors in the commodities markets.

For more on all of this, check out Eric Fry and Paul Van Eeden in yesterday’s Rude Awakening. Don’t miss the chart tracking the oil price with M3.

Source: Blame the Speculators, Continued