A study by four Attorneys General finds that huge increases in natural gas prices are due to the futures market and not supply and demand. Iowa Attorney General Tom Miller was one of the top state lawyers who’ve been investigating the link between the cost of natural gas and supply. Miller says, “We found nothing there (in gas demand) that would account for the huge price increases. We found that demand is steady, in fact over the last three-year period, demand is down.”
Miller says the study finds the cost increases for natural gas are more linked to a huge influx of money into speculative financial markets. Miller says even that is hard to track because of the way the trading is conducted. He says the trading is not done openly and only one-third of the trades are reported, so a company can report the trades that go for a high price and not the trades for a low price. Miller says that manipulation of the market seems to be were the huge price increases come from.
Miller says the Attorneys General are urging the federal government to take action. He says, “We think certainly as a first step, the federal government should require that all the trades of natural gas should be reported, and then that will have a good effect, and then we’ll know if we need to do anything more about large positions or manipulation.”
Miller says they found problem was very evident when there were large volumes of trades happening. Miller says when Enron got involved and banks and other trading houses, the price would go up dramatically and then would back to more like normal, but the normal price would be above the previous position that seemed to be normal.
Miller says federal lawmakers now need to take action to rein in the natural gas prices. He says they hope Congress will act, as he says they had a chance to act in 2000 to require the trades to be recorded and didn’t, “That was a huge mistake we think that’s probably cost consumers billions of dollars.” Miller says the markets need to be much more open.
Miller says this winter is a good example of the problem. Miller says natural gas prices this winter are up 28-percent, and usage is down five-percent. He says, “You can’t explain that in terms of the markets as we know them. It can only be explained in terms of manipulation and other things that we shouldn’t tolerate.”
The Attorneys General of Missouri, Illinois and Wisconsin joined Miller in examining the natural gas price spikes.