Senate committee tackles oil prices

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WASHINGTON (CNN) -- As gas prices hit another record high Thursday, senators in Washington suggested Congress may need to intervene and change how investors buy and sell oil.

The Senate Energy and Natural Resources Committee tackled the complicated but potentially critical topic of speculation, raising the possibility that Congress might make it harder for investors to buy high-risk oil contracts which some say are driving up gas prices.

"I think it's a minimum of a dollar a gallon," said Sean Cota, a regional chairman with the Petroleum Marketers Association of America. "That's very significant."

Two days earlier, oil executives told Congress that speculation might be responsible for half the current cost of oil. Leaders from five top companies agreed that current supply and demand levels should place the price near $55 a barrel, instead of the roughly $100 a barrel in recent days. Thursday, senators heard conflicting opinion on the idea, but many showed open distrust of the speculation market.

"I think there's an orgy of speculation that we ought to be deciding to do something about," said Sen. Byron Dorgan, D-North Dakota.

He and others raised the idea of changing the margin or amount investors must pay up front in order to engage in oil speculation. It would be a hugely significant change in financial markets. Dorgan said stock speculation requires a 50% margin, but commodities like oil demand a much lower threshold, just 5% or 7%.

Experts say the result has been a flood of investment in oil, seen as a commodity more immune from inflation issues.

"I do think the margin requirements are low," testified Sarah Emerson, the managing director of research firm Energy Security Analysis. Emerson told senators that a change in the margin rate may be among their only short-term options to address speculation and soaring oil prices.

"I do think that's one tool that Congress has," she said. "There really aren't any other easy fixes, save drawing down the SPR (Strategic Petroleum Reserve), which I wouldn't necessarily recommend."

Other analysts insisted that global events and the weak dollar might be just as much to blame for the oil bubble.

But senators from both parties focused on speculation and a possible change in the margin rate, insisting it needs to be addressed.

"This is very confusing and everybody gets confused," said Sen. Pete Domenici, R-New Mexico, ranking Republican on the Energy Committee.

"I don't think...that just because this is difficult and confusing that we ought to let it go," he added.