WASHINGTON — Don’t blame us. That’s the message financial managers responsible for millions of Americans’ retirement benefits delivered Tuesday to lawmakers who are increasingly blaming speculation for record fuel prices.
Congress has zeroed in on institutional investors as the culprits for the $4-plus gas prices smothering U.S. businesses and consumers.
Pension funds, Wall Street banks and other large investors that do not actually use fuel commercially have increasingly pumped money into contracts for oil as a hedge against inflation when the dollar falls. That transition from stocks, bonds and more traditional investments also has provided the so-called speculators with very healthy returns in recent years.
A growing number of lawmakers are convinced the influx of speculative money has inflated actual prices to the point where they no longer reflect true supply and demand.
Previously silent on the issue, pension-fund managers moved Tuesday to head off an effort to ban them from investing in commodities.
Such a ban would be like “robbing Peter to pay Paul” by threatening “the retirement funds of the very workers the proposal is intended to help,” said William Quinn, chairman for the Committee on the Investment of Employee Benefit Assets, which represents 110 private-sector pension plans that manage $1.5 trillion.
Senate Homeland Security and Governmental Affairs Committee chairman Joe Lieberman, I-Conn., outlined several proposed restrictions on institutional investors, including prohibiting index funds from investing in commodity futures.
But Quinn said the pension plans have less than 1 percent of their assets in commodities. He added that pension funds make long-term investments in futures markets and should not be compared with speculators.
James Newsome, president of the New York Mercantile Exchange, said regulators must have greater access to trades made through foreign exchanges and swap deals. However, he stressed that speculation is not the main driver of higher fuel prices, instead pointing to limited supplies and other global factors.
Michael Masters of the hedge fund Masters Capital Management said eliminating excessive speculation could lower oil prices from $138 a barrel to around $65, below where the commodity was trading a year ago.
