From March 26 Senate floor speech by Sen. Carl Levin, D-Mich.

Once again, oil prices have spiked to high levels, threatening our economic recovery. Prices are now nearing $110 per barrel, up nearly 30 percent since early October 2011, only five months ago.
For years now, the commodity markets have taken the American people on an expensive and damaging roller coaster ride with rapidly changing prices for crude oil.
In 2007, a barrel of crude oil started out the year costing $50. By the end of the year, the price had nearly doubled. In 2008, oil prices shot up in July to nearly $150 per barrel and then, by the end of the year, crashed to $35.
In the beginning of 2011, oil prices took off again, climbing to over $110 per barrel in May. Then they began falling, and in October oil traded at $75 per barrel, a drop of more than 30 percent over four months.
Now, five months later, oil prices are back up to nearly $110 per barrel. This unpredictable and incessant price volatility is burdening American consumers and businesses with both uncertainty and expense.
Middle East instability can’t explain these large gyrations.
We have seen uncertainty, unrest and armed conflict in that region for more than 50 years, without seeing this same pattern of extreme price volatility in oil prices. That volatility has become a feature of U.S. oil markets over the last seven years. There is something else at work behind the spikes and sudden drops in the price of oil and other commodities in recent years, and we have strong evidence showing what it is:  it’s the increasing role of market speculators betting on price swings. For years now, the Permanent Subcommittee on Investigations, which I chair, has been digging into the problem of excessive speculation in the commodity markets.
Since 2002, the Subcommittee has conducted a series of investigations into commodity pricing, focusing in particular on how speculators have changed the game.
Our investigations have used specific case histories, involving oil, natural gas and wheat prices, to show how excessive speculation in the futures and swaps markets has distorted prices, overwhelmed normal supply and demand factors and pushed up prices at the expense of consumers and American business.
In 2006, for example, the Subcommittee released a report that found that billions of dollars in commodity index trading by speculators in the crude oil market helped push up futures prices in 2006, caused a corresponding increase in cash prices, and was responsible for an estimated $20 out of the then $70 cost for a barrel of oil that year.
Since then, even more speculators have entered the commodity markets. Today we have commodity index traders, exchange traded products, even mutual funds, betting billions of dollars on crude oil prices on a daily basis.
Speculators have now come to dominate our futures and swap markets, overwhelming the commercial users and producers who use and need these markets to set fair prices and hedge risk.
At a November hearing before my Subcommittee, the chairman of the Commodity Futures Trading Commission (CFTC), Gary Gensler, testified that over 80 percent of the outstanding futures contracts for crude oil are now held by speculators. That fact is new, it’s significant, and we can’t ignore it.
It used to be that prices were determined primarily by fundamental market forces of supply and demand for physical commodities.
When supplies were tight and demand high, prices generally went up. In contrast, when supplies were ample and demand low, prices generally went down. Nowadays, that relationship is largely absent. U.S. crude oil prices today have become disconnected to supply and demand.
The United States has ample oil supplies, in the neighborhood of 350 million barrels in storage, which is toward the higher range since 2008.
World supplies are also adequate, with the Saudi Arabian oil minister recently stating that world supplies are stronger today than they were four years ago, in 2008.