Oregon Public Broadcasting

Senator Ron Wyden introduced a bill in Congress Thursday, to block a tax break for oil investors. As Kristian Foden-Vencil reports, Wyden says the tax break puts oil prices into a boom and bust cycle.

Companies that use a lot of fuel, like airlines, buy it months in advance – to hedge against price changes.

If they make a profit on those purchases, it’s taxed like their usual profit.

By contrast, Wall Street investors pay a lower rate on their profits.

Wyden says that means they can afford to buy more oil when prices rise and sell more when they drop – distorting prices and creating volatility.

Ron Wyden: “Businesses like airlines and truckers have been beaten up by the wild swings and high prices of oil and gas recently. And I wrote this bill to pop the speculative oil bubble that makes it harder for businesses to make a budget and stay in business.”

Ten years ago, speculation on oil futures accounted for 40 percent of trading on the New York Mercantile Exchange. Last year, it had grown to 70 percent.

Some economists say market speculation doesn’t create volatility, but helps commodities find their correct price.