RIYADH, June 14: Oil markets are in the midst of a severe storm. With Morgan Stanley and Goldman Sachs projecting the next oil price spike just round the corner and all fingers pointed at Opec, Riyadh was almost cornered into action, to seek a solution to the problem.

The kingdom has convened a summit inviting all stakeholders, from producers and consumers to traders and investment bankers, in Jeddah on June 22.

Saudi Arabia has underlined once again that producers cannot tame the bull. It is simply beyond them. Market fundamentals are no more in their control and others need to put in their weight.

And for a change, the G8 energy ministers, meeting the next day after oil leapt past the $139 mark last week, also looked inward, touting the need for domestic efficiency rather than piling pressure on Opec. And this was despite the call by the Australian Prime Minister Kevin Rudd for the G8 to “apply the blow-torch” to Opec.

G8 ministers too conceded they were powerless to fight the flow of financial capital. “There are relatively few things we can do short term,” the US Energy Secretary Sam Bodman agreed.

And underlining the problem, a leading US senator is now pressing the top futures market regulator for more information about speculation by big investment funds in crude oil futures and other energy markets.

Senator Jeff Bingaman, chairman of the US Senate Energy Committee, said a recent trend of institutional investors buying petroleum storage capacity has led to “concerns regarding potential market manipulation strategies,” and asked the Commodity Futures Trading Commission about how it tracks such trading activity.

Oil prices have doubled in the past year as big funds have poured money into commodities, seeking a hedge against inflation and the weaker dollar. Democrats in Congress have been looking for ways to rein in speculation in crude oil trading, which they see as the prime mover behind the surge in the US oil futures to record highs.

Ralph Nader, the former US presidential candidates, recently argued ‘oil was at $50 a barrel in January 2007, then $75 a barrel in August 2007. Now at $130 or so a barrel, it is clear that oil pricing is speculative activity, having very little to do with physical supply and demand.

Supplies of crude are so plentiful, according to the Wall Street Journal, “traders of physical crude oil say their market is suffering from too much supply, not too little.”

Iran, for instance, is storing 25 million barrels of heavy, sour crude oil because, in the words of Hossein Kazempour Ardebili, Iran’s oil governor, “there are simply no buyers because the market has more than enough oil.”

Mike Wittner, head of oil research at Societe Generale in London, agrees. “There are various signals out there saying for right now, the markets are well supplied with crude.”

Deborah Fineman, president of Mitchell Supreme Fuel Co. in Orange, New Jersey, summed up the scene: “Energy markets have been dictated for too long by hedge funds and speculators, who artificially manipulate the numbers for their own benefit. The current market isn’t based on the sound principles of supply and demand but it is being rigged by companies and speculators who are jacking up prices for their own greed.”

Harry C. Johnson, former banker who worked for many years inside Big Oil and ran his own small oil company in Oklahoma, blames “industry experts, who profit greatly from the high price of crude, and have stated openly that the worldwide economic price of crude, absent speculators, would be around $50 to $60 per barrel.

Toshinori Ito, senior analyst at UBS Securities Japan, says: “Oil prices are surging not because of a supply shortage, but because of massive liquidity,” referring to the influx of financial funds into markets, helped by low interest rates.

Chandren Nair, from the global institute for tomorrow, told Al Jazeera that increasing oil supply was not a solution to current problems. “Increasing supply is a knee-jerk reaction you’d expect from politicians. It’s politically expedient to say we have to produce more ... it’s intellectually lazy. “But look at long term issues facing the world. It doesn’t take a genius to understand we have to reduce the amount of oil we consume.”

Krchoksey, a brokerage firm, argues that the oil market is a bubble, and a number of super tankers chartered by oil-producing states are floating in the Gulf with inventories of oil they cannot sell.

“The situation is similar to the bubble in credit markets a year ago, where nobody wanted sub-prime mortgage bonds, but there was plenty of demand for ‘financial derivatives’ that allowed investors to bet on the future value of these bonds,” writes Amit Anand of Krchoksey.

Since September 2007, when the chairman of the US Federal Reserve, Ben Bernanke, started to slash interest rates, investors have hedged against the depreciation of the dollar with commodities.

Converts to Opec viewpoint seem going up. And with the producers and consumers almost powerless to rein in the speculators, six billion consumers all around the globe are paying a price and a hefty one while a few are filling up their coffers.

Long live capitalism.