Pickens Says CFTC Probe of Oil a `Waste of Time'

A U.S. probe into whether speculators manipulated oil prices up to more than $135 a barrel is a ``waste of time,'' billionaire hedge-fund manager Boone Pickens said yesterday.

The Commodity Futures Trading Commission, the watchdog for U.S. commodity transactions, said May 29 that it was investigating how much of the gain in oil prices was caused by manipulation, as opposed to consumer demand. The investigation has been under way since December.

``There's nothing to it to start with,'' Pickens said in interviews at an American Wind Energy Association conference in Houston. ``That's not what's happened. You have 85 million barrels a day of oil available in the global energy market and
86.4 million barrels a day of demand. So the price of oil is going to go up until you can kill demand.''

Crude oil for July delivery fell 18 cents to $127.58 a barrel in after-hours electronic trading on the New York Mercantile Exchange as of 7:32 a.m. in London. Oil has risen 93 percent in a year. It reached a record $135.09 a barrel on May 22. Some market analysts and members of the Organization of Petroleum Exporting Countries blamed speculators for the price.

``You've got to have a commodity market, because a producer has to have an opportunity to hedge when they feel like the risk is becoming too great for them,'' Pickens said. ``For every hedger, you have to have a speculator.''

Pickens, the founder and chairman of Dallas-based BP Capital LLC, manages funds linked to both energy commodities and equities. Yesterday, he reiterated a forecast, first made in April, that oil will reach $150 a barrel this year.

The CFTC said it's looking into the transportation and storage of crude oil as well as the trading of futures contracts.

The regulator will require more information on index funds and clients involved in swaps deals that are hedged on exchanges, the New York Times reported, citing draft proposals scheduled to be announced today. The CFTC will also issue expanded monthly trading reports from July and reduce the number of waivers on speculative limits given to index funds, the newspaper said.

There will also be confirmation of an investigation into a jump in cotton prices in February and a review of a program to cut costs for farmers hedging crop prices, the New York Times said. The CFTC will also start talks with the banking industry to ensure the farm industry can get credit, the newspaper said.

Hedge-fund managers and speculators reduced bets on higher oil prices by 80 percent since July as crude futures rose to records and U.S. regulators started investigating trading, government data show.

``What you're trying to do is trying to find a scapegoat and place blame for it when what you have is demand that is greater than supply,'' Pickens said.

U.S. fuel consumption averaged 20.5 million barrels a day in the four weeks ended May 23, down 0.7 percent from a year earlier, the Energy Department said last week. Gasoline demand dropped 5.5 percent in the week ended May 23, as prices at the pump reached records, according to MasterCard Inc., the second- biggest credit card company.

``We're using 400,000 barrels of oil less today than we did a year ago, but the Chinese are now using 500,000 barrels greater than they did last year,'' Pickens said. ``So whatever we kill in the way of demand, they pick up in their demand. You're gong to bid for the oil, and the highest bidder's going to get the oil until you finally kill demand with price.''

The national average pump price for regular gasoline rose 8 cents to $3.84 a gallon, up 19.6 percent from a year earlier and the highest in data going back to October 2006, the MasterCard report showed.

Pickens has advocated more investment in wind, solar and natural gas as energy sources. Last month, his Mesa Power LLP said it ordered 667 wind turbines from General Electric Co. to start building a $10 billion wind-farm project in Texas, the nation's largest.

Greater use of wind and other power sources in electricity generation will free up natural gas for use in transportation, reducing the need for gasoline and diesel fuel, which are refined from oil, he said. That could cut oil imports by as much as 38 percent within 10 years and also cut the price of power, he said yesterday.

``You're going to have to get natural gas in competition with gasoline and diesel,'' Pickens said. ``That's the only way out for us in this country.''