No doubt determined to explore all avenues to mitigate rising diesel prices, the American Trucking Assns. (ATA) is requesting Congress “to increase the transparency of futures markets and impose reasonable aggregate position limits on energy commodities” in a bid to drain off the influence of speculation on fuel pricing.

“Since March, the price of diesel has risen 56 cents per gallon despite supplies being at a historical high and diesel demand at a 9-year low,” said ATA president & CEO Gov. Bill Graves. “It seems that more is at play than just the fundamentals of supply and demand.”

Indeed, this week marks the fifth straight in which the retail price for diesel has climbed. It now stands at $2.62 for the week ending June 22, up from $2.57 for the week ending June 15.

Yet the price of crude oil remains off from last summer’s highs, stated ATA in a news release, which noted “the commodity has seen a dramatic and inexplicable run-up in price over the past five months. Despite U.S. oil inventories near a 19-year high and oil demand down 6% from a year earlier, the price of crude has more than doubled since February.”

And ATA argues that according to data from the Energy Information Administration (EIA), crude inventories in May were at their highest levels in almost two decades. “Based on current levels of demand, commercial petroleum inventories amount to about 60 days’ worth of supply – that’s 12 days more than a year ago, and 11 days more than the five-year average for this time of the year,” said the trucking lobby.

“While we don’t believe excessive speculation accounts for all of the recent run-up in oil prices, it has to have played a part,” said ATA vp & regulatory affairs counsel Richard Moskowitz. “ATA is concerned that speculation may be increasing, as investors seek investments that can insulate them from anticipated inflation that many believe is coming as a result of the U.S. and other governments’ massive economic stimulus packages.” In addition, ATA “recognizes that the recent fall in the dollar’s value has played a role in the rising price of oil. Since February, the value of the dollar has fallen approximately 8% compared to the Euro. Yet this 8% drop in the dollar does not translate to a 100% increase in the price of a barrel of oil.”

However, according to oil analyst Denton Cinquegana, a senior markets editor for the Oil Price Information Service (OPIS), it’s not “speculators” per se that are to blame. Or perhaps more to ATA’s point, there may be nothing Congress can do about it as nothing illegal appears to be going on. Cinquegrana contends the recent run-up in fuel prices reflects nothing more sinister than the simple fact the “mechanics of the [crude oil] market” are at work.

He says those mechanics includes the value of the dollar, the price of stocks and legal speculative actions—taken by everyone from large pension funds to individual investors excited about the return they might see from a “big oil” investment. “Anyone can easily invest in oil today-- and it is seen as a hedge against inflation and a weak dollar.”
The good news, according to Cinquegrana, is “in the last few days [crude] oil has come off its high and we should be able to soon close the books on the summer driving season [impact on prices]. Oil is now below $68 a barrel, based on August contracts. Essentially, some of the froth that had been whipped is being pulled off now that the reality [of higher prices] has set in.”

He says it’s also important to bear in mind the price of oil is tied to equities and the dollar. “When stocks rise, so generally does oil. And when the dollar is weak, oil is strong. There’s nothing long term going on—like a hurricane shutting a refinery. The prices [being seen] are a result of how the market works.”

While making no promises, Cinquegrana says to look for retail diesel prices to level off and then dip over the next two to four weeks. “Gasoline saw 53 days in a row with the retail price up,” he notes. “Yesterday was the first day we started to see that come back down. And it does always feel like the price moves up faster that it does down.”

ATA does allow that “financial participation via speculation in energy markets is necessary to a certain extent. Without speculators, trucking companies could not hedge their fuel purchases and would be even more exposed to fuel price changes. While some speculation is necessary to make a market, excessive speculation may fuel a dramatic price change as large institutions use derivatives and futures contracts as an asset-accumulation tool.”