A few weeks ago, I was very irritated with what I saw as hugely inflated oil prices being driven almost entirely by stuffed shirt speculators sitting on Wall Street, so I looked into my magic snow globe and made a prediction of my own: that oil would be $50 by the 4th of July.

This problem of speculators has been the topic of the day on Capitol Hill. Here’s part of the discussion:

A hedge fund manager and a top adviser to oil companies said Monday they believe oil prices could quickly fall by half if new regulatory changes limiting the role of speculators were adopted.

Michael Masters, of the Masters Capital Management fund, said that – with greater regulation – oil prices could drop to $65 or $70 within about 30 days.

“That’s half of where prices are today, and gas prices would reflect that,” he said.

Roger Diwan, an adviser to oil companies at Washington-based PFC Energy, agreed that regulation could lead to a drop in prices. He said it would take no more than 30 days for speculation in the oil market to decrease and gas prices to fall.

With more regulation, “prices will reflect closer the marginal cost of producing oil,” Diwan said. (source)

Very interesting …

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