Thursday, May 22, 2008

Are Pension Funds Creating High Oil Prices?

If you're wondering why driving to work has gotten so expensive, you might want to peruse your pension fund's investments. That's because speculation by institutional investors pouring money into the commodities market may be largely to blame for spiking oil prices, according to testimony on May 20 before the Senate Committee on Homeland Security & Governmental Affairs. Crude oil, a so-called hard asset, is viewed as a buffer against inflation—a foe of longer-term investment returns. At the hearing, "Financial Speculation in Commodity Markets: Are Institutional Investors and Hedge Funds Contributing to Food and Energy Price Inflation?," senators heard from those defending the role of speculators in oil and commodities markets as well as those who argue that excessive speculation is the root of global price surges.

Read the rest of the Business Week article.

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