WASHINGTON, D.C. -- As reported in numerous outlets, including The Wall Street Journal, the Commodity Futures Trading Commission is preparing a detailed report on the role of speculators in the oil market. The CFTC report, set to be released sometime in August, is expected to outline the significant role speculation played in driving the wild swings seen in oil prices over the past 18-24 months. At its peak last summer, oil hit $148 per barrel before falling to a low of $33 per barrel in December 2008.

In a letter to CFTC Chairman Gary Gensler, the Renewable Fuels Association urged the inclusion of grain markets in the Commission's report if not already included.

"Common sense told us that speculation, both in energy markets as well as in other commodities like grains, was a significant factor in the rollercoaster ride we have experienced in commodity markets of late," said Renewable Fuels Association President Bob Dinneen. "While we don't know the full extent of CFTC's report, we are hopeful the Commission also examined the role of speculators in grain markets. Last year's rapid swings in the price of corn corresponded perfectly with the dramatic swings in oil prices, suggesting that the oil market was in the driver's seat and other commodities were just along for the ride. Still, I hope the CFTC gives all commodity markets the scrutiny they deserve and uncovers the true causes of last year's unprecedented volatility."

During the height of the manufactured and fictitious food and fuel debate, the ethanol industry routinely noted the role of energy prices and speculation in the rising price of grains like corn and higher food prices.

In testimony before the U.S. Senate Committee on Homeland Security and Governmental Affairs in May 2008, hedge fund manager Michael Masters said, "Right now, Index Speculators have stockpiled enough corn futures to potentially fuel the entire United States ethanol industry at full capacity for a year." Now that the role of speculation in the oil markets is becoming clearer, it begs the question about the role of these same speculators in grain and other commodity markets.

"The RFA recognizes the important and fundamental role that honest hedging plays in commodity markets," wrote Dinneen in the letter. "It allows producers and consumers of the commodities to protect against volatility caused by natural disasters, political turmoil and other factors. But unbridled speculation undermines the value of futures markets. Market players who have no intentions of ever taking delivery of the commodities they buy are hurting the economy and restricting the ability of legitimate players to use the markets as they were intended."

SOURCE: Renewable Fuels Association.