Subcommittee on Oil and Gas and Other Energy Prices committee  It's an arbitrage process.

Subcommittee on Oil and Gas and Other Energy Prices committee  That's right.

Subcommittee on Oil and Gas and Other Energy Prices committee  The first thing I'd say is that there is a role for what we're calling “speculators” in the market. They do provide a huge amount of liquidity to the marketplace. And the reason that—

Subcommittee on Oil and Gas and Other Energy Prices committee  Liquidity allows buyers and sellers to transact at a given price. Without speculators, there would be less transaction. Something like the bid-asked differential would rise, there would be less activity in the marketplace, and it would stagnate. There would be no transparency in the marketplace.

Subcommittee on Oil and Gas and Other Energy Prices committee  I don't know how you'd tell. I can't answer that myself.

Subcommittee on Oil and Gas and Other Energy Prices committee  I don't think inventory is the answer here. There are situations.... There are stores of inventory. The U.S. has the strategic petroleum reserve, which is a store of inventory for emergency purposes. It generally is not used to regulate pricing. What producers are trying to do, I would say, is maximize the value of their resource.

Subcommittee on Oil and Gas and Other Energy Prices committee  Could I try to answer this one?

Subcommittee on Oil and Gas and Other Energy Prices committee  That's true, there is an amount of inventory that's always in place. The problem is that when you take one out, you have to replace it. What do you replace it with? You replace with what you paid for it that day. So that answers the question why, even though there's inventory in place, you still get the current price on the current day.

Subcommittee on Oil and Gas and Other Energy Prices committee  I agree it would raise the price. May I just rebut one thing Ms. Savage said? An example of the disconnect that can occur between the physical market and the futures market happened some time in 2007. The New York Mercantile Exchange trades a crude called WTI, West Texas Intermediate--the commodity crude--and it is physically produced in Texas.

Subcommittee on Oil and Gas and Other Energy Prices committee  Canada is a price-taker. As I've tried to say, these major refining centres tend to be the price-setting marketplaces. So other markets besides them take their prices from these major refining centres for both crude oil and crude oil end products. That's the first point. Are speculators having an impact?

Subcommittee on Oil and Gas and Other Energy Prices committee  I think the answer is yes. The countries that come to my mind are Nigeria, Venezuela, and probably Saudi Arabia. A lot of the producing countries do subsidize the price of their products to their citizens.

Subcommittee on Oil and Gas and Other Energy Prices committee  Is that question for me?

Subcommittee on Oil and Gas and Other Energy Prices committee  Actually, when I started in the business, Canadian prices were kept below world prices. I started in the industry in 1976, and I believe the prices stayed regulated until about the early nineties, and then went to world pricing after that—at the end of the NEP, I think. The way that was accomplished was that there was a cap put on the domestic production of oil, and then when a company such as Gulf Canada, which I was working for at the time, imported crude, it would pay the world price and the Canadian government would pay it the difference between the capped price on Canadian oil and the world price.

Subcommittee on Oil and Gas and Other Energy Prices committee  What I tried to present was that there are three different segments in the marketplace--the futures market, or NYMEX, being only one of them. You referred to over-the-counter, which I would call the swaps market, an independent market not regulated like the NYMEX is, and I think that's what you're referring to as having the Enron effect.

Subcommittee on Oil and Gas and Other Energy Prices committee  I think I said that I can't answer the question about how much is speculation and how much is not, but I gave you my personal perspective. I could be wrong. You're right, I could be wrong.