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The average nationwide pump price for regular gasoline rose to a record $3.978 a gallon yesterday, AAA said. The price was above $4 in 12 states and the District of Columbia. Gasoline demand in America fell 4.7 percent last week, which included Memorial Day weekend, from a year earlier, according to MasterCard Inc.'s SpendingPulse report. Sales have declined in 16 of the past 19 reports.
Soros laid some of the blame on recent oil price rises on commodity index funds, which only buy oil contracts, helping to push prices higher. Not `Legitimate' `Commodity indexes are not a legitimate asset class,'' he said. He added that raising margin requirements would not affect index trading but could function to limit speculation.
Soros attracted renewed controversy with his 10th book warning that an exploding ``superbubble'' threatens the global financial system, the New York Times reported on April 11. The book bases its conclusions on the idea that individual inclinations and actions generate market fluctuations, rather than the conventional view that markets move toward some kind of equilibrium, the newspaper said.
The current oil market price ``is a textbook illustration of my theory'' on bubbles, Soros said in an interview after his testimony today. ``The buying is based on a misconception'' as well as a fundamental driver of higher prices, he said. Soros said he does not consider himself an expert in oil markets and is not investing in them now. ``I stay away from the oil market because it is a very tricky market.'' He added ``I don't find it an attractive market.''
Failing Americans, The Senate committee also heard testimony from a consumer advocate who said U.S. regulators are failing Americans by not properly regulating energy markets. Minnesota Senator Amy Klobuchar said the U.S. spends $600,000 per minute on foreign oil. ``I want to follow the money and figure out how American consumers are getting ripped off,'' she said. ``We need a cop on the beat. We also need a prosecutor on the beat.''
Mark Cooper, director of research for the Consumer Federation of America, said the current commissioners of the CFTC and Federal Energy Regulatory Commission are to blame for allowing energy prices to rise to records. ``Just fire the commissioners and clean the problem up,'' Cooper told the committee. He compared the federal regulators' reaction to recent price spikes to ``the regulatory equivalent of the FEMA's response to Hurricane Katrina,'' referring to the Federal Emergency Management Agency. ``Americans are suffering needlessly due to the financial bubble'' in energy prices, he said. Soros disagreed with Cooper's analysis that $40 of the current oil price is related to the cost to get it out of the ground, $40 is added by the ``OPEC cartel,'' and $40 is due to speculators in the market.
`Underlying Factors' ``I think that is an exaggeration,'' Soros said. ``There are serious underlying factors for the rise of oil.'' Soros said too much regulation of oil markets could drive trading into unregulated areas such as the over-the-counter market. Oil has gained 91 percent in a year. The CFTC said last week it's been investigating the transportation, storage and trading of U.S. crude since December. The commission took the unusual step of announcing an on-going investigation due to ``unprecedented market conditions,'' it said May 29.