NEW DELHI: As oil approaches the $100-a-barrel milestone, M. S. Srinivasan, India's petroleum secretary, has an unorthodox recommendation for cooling overheated prices: halt trading of crude oil on commodity exchanges.
There are "no supply constraints right now, and demand has not escalated out of control," Srinivasan said in a recent interview in his New Delhi office. Rather, trading on exchanges like the New York Mercantile Exchange, or Nymex, is contributing "enormously" to high prices, he said.
If crude was eliminated from the commodities traded on Nymex, Srinivasan predicted, the world would "see a drastic reduction in the price." The benchmark price of crude touched $98.10 on Nymex on Wednesday, a new record, before retreating to $96.37.
Srinivasan's idea is based on a widely held belief that investors are artificially driving up oil prices. Hedge funds, banks and pension funds have poured capital into oil trading in recent years, betting that demand will increase. Analysts say these bets have become self-fulfilling prophecies, helping to push prices higher.