Speculators drove up the price of petroleum, wounding the United States economy, billionaire investor Wilbur Ross charged today. Ross, an investor in domestic manufacturing, said the rise in the price of oil had been “hurtful” to gross domestic product growth. Fueled by unregulated, unrestrained speculators, the oil markets have surged from $35 a barrel in 2009 to $114 earlier this year, and have now slid to $82. That volatility — driven not by supply and demand but by hedge funds and profiteers — has crippled the economic recovery. In an interview on NPR, Ross said each $10 swing in the price of a barrel of oil is “probably worth one or two-tenths of a percent in gross domestic product growth”:
ROSS: The second thing is that the keys to us are things like decline in the price of petroleum. We think that $10 a barrel in petroleum is probably worth one or two-tenths of a percent in gross domestic product growth.
NPR: You mean if it goes down $10 a barrel.
ROSS: Yeah, if it goes down or up. If it goes up, it’s hurtful. Lately it’s been going down. The price of petroleum had really been driven up, mainly by speculation rather than by physical supply/demand characteristics.
NPR: Oh yeah, the war in Libya caused a lot of…
ROSS: Well, yeah, that was psychological, though. Libya’s very small potatoes in terms of world production, so there’s clearly no scarcity, it’s just a speculative thing.
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As much as $50 of the $114 price of oil may be due to speculators, costing as much as a full percentage point of GDP growth. Furthermore, any domestic profits gleaned from expensive oil went almost entirely to the oil traders like Goldman Sachs and the Koch brothers, while working Americans suffered from high fuel costs.