The Commodities Future Trading Commission (CFTC), working closely with other international regulators including the Financial Services Authority in the UK, has begun a series of detailed inquiries over concerns that energy speculators are behind the rising oil price.
In a detailed statement, the CFTC admitted for the first time that it began its investigation in December, taking what it called the “extraordinary step” of disclosing the probe “because of today’s unprecedented market conditions”.

The CFTC declined to discuss the specifics of the investigation, but stressed that all of its enforcement inquiries were focused on “ensuring that the markets are properly policed for manipulation and abusive practices”.

“It doesn’t look like the party is over just yet for oil,” says Chris Mayer in The Daily Reckoning. “But even if it is, past peaks in oil give us clues. When you dig a little deeper into those relationships, you find a great road map for making money.

“If you look at the price of oil, you find something interesting. Since January 2001, you can explain the move in the price of oil largely as a function of increasing money supply. As the amount of money grows, the price of oil rises. In fact, almost 87% of the move in the price of oil can be explained by the increase in money supply.”

Meanwhile, legendary oil investor T. Boone Pickens is forecasting higher and higher prices for black gold.  He’s also putting money into new oil companies.

Pickens just bought this new oil company. According to Ann Sosnowski in Taipan Daily, it’s been on a solid run, returning an 83% gain in only four months. But it’s still cheaper than the major oil companies like BP and Exxon Mobil.

Such showdowns between lawmakers and oil titans have become a familiar routine on Capitol Hill. But with gas prices nearing $4 a gallon, and lawmakers headed home for a weeklong Memorial Day recess where they expect to get an earful from angry constituents, there is added urgency for Congress to appear active.

But while momentum is building for several measures, including a bill that would allow the Organization of the Petroleum Exporting Countries to be sued in American courts under antitrust laws, there is little sign that any of the proposals would do much, if anything, to lower prices quickly.

The hearing on oil profits came as Capitol Hill struggled to be seen to be ‘doing something’ about the 15-day run of record gas prices.

This week, the House voted in the so-called “Nopec bill”, which targets the OPEC oil cartel as a monopoly in violation of the Sherman Antitrust Act. Senate Democrats are also targeting windfall profits by oil companies and speculators in the oil futures market that they blame for high oil prices.

The oil company execs hit back at yesterday, however, pointing out that the fundamental laws of economics — such as supply and demand — was responsible for high oil profits.

“As repetitive and uninteresting as it may sound, the fundamental laws of supply and demand are at work,” said John Hofmeister, the president of Shell Oil. “Oil exporting nations, as has been said, are managing their natural resource development and production to supply their local and global markets in their own self-interest.”

Commodities investing expert Doug Casey at CaseyResearch.com points out that in its weekly inventory report, “the Energy Information Administration said that crude stocks were down 5.4 million barrels for the week ended May 16. Analysts had been expecting a rise of about 900,000 barrels.”

Keith Fitz-Gerald of Money Morning says the US can’t refine or drill its way out of the oil crisis, either.

“For one thing, refiners are the ultimate middlemen and they’re pinched at these prices. They simply can’t make money as they try to refine an increasingly expensive product and sell it to users who are chaffing at $4 a gallon. That’s why stocks like Western Refining Inc. (WNR), Tesoro Corp. (TSO), and Valero Energy Corp. (VLO), for example, have fallen by nearly 30-40% in recent months. Their margins get worse with each up-tick in oil prices from here on out now that we’ve reached a point where high prices are beginning to dampen demand.”For another, drilling and refining our way out of this assumes we have oil to begin with… we don’t. And even if we turn the Alaskan Tundra into Swiss cheese, the demand reduction we’re seeing here in the United States is being dramatically offset by developing countries that are guzzling gasoline at unprecedented rates.

Read on here to find out why Keith says oil prices will reach $225 a barrel and how a simple three-step plan can bring down oil prices, without the kind of political showboating seen Washington yesterday.

The plan would target profit from the biggest oil companies by taxing each barrel of oil costing more than $80, according to a fact sheet on the proposal. The tax would help pay for a $1,000 tax cut for working families, an expansion of the earned- income tax credit and assistance for people who can’t afford their energy bills.

The real question for Obama, should he end up in office, is: Where is America going to get its oil from?

“OPEC simply won’t raise output, the non-OPEC producers simply can’t,” says Profit Watch editor Manraaj Singh,

“Right now, the non-OPEC countries produce about 60% of global oil supply – about 50 million barrels a day. But they’re stuck there. In fact production is falling quickly in some of the biggest of them.

“Norway’s output has fallen by 25% from its peak in 2001. British output has slumped by 43% in eight years. In America, the giant Prudhoe Bay field in Alaska has seen output drop by 65% from its peak two decades ago…

“And in Mexico, production at the giant Cantarell oil field is collapsing and they haven’t found any new fields to replace it. But Mexico’s economy is growing rapidly. So, domestic consumption is shooting up while production is falling. Mexico’s exports could be wiped-out within five years. That means more sleepless nights for America’s leaders because Mexico is the second-biggest oil exporter to the US.

“Then there’s Russia… the biggest contributor to the growth in global energy supplies over the last decade. Output shot up from about 6 million barrels in 1996 to about 10 million barrels per day today. But the Russians say that they’ve hit peak production… so it’s all down hill from here.”