"High oil prices affect nearly every household and business in the United States. During the course of 2008, oil prices doubled to more than $145 per barrel and then fell by 80%. In early 2011, there was a run-up of about 20%, sending gasoline prices to near 2008 highs. Few would rule out the possibility of similar price swings in the months to come. What explains oil price volatility? Some consider price movements such as those of 2008 and early 2011 to be more extreme than warranted by the fundamentals of supply and demand. […] The role of speculators in oil and other commodity markets has attracted congressional interest. Staff reports by the Permanent Subcommittee on Investigations of the Senate Committee on Homeland Security and Government Affairs found that excessive speculation has had 'undue' influence on wheat price movements and in the natural gas market. A 2011 report by the minority staff of the House Committee on Oversight and Government Reform argues that 'addressing excessive speculation offers the single most significant opportunity to reduce the price of gas for American consumers.' Legislation before the 112th Congress (S. 1200 and H.R. 2328) would authorize and direct the CFTC [Commodity Futures Trading Commission] to take certain actions to reduce the volume of speculation in oil and related energy commodities. Another bill, H.R. 2003, would impose a tax on oil futures, swaps, and options that were not used for hedging commercial risk. This report provides background on financial speculation in oil, the workings of oil derivatives markets, and the different types of firms that trade in those markets. It reviews the concepts of manipulation and excessive speculation, and it briefly describes the fundamental factors that affect oil prices. This report will be updated as events warrant."
CRS Report for Congress, R41986