Nothing seems to stop the price from rising. In a study published last month, INSEE warned: “Energy Prices Accelerate in June.” Over a year, the cost of petrol increased by 35.9%, diesel by 45.9% and gas by 49.3%. For food, prices also increased: + 6.6% for bread and cereal, + 17.7% for oil.
In the midst of a debate in the Assembly to examine the purchasing power bill, the question of inflation caused a strong reaction from Adrien Quatennens. Invited by BFMTV, on July 18, the representative of La France insoumise pointed out those responsible, according to him, for this surge: the “The rise in prices (…) is due to speculation (…) large groups“.
It is not fair for the French to pay for the rise in prices that are mostly due to speculation and the superprofits of the big groups. share. pic.twitter.com/U9lBvGggcm
– Adrien Quatennens (@AQuatenens) July 18, 2022
Adrien Quatennens did not elaborate on the industry groups targeted. Neither specified the source of his analysis. So, is what the deputy said true or “fake”? Franceinfo interviewed several economists to prove this.
In economic matters, it must first be specified that speculation is a common behavior in markets. If a petrochemical fertilizer plant needs oil to make its fertilizers, it may want to protect itself against the rise of a futures contract, ie the right to buy a barrel in a few months of a fixed price. In this case, the factory speculates: it buys oil at a price different from the current market price to ensure the price it will pay for the raw material.
“This is called a hedging operation with industrial logic“, explains Jacques Percebois, professor at the University of Montpellier and director of the Center for Research in Economics and Energy Law (Creden).If I think the price of oil will rise in the future to $130, I will buy more oil“, for example a futures contract that gives the right to buy a barrel at 110 dollars for delivery in three months. “CThis operation will raise prices, but will allow me to hedge against higher prices in the future, like insurance“, reasoned the economist.
But manufacturers are not the only speculators in commodity markets. Investors, such as banks or funds, also buy oil or foodstuffs with the aim of making a profit on resale. An important financial assumption. If the action of investors makes it possible to ensure liquidity in the markets, that is the possibility to quickly find a buyer or seller, they raise the suspicion of speculation that is related to the real life of the economy.
Under these conditions, is it worth raising the speculation of large groups to explain the current inflation? In other words, are manufacturers organizing shortages to artificially raise sales prices? The question divides economists, because the speculative behavior is not the same depending on the sectors concerned, whether the market for food or petroleum products, for example.
The oil market does not indulge in pure financial speculation, judges Jacques Percebois: “Refineries and oil companies are just hedging.” For the specialist, Oil groups primarily seek to protect themselves against price fluctuations. Unlike Adrien Quatennens, the economist wants to be careful, though: “We can only measure the level of speculation and its impact on rising prices after the fact and we need to do the studies to analyze it.”
Because the effect of speculation on the rise in the price of oil is not completely rejected. “It can amplify up and down movements“prices, assures Carine Sebi, energy specialist and professor at Grenoble Ecole de Management (GEM). According to a Senate report [de 2005]speculation represents 10 to 20% of the price of oil, which cannot be neglected.”
The grain market, on the other hand, appears in its organization to be more sensitive to price manipulation than the oil market. According to Olivier De Schutter, author of a report on the right to food at the UN and member of Ipes-Food, a panel of experts on food issues, there is real speculation in the market for this person. “It doesn’t create inflation, but it can make it worse“, he explained. Olivier De Schutter criticizes the responsibility of trading companies that act as intermediaries between producers and buyers of cereal. “Grain traders are a small number of concentrated companies that control 75-80% of the trade.“, he said. These companies “can delay sales, accumulate stocks and, through their buying and selling practices, speculate on the increase in food prices to create a kind of scarcity..“
An analysis rejected by Philippe Chalmin, liberal economist and president of the Observatory on the formation of prices and margins of food products. Linking inflation speculation is a silly clothhe declared. There are many studies to examine the effect of speculation on markets. They show that in the medium term, there is no effect in terms of incidence on prices, or even, on the contrary, an effect. patch.“ A report published in 2011 by the Economic Affairs Committee of the National Assembly confirms this “that no systematic link can be established between speculation and the formation of long-term prices”.
Despite the absence of studies proving price manipulation by speculators, NGOs remain concerned and call for more regulation of food markets. “The lack of recent scientific evidence on the impact of excessive speculation on food prices does not justify the absence of political intervention”insisted Thomas Braunschweig, trade policy expert at the NGO Public Eye, to the Swiss magazine economic life.
In summary, it is difficult to be as positive as Adrien Quatennens. To date, no study has established an indisputable link between rising commodity prices and corporate speculation. But some markets, such as cereals, show real vulnerabilities in terms of price manipulation.